RIYADH, 23 October — Petroleum and Mineral Resources Minister Ali Al-Naimi said yesterday that foreign oil companies were expected to respond soon to a "final, lucrative offer" on three mega gas projects in the Kingdom.
"We expect that the response of these companies will be made soon to the final lucrative offer by Saudi Arabia," Naimi told a symposium on the "Future Vision for the Saudi Economy."
"The nature of negotiations over the projects is such that it takes a long time (because) each side wants to get a great benefit," the minister said.
Naimi stressed that the talks are in their final stages and reiterated the Kingdom’s determination to go ahead with the multibillion dollar projects regardless of the outcome of the ongoing talks.
Riyadh signed in June last year preliminary agreements with eight international oil companies for the projects worth $25 billion in investments. But talks with the companies to strike permanent implementation agreements have been stalled over profitability and commercial terms.
Al-Naimi also said that the ministry and the private sector are about to establish a corporation owned 80 percent by the private sector and 20 percent by the ministry.
The ministry is encouraging the private sector to take part in the development of industries in the fields of petroleum, gas, electricity, water desalination and petrochemicals, he said. while presiding over a session on natural gas and mining.
In his presentation on the "Saudi Petrochemical Industry — past, present and future," Abdul Aziz Al-Zamil, vice president of the Al-Zamil Group and former minister of industry and electricity, said the number of chemical industries, which stood at 280 in 1995, is expected to reach over 500 in 2005. The total investment in the industry increased from $500 million in 1970 to about $20 billion in 2000.
"Now petrochemicals are becoming the key to industrial development. Many of our petrochemical plants are among the world’s largest." He said two major factors contributed to the rapid development of the petrochemical industry. They were the desire to diversify the economy away from crude oil production and exports and, secondly, to make use of the underutilized hydrocarbon resources, associated gas and natural gas.
Referring to the current status of Saudi petrochemical industries, Al-Zamil said they account for about five percent of the world petrochemical output. As for exports, they constitute about eight percent of the global exports.
He said that since the global trend was to maximize utilization of currently underutilized hydrocarbon resources, it is expected that optimization of LPG and light naphtha utilization will be strongly encouraged in the near future in the Kingdom. There will also be a strong demand for C5-hydrocarbons, which provide the basic feedstocks for the production of hydrocarbon resins, elastomers, cyclo-olefin co-polymers, and other fine chemicals.
In this context, Al-Zamil said the private sector will be called upon to exploit the favorable investment climate provided by the government.
Speaking on "World prospects for natural gas and their implications on the energy policy of Saudi Arabia," Khalil Zahr, a UN energy expert, observed that fuel oil prices are likely to come under sustained downward pressure as it continues to lose its market share among energy products. As a result, Khalil said the market share for natural gas is expected to increase due to the potential of substituting natural gas for the higher valued crude and diesel oils used at present as boiler fuels.
Speaking on "Strategic considerations for mining sector development in Saudi Arabia‚" Dr. Robert Mabro, director of Oxford Institute for Energy Studies, referred to the good investment potential in the mining sector, since 7,000 mineral sites have been identified.
However, there were some disincentives for overseas investors, such as the visa hassle, foreign investors' perceived notion of discriminatory treatment vis-à-vis the Saudis and shortage of skilled Saudi workforce.
