Saudi starts slow pace oil investment race

Saudi starts slow pace oil investment race
REUTERS

DUBAI, MAY 10: The race to invest billions of dollars in Saudi Arabia's vast energy industry is finally underway - nearly two years after the starter's pistol was fired.

That is surprisingly good news for foreign firms who have been longing for progress since Saudi Crown Prince Abdullah asked them for investment ideas in 1998. Since then, executives from the world's biggest oil firms have visited the kingdom to lobby officials who manage the kingdom's huge oil reserves.

FOREIGN FIRMS ENTHUSIASTIC: They have become more optimistic of moving closer towards tangible negotiations after recent developments.

Saudi officials met with the heads of TotalFina, Eni, Marathon, BP Amoco, Conoco, Royal Dutch/Shell, Phillips Petroleum, Chevron, Exxon Mobil Corp, Texaco, Enron Corp and Occidental Petroleum. Instead of walking away with unanswered questions, this time they were given investment guidelines and timetables.

Saudi Foreign Minister Prince Saud al-Faisal, head of a committee negotiating with foreign oil companies, told a highly-publicised news conference Saudi Arabia was expected to conclude negotiations on bids by the end of this year.

While Western oil executives and Saudi oil experts do not expect the foreign cash to start flowing anytime soon, they were encouraged by signs of movement. Companies had asked for more information on investment opportunities after the recent meetings and were due to meet with Saudi officials on Wednesday, Western executives said. The Saudi officials cancelled the meeting but Western executives played down the decision and were upbeat.

"The Saudis are agressively imposing structure on the process. They have a rigorous process and they are giving the foreign firms clear guidelines and timetables," said one.

SAUDI ARAMCO NOT ENTHUSIASTIC: Despite progress, analysts note that Aramco's reluctance could slow down the talks. Foreign firms are now seeking vital information from SaudiAramco on the potential of gas fields before they commit to projects expected to attract of total of $100 billion.

While Saudi Arabia has made it clear it had no intention of opening up the heart of its energy business - oil exploration and production - it is offering upstream gas projects.

So firms are fighting hard for a chance to invest in gas exploration and production. "Saudi Aramco is so secretive and such a bureaucracy. The Saudi government is forcing it to give up highly confidential information. It is like pulling teeth," said a Saudi oil expert who has followed the talks.

"Before setting up projects, these companies are going to need bankable feasibility studies. It takes a lot of data that has not been available in Saudi Arabia," he added.

Analysts said that in the past, Saudi Aramco had beenreluctant to invest in projects to produce gas for some state enterprises because the companies rarely paid their bills.

Foreign firms who help develop gas for domestic consumption,on the other hand, will have to get paid to guarantee a return on investment.

One analyst said the request to Saudi Aramco for informationon gas fields is likely to shed light on how quickly the foreign firms will move to the next stage of negotiations.

"The foreign firms and the Saudis are dead set about moingalong. This will be a test of how quickly they'll do it," he said.