JEDDAH, 4 September — The government is expected to announce its final decision within three weeks on the oil giants’ proposals for implementing the proposed mega gas projects, a high-level source told Arab News.
The source denied reports that the differences among the oil majors were complicating negotiations.
“Within the next three weeks the government will make a final decision on whether to accept or reject the proposals,” the source pointed out. “Negotiations have been progressing well in a normal manner.”
The source said a ministerial committee was studying the proposals made by ExxonMobil and Royal Dutch Shell, which lead the companies picked by the government for implementing three core gas projects.
The statement follows reports about conflicts among the oil giants. “We did not find any conflict among the companies after they had presented their proposals,” the source added.
The Saudi ministerial committee, chaired by Foreign Minister Prince Saud Al-Faisal, held several meetings over the past weeks but did not take any final decision on the proposals.
Prince Saud has said an appropriate decision serving the interests of the Kingdom will be taken on the basis of the offers, asserting the projects will go ahead under all circumstances.
“I think that unless a major development takes place, the issue will have to go to Prince Abdullah, the regent, for a political decision,” an oil executive said.
Profitability, risks involved in the investments expected to last 25 to 30 years, and details about the “rate of return” from power plants, water desalination and petrochemicals were at the core of the tough negotiations.
Companies have been offered some 10 to 12 percent as a rate of return, but are demanding up to 18 percent.
The investment is very complicated, including upstream, mid-stream and downstream projects in gas exploration, petrochemicals, water desalination and power generation.
Exploration of gas has been restricted to areas not under Saudi Aramco, which the oil majors claim is not enough.
The projects, which require an initial investment of $25 billion, would cover a total area of more than 440,000 square kilometers.
Saudi Arabia picked eight oil companies in June last year to carry out the multibillion dollar gas initiative. Split into three consortiums — two led by ExxonMobil and one by Shell — they are tasked with bringing a gas field on stream and to build facilities that will use their production as feedstock for electricity, water desalination and petrochemical plants.
ExxonMobil is tasked with developing the South Ghawar field requiring a $15 billion investment, and the Red Sea field, needing $5 billion. Royal Dutch Shell was picked to develop Shaybah which requires $5 billion.
The South Ghawar project, located north of the Empty Quarter, includes construction of two electricity and desalination plants as well as two petrochemical plants in the Eastern Province and Western Province.
