CAIRO, 14 September — Saudi Arabia has promised foreign firms enough gas to make their multibillion-dollar investment in gas development viable, a specialized publication reported.
“In its latest offer...Saudi Arabia has committed itself to specific volumes required by the companies to make their investment viable,” said the London-based International Oil Daily.
But Riyadh has “declined to propose additional acreage in specific geographic areas” that are reserved for state-owned Saudi Aramco, it added.
The Kingdom has also improved the terms for the companies’ investment in downstream gas projects, according to the publication.
IOD said Riyadh told the companies this offer was “final” and they had to decide this month whether to accept.
Saudi Arabia last year selected eight Western oil firms to develop gas in three fields and to set up downstream facilities, such as petrochemical, power and water desalination plants, using the produced gas as feedstock.
The foreign firms are expected to pour in investments to the tune of $25 billion.
The companies are grouped in three consortia, two led by ExxonMobil and the third by Royal Dutch Shell. The other members are BP, TotalFinaElf, Phillips, Occidental, Marathon and Conoco.
The main stumbling blocks in the talks have been the rate of return on the investment required from the companies as well as diverging estimates on how much gas the three fields contain.
The companies are pressing for an annual rate of return in the 15 to 18 percent range, whereas the Kingdom is only offering eight to 12 percent.
The projects, known as the “Saudi gas initiative”, mark the first opening in the Kingdom’s energy sector since it was nationalized in 1981.
But it only involves gas production and development, with oil production remaining firmly a monopoly of Aramco.
Informed sources told Arab News that a number of new companies had come up with offers to invest in the Kingdom’s gas projects. They said a Taiwanese oil company had officially expressed its desire to join the gas projects.
