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Saudis meet with oil firm chiefs about $25 billion in gas projects Difference in opinion over return for gas development; Saudis offer 8-12%, Exxon, Shell want 15-18% return, source says compromise reached John R. Bradley Associated Press Writer
Saudi Crown Prince Abdullah met with officials from the world’s top oil firms to discuss obstacles hindering investment projects in three core ventures worth $25 billion in the Gulf kingdom’s gas fields.
Abdullah, the oil-rich state’s de facto ruler, met separately June 23 with Phillip Watts, the chairman of the Royal Dutch/Shell Group of Companies, and ExxonMobil chairman Lee R. Raymond, the official Saudi Press Agency reported.
Saudi Arabia approved offers from Shell, ExxonMobil and six other companies a year ago to work three large Saudi gas fields. But disagreements over various issues — including the level of revenues for the companies — have twice delayed the signing off on final deals. A Western diplomatic source said the companies are seeking 15-18 percent in annual revenues from gas produced in the fields, while Saudi Arabia wants the figure to be at 8-12 percent.
The source, speaking on condition he not be further identified, said both sides reached a “compromise” June 23. He did not elaborate.
The Saudi Press Agency said several Saudi ministers — including the ministers for foreign affairs, oil, finance, industry and planning — were at the talks.
The Saudis and oil company representatives also talked about oil investment issues, the agency said.
Last June, Saudi Arabia signed agreements with nine international oil companies, marking its first major foreign investment in its energy sector since nationalizing the industry in 1975. BP, Phillips, Total, also involved Core venture one is led by ExxonMobil, along with Shell, BP and Phillips. ExxonMobil also leads core venture two in partnership with Occidental and Marathon. Core venture three is led by Shell, along with TotalFinaElf and Conoco.
The Western companies, including Royal Dutch/Shell and ExxonMobil, are expected to help Saudi Arabia convert its utilities from oil-burning to natural gas, which would free up more of the kingdom’s crude oil for export.
Saudi Arabia’s state-owned energy company, Saudi Aramco, will be an equity owner in the projects.
Saudi officials have said that if the companies discover oil, they will be compensated and the fields will be repossessed by Saudi Arabia.
Saudi Arabia nationalized its oil fields in 1975 after tension caused by the Arab oil embargo against the West that began two years earlier, and closed its energy exploration and production sectors to foreign investment. Although locked out of the production of energy, ExxonMobil has $5 billion in refining and petrochemical joint ventures in the country and is the largest foreign purchaser of crude oil and other hydrocarbons from Saudi Aramco.
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