Saudi Arabia to Invest in Gas Ventures

Gas Plant

Gas plant. Credit: Saudi Arabian Oil Co.

Saudi Arabia and international oil majors have discussed plans on gas venture opportunities both inside the kingdom and abroad, as a part of the country’s drive to diversify investments, ahead of listing the national energy giant, Saudi Aramco.

Saudi officials delved on investment opportunities with firms like BP and Chevron including Italy’s Eni, with the objective to help create gas reserves, the world’s sixth largest, and especially at a time of increasing demand at home.

It could be a déjà vu for a few with similar talks, known as Saudi gas initiative, taking place between Aramco and global majors around 1990s and early 2000s. These talks collapsed with parties disagreeing over returns on investment.

Currently, Aramco is aiming to get a valuation share listing of around $2 trillion, which is expected to be the world’s biggest initial public offering (IPO). John Watson, the Chevron CEO, said that they were always having discussions with Saudi Arabia about business development. Meanwhile, Bob Dudley, BP Chief Executive, said that he would not eliminate possibilities of creative partnerships with Aramco, and added that an outright investment by BP in the IPO was unlikely. Saudi Energy Minister and Aramco’s chairman, Khalid al-Falih, said that Aramco was interested in investing in international ventures and gas in particular.

Aramco is all set to revealing a new gas strategy which is aimed at developing resources and keeping pace with the rising domestic demand. A strategy known as ‘Vision 2030’ aims at the kingdom’s push to diversify its economy, away from oil and phasing out polluting fossil fuels. According to BP’s annual energy review, Aramco controls gas reserves which are in excess of 8 trillion cubic metres and the Saudi company wishes to explore gas opportunities in the Red Sea including onshore shale gas.

Since the 1970s, Saudi Arabia has reportedly not allowed the majors to develop its oil. The 1997-98 $25 billion gas initiative included companies like Exxon and Shell expressing interest, but finally not agreeing to terms. While Riyadh invited investors in 2003-2004 to find and produce gas in Rub Al Khail, it was Russia’s Lukoil which quit Saudi Arabia’s gas quest.

Meanwhile, it is reported that Saudi Arabia slashed income tax on energy companies which were operating in the kingdom with the objective of making investments more attractive. So, the terms could be expected to be better now.

 

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