JEDDAH, 3 June — The announcement on May 18, 2001, by the Kingdom of the eight major oil companies representing the winners in the race for the development of the three major gas areas, South Ghawar, Shaybah and the Red Sea, will have a positive impact not only on the Saudi economy in general, but also among the major Saudi private sectors and Saudi contractors.

With today’s historic signings of memoranda of understanding between the Kingdom and the world’s top energy companies, it is appropriate to pause and take stock of the multidimensional significance of this event.

Firstly, the initiative will begin an era of increased competition, technical and commercial efficiency and investment in our energy economy. These factors will combine to create a ripple effect in our country as a whole. This is one of the great benefits that the Natural Gas Initiative promises to deliver.

For starters, this initiative will include the substantial initial investment of some $25 billion. On this occasion, and for the record, it should be noted that it was due to the well-targeted mission of the Saudi Supreme Petroleum Council (SPC) under the Chairmanship of Prince Saud Al-Faisal, could this milestone event take place today. This is in spite of doubts expressed by some news commentators that this could be achieved before the end of the year or even by early next year. Of course, the mission was guided by the Custodian of the Two Holy Mosques King Fahd and Crown Prince Abdullah, deputy premier and commander of the National Guard.

Today we say to our new partners — BP, Conoco, Enron, ExxonMobil, Occidental, Phillips, Royal Dutch/Shell, and TotalFinaElf — ‘Ahlan Wasahlan’!

The world has moved into a new millennium and so must the Saudi economy and our business sectors. If you look in any direction you will see that almost all goods and services in our everyday life reflect some degree of international contribution. So there should be little cause for apprehension due to the participation of international companies in the development of our energy and infrastructure sectors.

Without any doubt, this gas initiative will attract the largest inflow of investment from foreign companies in the history of the Kingdom. This initiative is not to explore, produce and only export product; rather, it is to explore, produce and utilize our precious gas resources within the Kingdom. The produced gas will be applied in several vital areas, such as:

• Power Production — an estimated $100 billion is projected to be needed by 2023 to meet the 4.5% annual growth in demand.

• Desalination Plants.

• New Petrochemical Plants.

• Replacement of most of the crude and fuel oil currently being used to fire existing power, desalination and cement plants with natural gas. Such displacement will serve to directly free up more crude oil for export and fuel oil to be cracked within the refineries to yield more white products, providing “Added Value” to our resources.

• Expansion of the pipeline network within the Kingdom’ s provinces for greater utilization and reliability of gas supplies.

• Improvements in our beloved environment through increased use of clean burning natural gas.

• Possible enhancements to the Mining sector, “The Sleeping Giant”.

I am sure that all eight leading oil companies are well aware that the Saudi private sector today is totally different than what it was 50 years ago. Also they must have noticed the special care and encouragement by Saudi government for the private sector and its development. The private sector is definitely capable and quite ready to be a “true partner” with all the eight leading oil companies in these new initiatives.

There are three roles I foresee for the private sector in these gas initiatives, and these are as follows:

A) As a minority shareholder with appropriate roles in the management of such projects (some entities may choose to simply be passive investors).

B) Service providers for Construction, Operation and Maintenance activities (amenable to long-term contracts).

C) To facilitate the local requirements of the governmental authorities and for the local service providers, including suitable training programs for the new Saudi employees, who will play an important role in the operations and maintenance of these plants to meet the Kingdom’s domestic employment plans.

The private sector currently owns, operates and maintains its own manufacturing plants with the latest know-how and technologies. Employing best practices from around the world, and benchmarking our performance, we have witnessed dramatic and continual improvements. Beginning more than ten years ago, the private sector attracted numerous highly qualified Saudis and other international professionals, many of whom have worked for more than 25 years in refineries and petrochemicals plants, to lead their oil, gas and power projects.

Also, the introduction of the world’s leading companies will bring in new cutting edge technologies and business practices to the Kingdom. In the meantime, the private sector is ready and willing to learn and adopt such new and advanced technical and management approaches from these leading companies in order to improve our capabilities and add more value to the ventures in which we participate.

It is not difficult to envisage the scenario wherein domestic businesses and investors participate with international petroleum companies in the energy sector — not merely as passive investors, but increasingly as capable energy developers. It has always struck me as more than a little ironic that a group of private companies from one of the Far East countries — a country with no domestic oil resources of its own, no less — would have the capability to develop and operate offshore oil fields in the largest oil region of the world, while at the same time there is little or no private sector capabilities to do so within the Kingdom. I suggest that the initiative will provide a good vehicle and learning curve to help address that dichotomy — but only if we are committed to developing such capabilities on a globally competitive basis. I believe that such a commitment does indeed exist.

I am extremely confident that the private sector will join hands and develop its own vision and mission toward the new Natural Gas Initiative, since it provides for a bright future for generations to come. It is now time, in my opinion, to begin to repatriate some of the substantial Saudi funds currently invested abroad, estimated to be in the range of $500-650 billion, in order to participate in these gas initiatives as a true partner with the major oil companies, and on the soil of this rewarding land.

To encourage the repatriation of these Saudi foreign funds, I note the significant announcement made last Tuesday at the two-day Economic Forum by Dr. Ibrahim Al-Assaf, minister of finance and national economy, that the Saudi law to regulate the Saudi Stock Market is under discussion in the Supreme Economy Council and that this could be in place by the end of this year.

Finally, as the private sector has honored the government’ s instructions two years ago not to talk to the major oil companies who submitted their proposals to the Saudi Petroleum Council (SPC) until the awarding, they hope to be invited for a special meeting with one or more members of the Saudi Supreme Petroleum Council in order to discuss the expected role that the government will allow the private sector to play, which will lead to the desired national benefits and expediting of the Saudization plans from these initiatives.

And so, we in the private sector should celebrate and herald the launch of this Natural Gas Initiative and prepare ourselves to capitalize on its opportunities to further improve our capabilities and to also create value and benefits for the Kingdom and its people.

(Gasem S. Al-Shaikh is a Director of the Saudi Binladin Group and is Managing Director of their Petroleum, Chemicals and Mining (PCM) Division)