Shell - seven decades in KSA

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Jeroen van der Veer will remain chief executive at Shell until June 2009.

Shell has been active in Saudi Arabia since the 1940s and has invested over US$7 billion with its partners in petrochemicals, refining and other downstream business ventures.

In common with all IOCs, Shell's efforts to become a part of Saudi's upstream oil segment have been frustrated and there are no signs of a dramatic near-term change in state policy.

Shell became the first IOC to enter Saudi Arabia's upstream sector since nationalisation in the 1970s. This followed the official 2003 signing of a shareholder agreement, allowing Shell to explore for gas, worth an estimated $2 billion. The Shell-led consortium gave the company a 40% interest in the joint venture, with national operator Saudi Aramco holding 30% and Total, 30%.

The venture has, however, faced delays. Concerns were raised over the price that Aramco would pay for gas produced from the fields, as the Saudi government subsidises water and electricity, setting gas prices well below market level at $0.75 per British thermal unit (BTU).

Shell has now stated that it will recoup any losses from gas sales by selling more expensive condensates at export prices.

Shell's standing was given a further boost in May 2005, when Saudi officials called for multinational and Saudi companies to form economic alliances to successfully complete projects in the country worth some $130 million. Speakers at the Saudi Mega Projects 2005 conference said that most projects in the country needed firms with more resources behind them than domestic companies can supply.

Saudi Arabia's multibillion dollar gas value chain investment programme, ‘Saudi Natural Gas Initiative', has facilitated Shell's market entry since 2006. The project comprises exploration and production, power generation, desalination and chemicals projects.

Shell will lead Core Venture 3, projects in Rub al Khali and Shaybah areas, together with Total Fina Elf and Conoco and will play a major role in Core Venture 1, South Ghawar gas development and related projects, with ExxonMobil, BP and Phillips.

Speaking of the agreement, Phil Watts, chief executive - exploration and production, said: "The Saudi Natural Gas Initiative represents an excellent opportunity for Shell to build upon its long history of partnership with the Saudi government and the Saudi people. We look forward to playing a constructive role in the establishment of the Saudi natural gas industry."

In regards progress, Shell has now drilled three empty gas wells and the first stage of drilling the fourth is taking place. They have now been left to continue the project jointly with Aramco due to the withdrawal of Total.

The level of Shell's involvement in the upstream sector ultimately depends on the extent to which Saudi Aramco maintains a monopoly over the sector. Foreign investment has certainly been more widely encouraged by the Saudi government in recent years. Whether this will continue remains to be seen.

Saudi Aramco is looking ahead
Headquartered in Dhahran, Saudi Arabia, the scope of Saudi Aramco’s operations is vast, comprising almost the entire oil output of Saudi Arabia.

GE delivering ecomagination
GE Oil and Gas has a long history in Saudi Arabia, supplying the country, and in particular the major national company Saudi Aramco, with its latest products and services.

Weatherford in the Kingdom
Weatherford has operated in Saudi Arabia for a long time, through an unbrella of its three main divisions: The Contract Drilling Rigs division, which has been operational for 15 years; Traditional Product and Services Lines, which operates under a joint venture (JV) with the Al-Rushaid Group since 1979; and finally the Non-Traditional Products and Service Lines, under a Weatherford Branch company and several agency agreements.

Schlumberger in KSA
In 2006, oil and gas service provider Schlumberger celebrated their sixty-fifth anniversary of the first wireline logging operation in Saudi Arabia.

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