RIYADH, 21 May — Oil giants Royal Dutch-Shell and TotalFinaElf are likely to win lead roles in two of the Kingdom’s vast gas projects. Analysts expect Dutch-Shell to win leadership role in core venture one and TotalFinaElf in core venture three.
Foreign Minister Prince Saud Al-Faisal, who on Friday announced eight international oil firms as winners in the race for a stake in the country’s gas development initiative, said the leaders of the two core ventures would be decided by a ministerial committee at a later stage. ExxonMobil secured the lead role in core venture two in the Red Sea area.
Friday’s announcement has kept economic and business circles busy as it was followed by hectic moves by major Saudi service and construction companies which vie for various sub-contracts.
The award of the giant projects marks the biggest advance in the Kingdom’s efforts to develop its gas reserves, the world’s fourth largest, since Saudi Arabia unveiled its plans to open up the energy sector two years ago.
According to analysts, the race for leadership in core venture one, the $15 billion South Ghawar gas field, would be between Shell and BP. ExxonMobil, being the leader of core venture two, may not compete for the role.
ExxonMobil Chief Executive Lee Raymond declined to comment on industry speculation that his company is favorite to win the leadership in core venture one as well. “I think the (Saudi) government has indicated that it still has that issue under review and expects to make some comments here in the near future and I think we’ll wait and see,” he said in New York.
Raymond expected a decision on leadership of the other two projects by the time memorandums of understanding are signed — due in the first week of June.
Prince Saud said the government would sign memoranda of understanding with the eight companies within the next few weeks to determine the projects, the amounts to be invested and their time frame. The projects will be implemented after the signing of the executive agreements.
With regard to core venture three located in Shaybah in the southeastern Empty Quarter, industry sources said the leadership was likely to fall on TotalFinaElf which has offered to invest about SR9 billion in the project.
Eleven companies have competed furiously for the opportunity to invest in the world’s leading energy producer. The projects will develop known gas reserves and create downstream projects fed by gas supplies, including power, desalination and petrochemical plants.
Drilling could begin within two years in the Red Sea coast project, Lee Raymond told Reuters on Friday. “Core venture two, at least initially, is a large exploration project. It’s an enormous area. It’s basically all of the western third of Saudi Arabia to the Red Sea,” he said.
“I would guess (we could start drilling) in a couple of years. There has been some seismic investigation done so it might be a little quicker than that in some areas.”
Raymond said ExxonMobil’s success in securing a role in Saudi Arabia’s gas sector had not done much to bring it closer to renewed access to the Kingdom’s vast oil reserves, which remain out of bounds to foreign firms. “We have not tried to delude ourselves into thinking that it (oil) is part of this,” he said.
He anticipated close co-ordination with state oil company Saudi Aramco on the ventures, even though Exxon was not aware of Aramco holding any equity in the projects.
“The South Ghawar project is right in the heart of Aramco country,” he said. “I would expect there will have to be very close co-ordination because there will undoubtedly be joint facilities and all kinds of logistical and technical issues.”
The three projects are estimated to require combined initial investment of $25 billion, but Raymond said that investments could ultimately go much higher. “Recognizing that this thing is going to go on for many years I suspect that in the end it will be much larger than that,” he said.
