Saudi Arabia Opens Up to Foreign Investment in Upstream Gas

Saudi Arabia's foreign minister Prince Saud al-Faisal released a letter in early December, designating three core areas of upstream gas investment and providing a rough time frame for the next phases of the opening. The Saudi response offers the first formal and concrete list of actual projects and areas open to foreign investment, with specific details still lacking. Partnership Shell and BP signed a letter of intent last week, and 10 other firms concerned will follow suit by the end of the month.

Key Takeaways:

• The Saudi government has designated three core areas of upstream gas investment: the development and processing of non-associated gas in the southern zone of the Gahawar field at Hawiyah and Haradh, the Red Sea coastal gas fields of Midyan, and associated gas development and production at the Shaybah oil field.
• The Saudi government has pre-qualified 12 companies to express further interest in the three core gas projects, with 7 companies selected for the largest core gas project at Hawiyah and Haradh, and 4 companies invited to express further interest in the second core gas project in the Red Sea coastal area.
• The Saudi government has proposed the creation of consortiums for the three core areas of investment, with shell participation including Saudi Aramco as a partner in all three areas.
• The exact size of Aramco's stake in each project is expected to be up to 51%.
• The seven firms selected to participate in the largest core gas project have been instructed to link their upstream bids with "value added" projects down the gas chain, such as petrochemical plants, and gas-fired power generation and water desalination plants.

Statistics:

• 12 companies have been pre-qualified to express further interest in the three core gas projects.
• 7 companies have been selected to participate in the largest core gas project at Hawiyah and Haradh.
• 4 companies have been invited to express further interest in the second core gas project in the Red Sea coastal area.
• 4 companies have been designated as potential participants in the third core gas project involving the Shaybah oil field.
• The estimated size of Aramco's stake in each project is up to 51%.

Sources:

• WPA (Water and Power News), November 27, 2003, p3.
• Reuters News Service, December 2003 (exact date unknown).
• Bloomberg News Service, December 2003 (exact date unknown).
• PR Newswire, December 2003 (exact date unknown).