DUBAI, (Reuters) - Saudi Arabia is expected to reveal the leaders of two coveted gas projects before putting pen to paper on multi-billion dollar agreements with leading foreign oil companies on June 3, industry sources said on Sunday, May 26.
On May 18 the kingdom awarded eight major oil companies stakes in a gas development initiative, its biggest opening to foreign investors in a quarter of a century.
ExxonMobil and Royal Dutch/Shell have won starring roles in the so-called "core venture" projects, estimated to require combined total investments of $25 billion.
Industry sources have suggested that Exxon is in pole position to lead the $15 billion South Ghawar development, known as core venture 1, with Shell a strong contender to lead core venture three—development of gas at Shaybah in the empty quarter of southeast Saudi Arabia.
BP is also in hot competition, sources said. Exxon, Shell, BP and Phillips have all been granted stakes in South Ghawar, viewed by many as the prize gem of the gas initiative—unveiled more than two years ago.
The leader of core venture 1 is due to get a 35 percent stake, two companies are to get 25 percent each and one firm 15 percent, sources in the region said.
Both supermajors already have considerable investment in the kingdom's refining and petrochemical sectors and feature as top customers of Saudi oil.
Shell, TotalFinaElf and Conoco have all been awarded stakes in the Shaybah venture, where the leading company is due to receive a 40 percent stake, with the remaining firms getting 30 percent each, according to industry sources.
Exxon already has secured the leading role with 70 percent in core venture two on the Red Sea coast while Occidental and Enron between them hold 30 percent.
By the signing ceremony in Jeddah, the oil companies will have had more than two weeks to pore over "preparatory agreements" which detail some guidelines for the three core ventures and outline the percentage stakes of each consortium, industry sources said.
Fiscal and regulatory frameworks are to be worked out during the second half of the year, they added.
Companies are expecting tough negotiations in order to finalize contracts by a year-end target. "This is just the start of things," an industry executive said. "There are going to be about five months of intense talks."
Top oil firms insist there are profits to be made in the kingdom, holder of the world's fourth-biggest gas reserves.
"The Saudis have been saying all along that these are world-class projects with world-class returns," an analyst said. "The oil majors are not doubting that."
And they have wound up with bigger exploration blocks than they first envisaged. "They all asked for more exploration and they got it," an industry executive said.
The scope of South Ghawar core venture 1 includes gas exploration in the North Rub al Khali, a natural gas liquids (NGL) recovery plant, gas processing, participation in expansion of the gas pipeline network, construction of two power and water desalination plants and two petrochemical plants.
Investment of up to $5 billion in the Red Sea core venture 2 includes an exploration area in the northern Red Sea, development of the existing Midyan and Barqan gas fields and requirements for power, desalination and petrochemical plants.
Investment of some $5 billion in the Shaybah core venture 3, Shaybah includes gas exploration in South Rub al Khali, development of the Kidan gas field and power, desalination and petrochemical plants.
Analysts expect state oil company Saudi Aramco to participate in the gas initiative. "It is unwise to think that Saudi Aramco will not be involved," a regional analyst said.
By Peg Mackey
© 2001 Mena Report (www.menareport.com)