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Thursday, Oct. 1, 1998
Saudis court U.S. oil companies once again
Nationalization of oil industry in 1973 put end to foreign firms' exploration, production
By H. JOSEF HEBERT
Associated PressWASHINGTON -- For the first time in a quarter-century, Saudi Arabia is seeking out U.S. oil companies to help develop the kingdom's vast energy reserves -- dramatic evidence of a changing global oil market marked by low prices and tough competition.
Saudi officials began talks with seven U.S. oil companies to explore ways for the Americans to invest in the kingdom's oil industry, including exploration and production.
Industry experts expect the process to take a year or more -- and even then, it may not be a certainty.
But the overture by Saudi Crown Prince Abdullah in a private meeting with oil executives over the weekend was the first time the Saudis have sought outside participation since the kingdom nationalized its oil industry in 1973. No foreign companies have been involved in exploration or production in Saudi Arabia since then.
The Saudis' direct approach caught some oil executives by surprise. But industry analysts and Middle East scholars said it wasn't unexpected.
The Saudis ``desperately need capital to invest in their oil sector to keep the oil flowing,'' said Yehya Sadowski, associate professor of Middle East studies at Johns Hopkins University. ``They don't have the capital, but the oil companies do.''
The Saudis' financial problems are exacerbated by low oil prices, growing competition from other oil producers such as Venezuela and Mexico and slack demand, made worse by the economic crisis in Asia.
Some of Saudi Arabia's neighbors are seeking out foreign investment as well, despite concern about the political backlash from Islamic nationalists. Iran has sought bids for at least 40 oil and gas development projects, and Kuwait is said to be holding private, preliminary discussions on foreign investment.
In Saudi Arabia, Abdullah has essentially headed the government since 1995, when his half-brother, King Fahd, had a stroke. He told oil executives he wants ``recommendations and suggestions'' on what role they might play in developing new and existing Saudi oil fields, according to Saudi sources.
The U.S. companies were cautious in their comments, fearing they might antagonize the Saudis, who would like the issue to have a low profile.
``I didn't comment before the meeting. I can't comment now,'' said Ed Burwell, a spokesman for Exxon Corp.
The American executives could not have been more pleased, however, at potential access -- after an absence of more than two decades -- to the world's largest oil reserve.
``All the oil companies will gladly go to Saudi Arabia,'' said Jay Bhutani, an industry analyst at Donaldson, Lufkin & Jenrette. ``No one wants to be left out of a country like Saudi Arabia.''
But Bhutani and others said the discussions could take a year or more.
``It's the start of a dialogue,'' said one Saudi official, who spoke on the condition of not being identified.
While Saudi leaders are looking for new partners, it will not be the kind of relationship U.S. companies had a quarter-century ago.
Before 1973, ``Aramco, serving as a cover company for a variety of the oil majors, was in a position to tell Saudi Arabia what oil prices they had to accept,'' said Sadowski, the Johns Hopkins professor.
``I'm sure the first thing the Saudis will do this time is to prevent the oil companies from forming any united organization that would give them leverage against the kingdom,'' Sadowski said.
U.S. officials familiar with the Saudi discussions said the Saudis are sensitive to both the concerns of Islamic nationalists and the need to strengthen the country's ties with the United States on energy matters.
``They're saying it's better to be in tight (with the United States), but they want it on their terms,'' said an administration official.
Saudi Oil Minister Ali Naimi, who is said to personally oppose the overture, has been directed to meet with companies individually in the coming weeks, according to U.S. sources.
Those attending the meeting with Abdullah included senior executives from Mobil Corp., Exxon Corp., Texaco Inc. and Chevron Corp. -- all partners in the Arabian American Oil Co., Aramco, in the 1930s.
Also present were executives from Atlantic Richfield Co., Conoco Inc. and Phillips Petroleum Co.
The largest foreign investor in Saudi Arabia, Mobil, is invested in petrochemicals, lubricants base oil refining, and lubricants marketing in the country.
``We would as a normal matter of business discuss with them ways we could improve businesses in which we are involved,'' said Mobil Corp. spokesman Bill Cummings, when asked about Mobil's partnerships in Saudi Arabia.
Saudi Arabia has the world's largest known oil reserves -- more than 260 billion barrels -- the lowest costs of extracting oil and the most production of any country in the world -- 8 million barrels a day.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web