8 Western Firms Picked for Huge Saudi Gas Project
Exxon Mobil Corp. and Royal Dutch/Shell Group led a group of eight Western companies named Friday that will take part in a $25-billion natural gas development program in Saudi Arabia, the kingdom’s biggest opening of its energy industry to outsiders since the 1970s.
The companies, including Occidental Petroleum Corp. of Los Angeles, will help Saudi Arabia convert oil-burning utilities to natural gas, which would free up more of the kingdom’s crude oil for export. The other companies selected were BP of Britain, Total Fina Elf of France and American energy firms Conoco Inc., Phillips Petroleum Co. and Enron Corp., the official Saudi news agency said.
For Saudi Arabia, the program would create jobs and spur an economy saddled with a 15% unemployment rate. For its business partners, the initiative offers benefits in the short and long term. In particular, analysts noted, the Western companies would have a lead should the kingdom open access to its crude oil reserves, the world’s largest.
“I don’t think it’s going to be spectacularly lucrative, but there are other pressing reasons to be there,” said Julian Lee, an analyst at the Center for Global Energy Studies in London. “It’s part of a long-term play by the oil companies, [which] want ultimately to get access again to Saudi crude.”
Saudi Arabia took over its oil fields in 1975 in the wake of tensions arising from the Arab oil embargo against the West that began in 1973.
The awards announced Friday are the culmination of three years of talks and lobbying by the companies with the Saudis, whose natural gas reserves are the world’s fifth-largest.
Shares of all five American companies rose in trading Friday on the New York Stock Exchange. Exxon Mobil gained $1.47 to close at $90.20, Phillips rose $1.65 to $67.52, and Enron added $2.70 to $54.90. Occidental rose 53 cents to $31.08, and Conoco climbed $1.25 to $33.05, both 52-week highs.
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Associated Press and Bloomberg News were used in compiling this report.
