World of Oil

Western oil companies’ hopes of entering Saudi Arabia’s upstream gas market appear to have been crushed. In a surprise move that could damage relations with the U.S., Saudi Foreign Minister Prince Saud al-Faisal took three gas development areas previously awarded to foreign consortia off the table. As was leaked to a New York-based newspaper, Prince Faisal divulged his decision in a letter early last month to ExxonMobil and Royal Dutch Shell, leaders of the consortia set to operate the tracts. Talks aimed at signing final contracts for the areas had been bogged down for months over the rate of return that foreign firms would receive. Instead of these premier areas, the Saudis were preparing to offer a scaled-down, "take it or leave it" program of less significant gas tracts. Oil companies said that they do not believe these areas can produce sufficient income to offset investments needed for desalination, power and other projects.