Escalating Middle East tensions are not tempering industry interest in the region, especially in Saudi Arabia and Iraq where the potential for profit is high.
Near term, a $25 billion Saudi gas initiative remains on track despite 3 years of bumpy negotiations between the Saudi Arabian government and industry.
Seven foreign companies, most US-based, want to invest in three Saudi-designated "core" ventures that will direct new gas exploration and production into downstream petrochemical, power, and water projects.
ExxonMobil Corp. is slated to oversee Core Venture One (CV1) in South Ghawar field and Core Venture Two (CV2) at the Red Sea. Other partners include Royal Dutch/ Shell Group, BP PLC, and Conoco- Phillips for CV1 and Occidental Petroleum Corp. and Marathon Oil Co. on CV2.
Shell is leading Core Venture Three (CV3)'s Shaybah field in the Empty Quarter, with investment from TotalFinaElf SA and Conoco- Phillips.
CV3 likely
Of the three projects, CV3 remains the most promising (OGJ Online, Sept. 10, 2002).
Saudi foreign minister Prince Saud al-Faisal Dec. 25 said he expects a final CV3 deal within 2 months. Saudi and industry officials privately say they also hope that CV1 moves forward, perhaps within 6 months.
But prospects for CV2 remain cloudy; industry officials familiar with that project expect it to be reopened for bid. That opens the door for more potential investors including ChevronTexaco Corp. and as yet unnamed state-owned oil companies from Europe or Asia.
Iraq
Longer term, Iraq also holds significant potential, assuming Saddam Hussein is not in power. But shifting political landscapes may mean foreign companies face prolonged negotiations before large investment deals can be finalized, Middle East analysts say.
US policymakers should also be careful not to assume that oil revenues will help defray war costs and the expense of rebuilding the Iraqi economy, a report cosponsored by the Council on Foreign Relations and Rice University cautioned.
"Notwithstanding the value of Iraq's vast oil reserves, there are severe limits on them both as a source of funding for post-conflict reconstruction efforts and as the key driver of future economic development. Put simply, we do not anticipate a bonanza," the authors said.
The US State Department meanwhile says any military action undertaken by US-led forces will be mindful that the oil fields are the property of the Iraqi people.
"If a coalition of forces goes into those oil fields, we would want to protect those fields and make sure that they are used to benefit the people of Iraq and are not destroyed or damaged by a failing regime on the way out the door," Sec. of State Colin Powell said on Meet the Press Dec. 29.
"And you can be sure that they would be protected and the revenue generated from any such oil fields would be used in accordance with international law and to benefit the people of Iraq," he said.