JEDDAH, 15 November 2003 — Petroleum and Mineral Resources Minister Ali Al-Naimi will sign a landmark deal in Riyadh today with Royal Dutch Shell and TotalFinaElf for gas exploration and production in the Rub Al-Khali or Empty Quarter.
“The minister will sign Saturday evening an agreement with three of the world’s largest companies: Shell, Total and Aramco,” an official statement carried by the Saudi Press Agency said.
“This agreement will be the first step and will be followed by others within months, providing rights in new areas for more investment,” the statement said.
According to Al-Naimi, the Kingdom will hold an international tender early next year for three new gas exploration and production projects. The three separate projects cover areas of 29,900 sq. km, 38,800 sq. km and 51,400 sq. km in various parts of the Kingdom.
The statement highlighted the directives of Crown Prince Abdullah, deputy premier and commander of the National Guard, to open up the sector of gas exploration and production to foreign investment.
The deal, which has been approved by the Cabinet and the Shoura Council, involves the creation of a new company, which will have a 25-year concession for gas exploration and production from an area of about 210,000 sq. km in the Empty Quarter. Shell will control a 40 percent stake, with TotalFinaElf and state-run Saudi Aramco controlling 30 percent each, the minister said.
“The deal is also based on the national gas strategy, which aims at strengthening the capacity of the Kingdom’s gas industry to meet future needs,” the statement added.
The deal has been estimated to be worth $2 billion, a far cry from the ambitious $20 billion mega gas projects previously planned with foreign oil giants.
The Shell deal, awarded on July 16, came after the collapse of the Saudi Natural Gas Initiative (NGI) in its integrated form, which included power, water and petrochemical projects in addition to gas exploration and production.
“This agreement is an important breakthrough as it heralds the first time after the creation of Saudi Aramco that foreign oil companies have gained access to gas resources in Saudi Arabia,” said Shell’s President Jeroen van der Veer.
The project, a pared-down version of the $5 billion Shaybah venture that Anglo-Dutch Shell and its French partner Total negotiated for five years, was the sole survivor of the Kingdom’s gas initiative for foreign investors.
The project was first presented at a meeting in London last July, which was attended by a large number of oil companies from the United States, Europe, Japan, India, Russia and China.
