RUSSIA - In Saudi Arabia.

Alekperov, Saudi Aramco CEO Abdullah Jum'ah and Saudi Oil Minister Ali Naimi on March 7, 2004, signed a 40-year contract to explore for and develop natural gas in Area A in the remote Rub' al-Khali (Empty Quarter) desert. LUKoil then said: "Probability of a commercial hydrocarbons discovery [in Area A] exceeds 80%".

The venture, Luksar, is 80% owned by LUKoil and the rest is held by Saudi Aramco. The gas field of 29,900 sq km Area A is in the northern part of the Rub' al-Khali desert. The JV was to borrow $215m from Saudi Hollandi Bank, which is 40% owned by ABN Amro Bank, to fund a five-year exploration programme. Luksar formed an 11-member board comprising eight from LUKoil, two from Saudi Aramco and a Saudi government representative. The board appointed a LUKoil man as CEO of the JV. State-owned Saudi Aramco will buy the gas from the JV and build pipelines to customers. LUKoil will market condensate from the field.

A Shell/Total JV in November 2003 won a similar contract with Saudi Aramco to develop gas within Shaybah oilfield and the Kidan gas structures in Rub' al-Khali.

Saudi Arabia has been seeking to attract foreign companies after it broke off talks in June 2003 with ExxonMobil over two gas JVs, ending more than two years of negotiations. China Petroleum & Chemical Corp. (Sinopec) and an ENI/Repsol partnership won contracts for two nearby gas E&P areas.

Saudi Arabia needs gas to fuel power plants and water desalination stations and to increase production of petrochemicals as it expands economic development beyond pumping crude oil. International energy companies, evicted from Saudi Arabia decades ago, want to return to the world's top oil producer.

LUKoil Overseas (LO), created in 1997, has been in operation since 2001. Its goal is to become "a competitive trans-national firm" (see Vol. 59, No. 13).

LUKoil is to produce 50 BCM/year of natural gas by 2010. In the spring of 2003, it signed an agreement with Gazprom on co-operation in Yamal projects. The main reason for this is that Gazprom is committed to buy gas from LUKoil at the entrance of the Yamburg compressor station.

Under that deal LUKoil was to supply Gazprom with 8.75 BCM/year from Oct. 1, 2005 to Dec. 31, 2006. This was to move from the Nakhodkinskoye field to Gazprom's gas pipeline system at the price of $22.5 less VAT per 1,000 CM. From 2008 on, LUKoil will produce up to 10 BCM/year at this field.

LUKoil has the biggest petrochemical asset base in Russia and East Europe. It meets a big part of domestic demand for various chemicals and is a leading exporter of chemical products to more than 50 countries in Europe, Asia, Africa and America (see DT No. 9).