RIYADH, 1 May – Recent political events in the Middle East have played a substantial role in delaying negotiations between the Saudi government and international oil giants to reach final agreement on multibillion dollar gas projects.
Crown Prince Abdullah, deputy premier and commander of the National Guard, who spearheaded the Kingdom’s gas initiative, has been busy promoting his Middle East peace plans and with trying to resolve the conflict that escalated recently with Israel’s incursions into the occupied territories.
Foreign Minister Prince Saud Al-Faisal and Petroleum and Mineral Resources Minister Ali Al-Naimi, key players in the negotiations, are accompanying the crown prince on his visit to the United States.
However, sources close to the Saudi negotiating team have told Arab News that there have been intense meetings between the two sides since the beginning of April to look into queries by the international firms regarding the final offers presented by the Saudis.
"The negotiations are progressing well, with both sides cooperating with one another and showing understanding of the needs of the other side," the sources said.
The two sides were expected to reach a final deal in March, but they were delayed because of differences in opinion about the profit the companies would be able to make.
There were also complaints by some companies that they were being allocated areas which do not contain large quantities of gas reserves.
According to Saudi Aramco, the area in dispute contains 30 trillion cubic feet of gas. But the concerned companies disputed this estimate, arguing that the gas reserves there would not exceed three to five trillion cubic feet.
Riyadh announced in May last year that the oil majors had made a series of initial proposals that would inject more than $100 billion into the upstream gas and downstream oil sectors.
The companies that have submitted proposals include Shell, Exxon Mobil, BP Amoco, ENI, Chevron, Philips, Conaco, Total Fina, Elf, Enron and Texaco.
Petroleum and Mineral Resources Minister Naimi said the two sides were working hard to "bridge the gap" in negotiations.
"Most of the information published (about a dispute) is baseless. But in the negotiations, there are positions, not differences, and negotiators are trying to bridge the gap," Naimi told a press conference.
Western oil executives and experts said last month that profitability, high taxes and disappointment at the size of the gas reserves on offer were the main bones of contention.
"Undoubtedly, the companies have their demands, and the state has its demands. We are trying to sort out these demands into an agreement. I don’t call this a dispute," Naimi said.
The minister said the Kingdom, which has the fourth largest proven gas reserves in the world, is planning a second phase of gas projects, which would be "more substantial" than the first. He gave no details.
Abdullah Juma, president and CEO of Saudi Aramco, has said that the basic objective of the Saudi gas initiative was to make available cheap fuel in the country’s main industrial centers.
This, he said, will expedite diversification and expansion of industries generating plenty of job opportunities.
Juma said Saudi Aramco produces 5.4 billion cubic feet of gas, 400 million cubic feet of ethane and 700,000 barrels of liquefied natural gas daily.
The projects currently under way will enhance the daily output to 7 billion cubic feet of gas and 600 million cubic feet of ethane.
