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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: diana g who wrote (31693)	11/11/1998 9:42:00 AM
From: Tomas	Read Replies (1) \| Respond to of 95453

The Oil Daily: Saudi Arabia Puts U.S. Projects on Fast Track The Oil Daily, November 11, 1998 Having stunned the oil world in September by asking selected U.S. oil companies to submit proposals for any type of cooperative venture they wanted, Saudi Arabia's Crown Prince Abdullah apparently does not intend to dally over decision-making. With an unofficial deadline for the first round of bids set for the end of this year, participants at the now-famous Saturday tea party at Ambassador to the United States Bandar bin Sultan bin Abdul-Aziz's Washington residence are rushing to prepare offers that could see them back developing the kingdom's oil for the first time in more than 20 years. The seven who attended were former Aramco partners Chevron Corp., Exxon Corp., Mobil Corp. and Texaco Inc., plus Atlantic Richfield Co. (Arco), Conoco Inc. and Phillips Petroleum Co. At least two proposals, from Arco and Conoco, are already being considered, Western industry sources say. Others are on the way from Phillips, Texaco and Occidental Petroleum Corp. -- though it wasn't actually at the party. Mobil and Chevron are both said to be putting in offers relating to the Abu Safah border field that Saudi Aramco operates on behalf of Bahrain, while Exxon is said to be looking at options including asset swaps, international alliances and gas-to-liquids development. Crown Prince Abdullah is set to pass the proposals on to oil minister Ali Naimi, Foreign Affairs Minister Prince Saud al-Faisal and possibly Finance Minister Ibrahim al-Assaf. They will also be reviewed by technical groups from Saudi Aramco and the oil ministry, before a final decision is made by the cabinet. Participants at the tea party said decisions should be made within six months to a year. While instructions to the selected companies were vague, one thing is sure: No preconditions or prohibitions are being placed on what firms can bid for -- despite some signals that interest might be limited initially to natural gas, rather than oil (TOD, 11-3-98, p.1). The key will be how adept companies are at selling their ideas to a Saudi government that is keen to radically alter the country's economic structure and to cement its relationship with the United States. At the economic level, its primary aim is to ensure that the economy expands enough to keep pace with a rapidly growing population. A larger oil industry is seen as critical to this growth. Evaluation of the proposals will be based on various criteria, including Aramco's own capabilities. One of the concerns arising from the reopening is the possibility that it may be seen as an implied criticism of the state oil giant. Efforts are being made to dispel any such notion. One suggestion is that Aramco will be given the opportunity to offer a counterproposal to ideas that it sees as infringing on its turf. Aramco sensitivities are also part of the reason that there is a very public push to focus international private attention on natural gas and associated developments because Aramco has not recently invested heavily in this area. On the upstream oil side, Saudi industry insiders point out that Aramco has up to 2 million b/d of spare capacity at current production rates of around 8 million b/d. However, the emphasis on gas is not exclusive. One of the goals is to free up money in Saudi Arabia for other uses, a fact that creates plenty of scope for argument in favor of upstream oil deals as well. The argument for a broad opening is further strengthened if it can be shown that the money spent by private oil companies inside Saudi Arabia would otherwise have gone into oil development in other countries. That's particularly important, given that several countries -- most notably Venezuela and Iran -- have opened their doors in recent years to private investment, Kuwait is about to do the same, and companies are set to start developing Iraq's oil once sanctions are lifted. Given that Saudi Arabia has the world's largest and least-costly-to- produce oil reserves, government insiders believe that investors will find it difficult to go elsewhere if these reserves are available. However, Riyadh is anxious not to end up with extra new capacity that remains idle, and deals will probably stipulate that companies themselves refine some or all of the oil they produce, participants at the Washington meeting said. With U.S. firms heading the charge, the theory goes, that could assure success for years to come for the Saudi government drive to remain the top U.S. supplier. However, the bidding companies are likely to fight any potential requirement that oil they produce be returned to the United States, with U.S. industry sources terming such a concept unrealistic. So far, the invitation to submit bids for projects in Saudi Arabia has only gone to U.S. firms. But European companies, particularly British Petroleum Co. plc and Royal Dutch/Shell Group, will probably be invited to join, at least for a second wave of projects. Toby Odone The Oil Daily -- 11-12-98