Saudi Aramco

The largest oil company in the world, with a quarter of global oil reserves under its control, Saudi Aramco is as elusive as most oil companies when it comes to public information.

This summer the company was the focus of some probably unwelcome press reports after the failure of the $25 billion Saudi Gas Initiative. For after more than two years of negotiations with eight major foreign oil companies - admittedly complicated by the events of 9/11 and the war in Iraq - the Saudi Government decided to call it a day on the world's most ambitious foreign direct investment project.

It can hardly be controversial to say that many people inside Saudi Aramco were strongly opposed to this incursion into their territory. Few tears will have been shed at the abrupt termination of the SGI.

However, shortly afterwards a new gas exploration venture was announced with the ever-patient Shell and Total with Saudi Aramco as the sole local partner. This seems to be a sign of things to come in the Saudi gas sector. The Russian giant Gazprom has also been cited as a potential future partner for gas projects.

Gas developments are nothing new for Saudi Aramco. In the mid-1970s Saudi Aramco invested in the master gas-gathering scheme which made use of gas that was previously flared. This supported the Kingdom's programme to develop large-scale iron and steel and ethylene plants with gas as the feedstock.

However, aside from the gas facilities installed at Ghawar, the Kingdom made little progress in developing its massive gas reserves until the completion of the Hawiyah gas complex in 2001 which supplies power stations in eastern and central Saudi Arabia. The next phase of the project is for two large projects to recover ethane and NGL, according to MEED magazine.

It is fair to say that further developments were put on hold until the SGI negotiations were concluded. That done the world now awaits announcements from Saudi Aramco about the future of its gas development projects.

This should not be long in coming. The Kingdom will have its best year for oil revenues in a generation in 2003 with $85 billion forecast. Some of this money could be profitably invested in Saudi Aramco's gas and oil projects, though it may be a while before the dust fully settles on the SGI debacle.