RIYADH, 19 August — High-level government sources have confirmed that recent meetings between the Japanese minister of trade and industry and Saudi leaders were aimed at regaining the Arabian Oil Company’s drilling concession in the Al-Khafji oil field.
The sources said Riyadh was unable to understand Japan’s official denial of its attempts to win back the concession despite the Japanese oil company’s attempt and failure to reach a deal with the Saudis last year.
AOC’s concession on the Saudi side of the Neutral Zone between the Kingdom and Kuwait was AOC’s largest in the world. It supplied more than four percent of Japan’s oil requirements. The Al-Khafji field was taken over by Saudi Aramco after talks of renewing the concession failed.
Last month, Japanese Trade and Industry Minister Takeo Hiranuma held talks with Custodian of the Two Holy Mosques King Fahd, Prince Sultan, second deputy premier and minister of defense and aviation, Planning Minister Khaled Al-Gosaibi, then the acting petroleum and mineral resources minister, and Commerce Minister Osama Jaafar Faqeeh.
“This is not the first time Japan has tried to regain the oil drilling concession. It earlier failed to reach a deal with the ministerial committee, chaired by Foreign Minister Prince Saud Al-Faisal, charged with holding negotiations with international oil giants on gas investment projects.”
Saudi sources, however, pointed out during the new talks that Japan was not ready to back down from the stands that resulted in its losing the concession in the first place. The sources added, “It is now trying to revive the oil talks at political levels but that will not work due to the difference in the Kingdom’s economic situation when AOC won the concession 40 years ago and the present situation.”
Saudi Arabia does not oppose Japanese investment in any of the Kingdom’s economic sectors. “But it totally refuses to accept exploitation of its natural resources without any recompense,” the sources said, adding that Japan had entered the talks without differentiating between the Kingdom’s past and present economic capabilities.
The sources continued: “They thought the Saudi demands were just a maneuver which could be overcome easily and then get the concession renewed. Now time has proved that they were wrong in their expectations.”
Tokyo’s latest initiative was prompted by a proposal from the Japanese Economic and Social Reform Committee set up by Prime Minister Junichiro Koizumi. The proposal called for fresh efforts to regain oil concessions in the Gulf to shore up the country’s economy.
The Japanese move to promote investment in Saudi, Kuwaiti and Iranian oil fields in cooperation with such international companies as Royal DutchShell, they said, was aimed at offsetting the energy shortage the country has recently experienced. The shortage caused industrial output to fall by four percent, increased the unemployment rate by five percent and reduced prices of consumer products by 6.2 percent.
The Saudi-Japanese talks to renew AOC’s concession failed in February last year when Tokyo rejected the Kingdom’s conditions. During the talks, Saudi Arabia proposed Japanese investment in petrochemical projects in Al-Khafji but Japan rejected the offer. The Kingdom also demanded that Japan increase purchases of Saudi oil to 1.5 million barrels per day and invest in a $2.1 billion railway project.
Despite the failure of the talks, Japan maintains its position as the Kingdom’s second largest trading partner in terms of trade volume. In 1999 bilateral trade amounted to SR38.5 billion with the balance heavily in favor of Saudi Arabia. There are 37 joint ventures between the two countries — 10 of them in industry and 27 in non-industry sectors; there is a total capital investment of SR18.32 billion. Investment in joint ventures is 52.98 percent Saudi and 46.52 percent Japanese.
