Eight producers to put $25 billion in Saudi gas projects

In a major move to reopen its upstream sector to foreign investors, Saudi Arabia on Friday named eight international oil companies to participate in three natural gas exploration and development projects with an initial total cost estimated at $25 billion.

Sam Fletcher
OGJ Online

HOUSTON, May 18 -- In a major move to reopen its upstream sector to foreign investors, Saudi Arabia on Friday named eight international oil companies to participate in three natural gas exploration and development projects with an initial total cost estimated at $25 billion.

ExxonMobil Corp., the Royal Dutch/Shell Group, BP, and Phillips Petroleum Co. will participate in the biggest of those projects, designated Core Venture 1, in the Rub' al Khali area in the kingdom's eastern province.

ExxonMobil also was named as operator for Core Venture 2, on the Saudi Arabia's northwest coast along the Red Sea. Other participants in that venture are Enron Corp. and Occidental Petroleum Corp.

Shell, TotalFinaElf SA, and Conoco Inc. will participate in Core Venture 3 to develop the Shaybah area in the "empty quarter" of southeast Saudi Arabia. It is one of the most remote and barren deserts on the globe and the region where the Shaybah oil field was brought into production in mid-1993.

However, Conoco officials in Houston said they hope to make it "one of the most productive and innovative projects in Saudi Arabia."

Operators have not yet been named for the other two core ventures. However, various sources reported ExxonMobil is a strong contender to head Core Venture 1 as well, while Shell is viewed as the best bet to be named operator of Core Venture 3.

Investments by the western oil companies will go beyond the usual exploration and development operations.

Core Venture 1 participants will provide "field production and gathering facilities, gas processing and fractionation plants to recover and separate liquids from existing and new gas production, gas and liquids transmission, and downstream investment in power, petrochemicals and water desalination," said ExxonMobil officials.

That includes up to 4,000/Mw of new power generation capacity integrated with water desalination; and two new petrochemical facilities, one each on Saudi Arabia's east and west coasts.

Core Venture 2 centers on development of discovered gas reserves in gas-prone northwest Saudi Arabia and exploration in the northern portion of the Red Sea. Midyan field is in that region at the mouth of the Gulf of Aqaba. Participants also will invest in power and desalination facilities in that region, with opportunities for additional investment in chemical operation if their exploration efforts prove successful.

Previous discoveries in the Midyan basin were in the Lower Miocene Maqna group. Surface and subsurface data indicate a deep central basin bounded by Precambrian basement on the north and northeast with Cretaceous and Tertiary sediments exposed in an uplift on the northwest along the Gulf of Aqaba (OGJ, July 11, 1994, p. 47).

Additional details about the three areas and various development plans were not available Friday from either Saudi Arabian or company officials.

Company officials contacted by OGJ Online generally were circumspect in their comments, pending final negotiations with the Saudi officials over the next few weeks. None could say even how much acreage is involved in any of the projects.

Contacts at the Saudi Arabia embassy in Washington, DC, said they had received no details on the projects because government offices in Saudi Arabia were closed Friday, which is observed as the Sabbath in Muslim countries.

Announcement of the awards to the eight companies was made through the official Saudi Press Agency.

ExxonMobil is the largest foreign investor in Saudi Arabia at more than $5 billion, company officials said. Its interests include two petrochemical joint ventures and the Samref refinery joint venture in that country. The company is also the largest foreign purchaser of oil and other hydrocarbons from the kingdom.

ExxonMobil Chairman Lee Raymond said the firm will combine its "strong track record of bringing large scale projects on-stream in a safe, cost effective, and timely manner" with the company's proprietary technology on the two new Saudi Arabian projects.

Earlier this week Dhaifallah A.F. Al-Utaibi, senior vice-president of engineering and operations services for Saudi Arabian Oil Co., said that firm plans to spend more than $15 billion on massive oil and gas development projects in the next 5 years."Exploration for more gas sources is now focused on the South Ghawar, Berri and Qatif fields in the Eastern region," said Al-Utaibi, in a report carried Friday by the Saudi Gazette. He urged local and foreign companies to be ready to respond positively to the oil, gas and petrochemical expansion plans in the Gulf region during the next 10 years with expected expenditures of over $50 billion.

"In response to the anticipated increase in the demand for gas in the Kingdom, we had to expand the capacity of the master gas system from 3.7 to 7.8 bcfd," Al-Utaibi said.

Saudi Aramco's efforts to find new gas sources resulted in the discovery of 30 tcf of gas reserves over the last 3-4 years, he said.

Contact Sam Fletcher at Samf@OGJonline.com

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