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SAUDI ARABIA - Mar. 7 - Foreign Firms Invest $800m In Gas.

Oil Minister Nuaimi signs gas E&P deals worth a total of $800m with Russia's LUKoil, China's Sinopec and a consortium of Italy's Eni and Spain's Repsol YPF covering 120,000sq km of the Empty Quarter desert.

LUKoil's deal, coming less than a year after Crown Prince Abdullah's landmark visit to Moscow, commits it to invest $200m to explore a 29,900 sq km area, with drilling in the kingdom's onshore gas fields to be technically easy. LUKoil CEO Vagit Alekperov says he expects a minimum rate of ROI of 12.5 to 15%, noting: "For the first time in the history of bilateral relations, the doors to Saudi Arabia have been opened to the Russian petroleum business". He says LUKoil could invest up to $3 bn in the Saudi gas sector if it were to find gas.

Sinopec's presence is driven by Chinese concerns with its soaring energy needs and import dependence. The kingdom already ranks as China's top supplier exporting some 13.5m t/y of crude oil, and there is room to expand. Sinopec has pledged to invest an initial $300m in drilling wells and shooting seismic surveys in a 38,800sq km block.

The biggest block on offer, at 51,400sq km, goes to Eni/Repsol. State-owned Saudi Aramco will take 20% in all three JVs. The contracts follow November's gas E&P deal with Shell/Total.

Only one US company, ChevronTexaco, bid in the current round.
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Publication:APS Diplomat Recorder
Date:Mar 13, 2004
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