JEDDAH, 5 March 2004 — Saudi Hollandi Bank (SHB), part of Dutch ABN Amro group, has extended a $215 million letter of credit to a natural gas joint venture between Russian oil company Lukoil Holdings and Saudi Arabian Oil Co., Tom Lind, head of SHB structured finance, said yesterday.
The letter of credit covers the performance risks for the gas exploration contract, said Abdul Elah Al-Shaikh, head of SHB’s corporate banking group.
“Obligations under the standby letter of credit will be syndicated on the international bank market, including the bank market of Saudi Arabia,” Hamad Al-Huthaili, SHB board member, said.
Lind told Arab News that this transaction indicated SHB’s new capabilities in structured finance and looked forward more deals in the petrochemical, oil, gas and telecommunication sectors.
Lukoil subsidiary Lukoil Overseas Ltd. said the two companies signed a shareholders agreement to regulate the Lukoil Saudi Arabia Energy Ltd. joint venture, also known as Luksar. Lukoil owns 80 percent of the joint venture, while Saudi Aramco holds 20 percent.
In January, Saudi Arabia awarded Lukoil rights to explore and produce natural gas over 40 years. Luksar is to explore and produce gas in 30,000 square kilometers of acreage, known as “Zone A,” near Ghawar, the world’s largest oil field. The final deal is to be signed March 7 in Riyadh.
In January, Lukoil joined a small club of foreign energy firms with a foothold in Saudi Arabia, announcing a deal to find and pump gas in the world’s top oil producing nation.
The project is small by the standards of Saudi Arabia’s immense hydrocarbon reserves, but it creates a potentially useful new link for world No. 2 oil exporter Russia with Saudi Arabia. Other Saudi gas project winners this year included Italy’s ENI, Spain’s Repsol YPF and China’s Sinopec.
Lukoil is Russia’s second-largest crude oil producer and has the largest presence in the Middle East among Russian oil majors. The company is exploring Egypt’s coast for hydrocarbons, and is currently in talks with Iraqi oil officials and the US governing body to retain oil contracts it signed before Saddam Hussein was toppled.
— Additional input from agencies
