JEDDAH, 7 June 2003 — Prospects for Russian gas giant Gazprom winning major contracts in the Kingdom’s national gas initiative (NGI) rose after Thursday’s announcement by Riyadh that it has canceled negotiations over deals with a consortium of companies led by ExxonMobil.
“The chances are now higher of international oil companies, especially Gazprom, winning contracts to develop the Kingdom’s gas sector,” Al-Madinah Arabic daily reported yesterday, quoting a high-level Saudi industry source.
The source said the Saudi negotiating team was now in a much better position than four years ago, when talks with international oil giants started to conclude deals on developing three major gas fields.
Petroleum and Mineral Resources Minister Ali Al-Naimi sent a letter on Thursday to Exxon and fellow consortium members ending negotiations to develop gas in the South Ghawar field. The Saudi decision comes into effect on June 15.
“Saudi Arabia has canceled the Exxon-led deal for South Ghawar effective June 15,” a Saudi industry source told Reuters of the US major’s $15 billion project. Other potential investors in what was known as Core Venture One were Royal DutchShell, BP and ConocoPhillips.
“There are a lot of choices and alternatives before the Kingdom to select international companies willing to join Saudi Aramco to develop the gas sector,” the source told Al-Madinah, and highlighted the Saudi oil giant’s experience in the field.
Foreign Minister Prince Saud Al-Faisal, who is chairman of the Saudi negotiating team, and Al-Naimi recently visited Moscow and held talks with top Russian officials on prospects of expanding oil cooperation.
The Kingdom signed in June 2001 preliminary agreements with eight international oil companies for three mega gas projects worth some $25 billion in investments.
The source, who requested anonymity, said the Kingdom had a feeling since Crown Prince Abdullah’s meeting with top executives of ExxonMobil and Royal DutchShell in Jeddah last year that the American companies were not serious in their negotiations.
“The spirit of cooperation was lacking. They did not show any desire to reach an agreement satisfactory to both sides,” the source told the Arabic daily.
“ExxonMobil, being the leader of the consortium, calculated that any disagreement with it would hamper the remaining projects,” the source told Al-Madinah, adding that the negotiations were not complicated in terms of gas reserves or quality of gas or other electricity and desalination projects.
Al-Naimi said the Saudi government did not agree with ExxonMobil’s characterization of the history of negotiations for Core Venture One. “The Kingdom spared no effort to be flexible and has offered a wide range of incentives to the consortium,” he said.
The minister sent the final Saudi offer late May and requested a response from ExxonMobil and Royal Dutch Shell, the lead international oil company (IOC) from Core Ventures One and Three, by June 4, the Middle East Economic Survey said.
