Saudi Arabia signed upstream gas exploration and production agreements with Russia's Lukoil and Sinopec of China yesterday as Spanish and Italian firms lined up to ink deals later in the day that the kingdom hopes will attract billions of dollars in investments.
Contracts to explore for and produce non-associated gas in the northern part of the vast Rub al-Khali, or Empty Quarter desert, were also to be signed at the same ceremony in Riyadh by a consortium formed by Spanish oil group Repsol YPF and Italy's Eni.
State-owned Saudi Aramco is a partner in the three ventures, controlling 20 percent of the stakes in each of the projects in three regions covering a total area of 120,000km2.
"We expect investment in the first phase [exploration] to reach US$300 million," said China Petroleum and Chemical Corp (Sinopec,
The Sinopec-Aramco joint company will be incorporated in the Virgin Islands, he said, noting that last year China imported 11.92 million tonnes of crude from Saudi Arabia and this year plans to ship in 13.15 million tonnes.
Saudi Oil Minister Ali al-Nuaimi said the contract area for Sinopec covered 38,800km2.
"Efforts are also currently underway to establish a partnership between Aramco and Sinopec to provide the Chinese market with petroleum products through investments in joint venture refineries," Nuaimi told reporters.
Vagit Alekperov, president and chief executive officer of Lukoil had first put pen to paper with Abdullah Jumah, president and CEO of Saudi Aramco and the kingdom's oil minister.
"For the first time in the history of bilateral relations the doors to Saudi Arabia have been opened to the Russian petroleum business community," said Alekperov.
"The size of the investment will depend on the size of prospection and exploration work and it could go up to around US$three billion," he said.
Al-Nuaimi looked to future profits. "The area Lukoil and Saudi Aramco will jointly explore measuring 29,900km2 contains promising indications that we expected will yield profitable returns to the kingdom and Lukoil," the minister noted.
Under the terms of the contracts being signed yesterday, the exploration phase has been set at 10 years, divided into three periods of five, three and two years, with the latter two optional, a senior oil ministry official said Saturday night.
The contracts, awarded in late January, will run for a maximum of 40 years, the ministry's director general in the oil-rich Eastern Province, Yahya Shinawi, told reporters.
The north Rub al-Khali basin has been divided into three "contract areas," designated A for Lukoil, B for Sinopec and C for the Spanish-Italian consortium.
Associated gas and oil are "outside the scope" of the agreements, although they provide for the conditional exploitation of 500 million barrels of oil in place, he said.
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