RIYADH, 10 September — Eight foreign oil majors are assessing new ideas put forward by the government to try to break a stalemate in negotiations over multi-billion-dollar gas projects in the Kingdom, an oil executive said yesterday. “The government responded last week to a proposal made by the two leading companies late July. The response includes new ideas which need to be discussed,” the Western executive told AFP. The companies are likely to make a “counter proposal” within a few weeks, said the executive who declined to say if the signs were encouraging or not.
The negotiations are being headed by ExxonMobil, which has the lead in two consortia, and Royal Dutch Shell, leader of the third. The other members are BP, TotalFinaElf, Phillips, Occidental, Marathon and Conoco. The firms signed preliminary agreements in June 2001 for the projects expected to require $25 billion of investments. But talks to close a final deal have been stalled with differences on details of the commercial terms. The projects also include water, power and petrochemical plants.
High-level talks were held in the summer in Jeddah between the Saudi ministerial team headed by Foreign Minister Prince Saud Al-Faisal and the CEOs of ExxonMobil and Shell.
The latest Saudi ideas are likely to open the way for further detailed talks to strike an agreement, the executive said. The projects, known as the “Saudi gas initiative,” mark the first opening in the Saudi energy sector since it was nationalised in 1981. The main stumbling blocks in the talks have been the rate of return on the investment required from the companies as well as diverging estimates on how much gas the three fields contain. The companies are pressing for an annual rate of return in the 15 to 18 percent range, whereas the Kingdom is only offering eight to 12 percent. Wall Street Journal Europe gave a downbeat assessment yesterday of the state of negotiations, reporting that Saudi Arabia was not going to open key gas fields to US and European oil firms.
The London-based International Oil Daily, meanwhile, reported last week that differences have appeared between the oil firms on whether to accept the terms being offered by the Kingdom.
