Saudi Arabia withdraws from $15 billion deal with Exxon Mobil

by The Associated Press

Saudi Arabia called off a proposed $15 billion deal with a group of oil companies led by Exxon Mobil Corp. to develop its massive eastern gas fields, a Saudi oil official said June 6.

The official, speaking to The Associated Press on condition of anonymity, said Saudi Oil Minister Ali Naimi notified the companies June 4 that the country has revoked a memorandum of understanding signed three years ago regarding the development of the South Ghawar gas field, 149 miles southeast of the capital, Riyadh.

The Saudis and the companies apparently disagreed on the terms of the agreement, including the amount of gas reserves the companies will handle and revenues, the official said.

He said Saudi Arabia will be working on developing the fields with other companies, but did not elaborate on which companies or what stage the negotiations were at.

Exxon Mobil Corp. share prices slipped 24 cents to $37.16 on the New York Stock Exchange June 5 on reports that Saudi Arabia had pulled out of the project.

ExxonMobil spokeswoman Cynthia Langlands confirmed June 5 that company officials had been meeting and exchanging letters with Saudi officials, including Naimi, who has represented the Saudi government in negotiations with foreign oil companies.

Foreign oil companies — including Texas-based ExxonMobil, Royal Dutch/Shell and BP — have been seeking to invest $25 billion in gas-development and desalination projects in exchange for access to Saudi Arabia’s vast gas fields.

The project, announced in 2001, would represent the biggest opening of the Saudi oil and gas industry to outsiders since the 1970s.

Exxon Mobil, which has a long history of operating in Saudi Arabia and has invested heavily in its oil-refining and petrochemical industries, had been picked to lead the $15 billion development in South Ghawar — the largest of the projects — and a smaller project near the Red Sea.