Saudi Arabia in Pacts With Nine Global Oil Firms

Saudi Arabia signed agreements with nine international oil companies Sunday, a move that marks the first major foreign investment in its energy sector since nationalizing the industry in 1975.

The deals, worth a total of $25 billion or more, involve the development of three natural gas fields in the kingdom and a number of related power plants, transmission pipelines and water desalinization projects.

The Western companies will 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.

Exxon Mobil Corp., the world’s largest publicly traded oil company, is the lead manager on two of the projects, including the $12-billion-to-$16-billion Ghawar Core Venture 1 project. It also will lead a second core project. Royal Dutch/Shell was chosen to lead a third project. The last two projects have a value of $7 billion to $10 billion each, Prince Saud al Faisal told reporters.

The other companies selected were BP of Britain, TotalFinaElf of France, Conoco Inc. of Houston, Phillips Petroleum Co. of Bartlesville, Okla., Occidental Petroleum Corp. of Los Angeles, Enron Corp. of Houston and Marathon Oil Co. of Houston.

Harry Longwell, director and senior vice president at Exxon Mobil, said the financial terms of the deal are still being discussed. But he said his company is ready to begin the work when the final contracts are signed.

“The Saudis’ expectations are extremely aggressive,” Longwell said. “It’s a very tight schedule and in recognition of that, the ability to get this done is one of the key reasons we were chosen to lead two of these ventures. We already have a senior management team in place and are ready to go to work immediately.”

Saudi Oil Minister Ali Ibrahim Naimi said the companies are expected to profit on returns from the exploration and development of gas fields with more than 15% of the investment cost.

Saudi Arabia’s state-owned energy company, Saudi Aramco, will be an equity owner in the projects.

Saud said 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 and closed its energy exploration and production sectors to foreign investment.

Although locked out of the production of energy, Irving, Texas-based Exxon Mobil 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.