2001 News Story

Prince Saud Al-Faisal comments on gas agreements

Foreign Minister Prince Saud Al-Faisal, who is supervisor of the team negotiating with the international petroleum companies, in a press conference yesterday described the signing of the preparatory agreements for development of Saudi Arabia's natural gas as a historic event for the Kingdom, noting that they bring about a new kind of partnership in the energy sector. The agreements, he said, "describe a process of study and dialogue within a shared vision that will lead to the development of new gas resources and a major investment in the production of water, power and petrochemicals." This investment is estimated to be around U.S. $20 billion, and may reach more than $50 billion. Prince Saud declared that the initiative for this concept came from Crown Prince Abdullah in September of 1998. Referring to the companies selected, he said they are well known, some of them having done business in the Kingdom for many years.

Prince Saud explained that the three core ventures, each of unprecedented scale, were formulated in December 2000. They are integrated across different aspects of the energy sector, and include a balance of activities between exploration for natural gas, its production, processing, and transportation, and utilizing it for energy-intensive industries such as electrical power generation, desalination processes, and the production of petrochemicals. Each venture is to be undertaken by a partnership between a consortium of experienced and committed international companies who are investing their expertise and capital, and the Kingdom, which will provide resources, a stable environment for investment and its own development skills.
The first venture, led by Exxon-Mobil with Royal Dutch Shell, British Petroleum, and Phillips, will focus on the utilization of existing Saudi Aramco natural gas supplies in the South Ghawwar Oilfield, and on aggressive exploration for gas in the northern part of the Empty Quarter (Rub Al-Khali). Downstream, this venture includes investment in electric power generation, water desalination, and petrochemicals production on both the east and west coasts, with capacities to total 4,000 megawatts of electricity, 300 million imperial gallons of water per day, and 2 million tons per annum of petrochemicals.
The second venture, led by Exxon-Mobil with Occidental and Marathon, combines the development of known natural gas reserves in the northwest of the Kingdom at the Midyan and Barqan fields, and includes electric power generation and water desalination projects. In addition, new areas will be opened up to exploration along a certain stretch of the Red Sea.
The third venture, led by Shell with TotalFinaElf and Conoco, will focus on the exploration and development of associated gas in the Shaybah Field, development of known natural gas supplies in the Kidan field, and exploration in nine of the largest concession blocks in the Kingdom, in order to provide valuable feedstock for power, water and petrochemical projects connected to the Master Gas System.
Prince Saud said he expected the project definition program to be accomplished within six months. This, he explained, "will be followed quickly by definitive documentation of component projects, after which real investment in design, procurement, construction and start-up can begin". He noted that the Kingdom has studied the experience of other countries that have followed similar gas development programs and built out the associated infrastructure. These studies, he said, have indicated that investment of $1 billion in a given year can create, through the beneficial operation of the economic multiplier effect, as many as 20,000 direct and indirect jobs, specifying that: "In the case of the Kingdom's natural gas initiative, a sustained investment of at least $5 billion per year is expected during the early part of the program. Therefore, we expect the initiative to result in the creation of thousands of jobs for Saudi citizens, and many opportunities for the advantage of Saudi businesses. It should also present competitive investment opportunities for Saudi capital that is currently deployed outside the Kingdom."
The benefits of the initiative, Prince Saud went on to say, include the development of commercial and legal principles as well as fiscal and regulatory regimes that will benefit the Kingdom across many sectors of its economy.  "These changes", he said, "will facilitate investment by the Saudi business community. They will also improve the Kingdom's access to international capital markets and will better integrate the Kingdom into a growing world economy creating greater opportunities for all Saudi citizens."
Concerning utilizing this economic event in support of the Palestinian issue, Prince Saud declared that strengthening any part of the Arab economy is a source of strength to the other parts, including Palestine. He remarked that the government of Egypt, like that of the Kingdom, has taken steps to expand the economic base, and urged all Arab countries to do the same.