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Tuesday, 23 July, 2002, 16:22 GMT 17:22 UK
Deadline looms for Saudi gas deal
Aramco refinery at Ras Tannura
Foreign firms will work with Saudi Aramco
The future of a landmark $25bn gas deal between Saudi Arabia and western energy firms is hanging in the balance.

The deal represents the first major foreign investment in the Saudi energy sector since it was nationalized in 1975.

But the conditions of the agreement have been fought over since it was first agreed in June 2001.

Firms involved
Exxon Mobil
Shell
BP
TotalFinaElf
Occidental
Philips
Conoco
Marathon
The oil firms have now been told to submit their final offers, with Saudi Foreign Minister stressing his determination to press ahead with the liberalisation of the energy sector "under all circumstances".

Unnamed sources and press speculation has repeatedly suggested that the deal is on the verge of failure.

Such a failure would be an acute embarrassment to both the foreign minister Price Saud al-Faisal and Prince Abdullah who were keen advocates of the deal.

Start all over again?

Chief executives of both Exxon Mobil and Shell have already held talks with Crown Prince Abdullah on the matter.

The firms are thought to be unhappy with high taxes and the amount of access given to the prized gas reserves.

Saudi foreign minister Prince Saud al-Faisal
Prince Saud: determined to press on with liberalisation
Saudi sources have suggested that the projects will be re-offered for fresh bids if there is no agreement with the parties now involved.

And there is already speculation as to the timing and shape of a relaunch.

Prince Saud, seen as a moderniser, was one of the driving forces behind the initiative and successfully faced down the reluctance of national energy company Saudi Aramco to allow foreign investment in gas exploration and production.

Rich resources

The deal is a series of interlinked contracts worth about $25bn with eight major firms to develop gas fields the size of Sweden.

The projects - to be carried out in co-operation with state-run Saudi Aramco for up to 30 years - are also expected to involve the development of power plants, pipelines and water desalination projects.

Saudi Arabia hopes the projects will help convert the country's domestic utilities from oil to gas dependency, freeing up more of the country's crude oil output for export.

In addition to the largest oil reserves in the world, Saudi Arabia boasts the world's fourth biggest gas reserves.

Analysis of the oil market, OPEC, and the alternatives

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04 Jun 01 | Business
19 Feb 02 | Business
11 Feb 02 | Business
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