Saudis start their charm offensive Terry Macalister Wednesday July 23, 2003 The Guardian
Saudi Arabia yesterday launched its first gas licensing round in an attempt to attract some of the western investment heading for Iraq, Kuwait and other oil nations now favoured by America. Saudi energy minister Ali al-Naimi, attending a special conference in London, said that 41 firms, including BP, had expressed interest in its upstream exploration over the last 24 hours. He was confident many would put in formal bids attracted by what he called its reputation as "the most tranquil country in the world". The desert kingdom has been sidelined by Washington since the aftermath of September 11 when many of the al-Qaida terrorists were found to be Saudi nationals. Riyadh, once America's leading ally in the region and a vital provider of oil, is now seen as unreliable. Yesterday the Saudis sought to capitalise on a joint venture signed last week with Shell and Total of France which Mr al-Naimi claimed would provide the two firms with returns of more than 15%. They admitted that failure to tie up earlier deals with BP, ExxonMobil and Shell had been caused by the country's insistence that exploration was tied to industrial schemes such as building desalination plants. The renewed attempt to attract interest in Saudi's energy sector, launched at the London conference, came just a week after Kuwait held talks in Britain with Shell and BP. The Saudis are offering to open up to three areas for licensing amounting to 150,000 square kilometres in a region known as south Gawar. This was acreage which Exxon and BP had been haggling over. Mr al-Naimi promised complete transparency in the licensing process but was short on details. He said they would be made public as the licensing process progressed - with final agreements in place early next year if all went well. Asked whether some oil companies might be put off by the recent spate of bombings and the arrest this week of 16 al-Qaida suspects, the Saudi minister said: "Saudi Arabia is still the most tranquil country in the world as is evidenced by the interest [of 41 companies] in the programme." Terms and conditions for the licensing would be "extremely competitive" bearing in mind the opening up of other Middle East nations, such as Iraq and Kuwait, to foreign firms. Mr al-Naimi believed bidders would be attracted by the clarity of the laws and the long history of joint venture arrangements in the country. He dismissed worries that foreign oil companies could be thrown out in another bout of nationalisation, saying that anyone who was aware of the industrial history of Saudi "would not use the word throwing". Mr al-Naimi also denied reports that state-owned oil company Saudi Aramco - formerly part owned by western firms - was resistant to the new licensing offer. "This statement or assumption is a false one," he argued at a press conference in London. Companies who won permission to search for gas would receive the standard Saudi price of 75 cents per British Thermal Unit (BTU). Oil is not part of the licens ing and any found would have to be handed back to the Saudi government. The Saudis said they wanted western help to meet growing local demand for gas while industry experts pointed out that the country had let opportunities slip by because of ambivalent attitudes towards the west. "The Saudis have obviously had to compromise to win a deal with Shell," said Nassir Shirkhani, from oil industry newspaper Upstream. "In the past western oil companies would have rushed to Saudi but with the opening up of Russia and west Africa there are many other alternatives."
