SAUDI ARABIA - Oct. 22 - Gas Project To Proceed Amidst Criticism.

Speaking in Riyadh, Oil Minister Ali Al Naimi says the $25 bn gas initiative will go ahead even if the government fails to agree terms with foreign energy companies. He says the kingdom has offered "rewarding and just" terms to eight international oil companies after more than a year of intensive talks on allowing the companies unimpeded access to natural gas. The government, he adds, expects a response from the companies - by Nov. 1. But according to western analysts, the terms for the gas project are not satisfactory, with one analyst saying: "Nothing has changed. It seems as though the early promise of a new partnership between the government and the energy majors has vanished". (The gas initiative was launched by Crown Prince Abdullah in Aug. 1998 when oil prices had fallen to $10/b and the government was searching for money to pay for urgently needed power and desalination plants. Al Naimi is widely seen to have opposed the project from the start. As it was originally conceived, the government would enlist the money and technical expertise of eight international companies to exploit the kingdom's natural gas resources as feedstock for power, desalination and petrochemical plants in three core ventures - south Ghawar in the Eastern Province, on the Red Sea coast, and in the Shaybah area that straddles the UAE border).

Al Naimi made it clear there were many "alternatives" to involving the companies in terms of implementing the initiative. Among these alternatives are two gas-processing plants, costing up to $8 bn, which Saudi Aramco, the state oil company, is developing at its own expense. The first one, at Haradh, came onstream in 2001 and was opened last week by Prince Abdullah. Others include the government inviting international power producers to build and own new power plants to provide urgently needed electricity.