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To: BigBull who wrote (43176)	4/24/1999 1:33:00 PM
From: BigBull	Read Replies (2) \| Respond to of 95453

Another story on Changes in the gulf. Business News -------------------------------------------------------------------------------- Gulf 'must speed up oil opening' London (Reuters) - Gulf states must speed up their gradual opening to foreign oil companies or lose the investment vital to revive their sickly economies, analysts said yesterday. A rising oil price, complacency born of wealth and lingering 1970s-style resource nationalism have made the Gulf highly resistant to pressures for a quicker opening, they said. "The Gulf could become the Silicon Valley of the oil industry if it brought in more foreign investment," said Henry Azzam, managing director of Middle East Capital Group. "It could become a hub for oil development that would generate diversified economies and provide jobs," he told a conference of London's Centre for Global Energy Studies. "If they don't open up more they will lose out in the long run." Saudi Arabia, the only Gulf country yet to embark on a programme of attracting foreign investment to revive giant but ageing reservoirs, would eventually have to do so under relentless commercial pressures, the analysts said. But exactly when Riyadh will roll out the red carpet for foreign majors remains unclear amid signals from the kingdom that there is no need for any early upstream expansion. Some analysts suggest that Riyadh will only change course under exceptional circumstances such as a lifting of United Nations economic sanctions against rival oil power Iraq, which has no qualms about opening its own giant fields to foreigners. "The pressures to reopen are compelling and overwhelming, but the timing is unclear," Edward Morse of Hess Energy Trading said of Saudi Arabia. "If the doors are kept closed, the risk is that market share will be lost to others." Non-Arab Iran is frantically seeking foreign help for its delapidated fields but faces some internal political opposition, distractions caused by oil industry restructuring and a lack of trained staff to negotiate the new ventures. Across the waterway the Gulf Arab states of the Gulf Cooperation Council (GCC) - Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain and Oman - have put in a more leisurely performance. The GCC oil states have no room for complancy, Azzam said, noting that the countries' combined income this year could fall to around $53.69 billion from $63.59 billion in 1998, despite higher oil prices. "I would go full speed ahead if I were the Gulf states. They should have started the process in the 1980s," said Herman Franssen, director of Petroleum Economics of the United States. Recent Opec production cuts have inflated the world's unused output capacity and weakened the rationale, in the short-term at least, for bringing in foreign oil companies. And yet the resultant 50 per cent oil price rise this year, if sustained, will raise the incentive for foreign oil companies to invest in higher cost areas that have steadily captured market share from Opec's Gulf members for the past 20 years. That increases the pressure on Opec Gulf heavyweights to raise their capacity to satisfy growing world demand. To do that they need foreign capital, technology, trained experts and access to downstream markets. "It's very difficult to deal with market risk when you are a monopoly without a clear link to the downstream," said Morse, noting that both Iran and Kuwait want to commit foreign partners to lifting quantities of crude as part of their contracts. Geopolitics, in the form of strengthening alliances to major Western powers, are also a factor, but the economic need to provide jobs is the most urgent domestic imperative. "The need for change is more compelling than ever," Azzam said, noting that Saudi unemployment among its nationals was running at around 27 per cent, mostly among young men. "Policy makers still see low oil revenues as a cash flow problem that will not continue, rather than a structural problem that will remain," said Azzam. Other pressures include ever lower costs from technology that make developments in non-Gulf areas more economic. Analyst Manoucher Takin said development costs had fallen by 12 per cent in the UK North Sea between 1991 and 1998 while those of Norwegian fields had fallen by 22 per cent. Gulf states still need to make their industries more attractive to foreign companies by streamlining complex and opaque legal and trade practices, the analysts said. Above all there looms Iraq, eager to bring in foreigners to raise its war-damaged production capacity once it is freed of the shackles of Gulf War sanctions. Franssen said 50 companies from 27 countries were trying to negotiate development or exploration contracts with Baghdad to exploit reserves second only to those of Saudi Arabia. "Iraq is the El Dorado of the oil industry," he said. "The prospect is enormous, astronomical, and it can move very rapidly to raise its production capacity."

To: BigBull who wrote (43176)	4/24/1999 3:28:00 PM
From: Ahmed Elneweihi	Read Replies (2) \| Respond to of 95453

BigBull, Even though I am from the Middle East (this is why I do not like anti-Arab remarks I read sometimes on this thread), I do not want to venture predicting what could happen there. The problem is that in the ME, the policies could change because of the ruler (be it a king or a president) change of heart or opinion. You may not see the continuity of policies that we are used to in the West, because in the latter the policies in general are determined by the institutions and business which do not usually make 180-degree decisions. But, there is one thing clear in the ME and elsewhere is that economic progress can not proceed in a country without some western business participation. Given that, a country like Iran may decide that while they oppose the West on so many fronts, they may not see anything wrong with accepting western participation in things such as development of oil fields. After all, who else can do that for them; definitely not Russia. I agree with you that if Khomeni was alive, something like this would not have happened. He was a man of principles (whether you agree with his principles or not) who would sacrifice economic well being for the sake of what he believed to be morally correct. I suspect the new regie in Iran may be more flexible. Now, I would like to know from you a few things, what is the enormous implication on our investment that you see in the ME opening its fields to the west? Would not something like this benefit only the major internationals such as XON and the like? Or were you thinking of the osx companies that have presence in the ME (I know of SDC and to a degree GLBL)? And, are you not concerned that developing of new fields could contribute to a long term decline in the price of oil if more oil becomes available at the time that alternative fuels are developing and becoming more of a reality than say ten years ago?