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. Last Updated: 07/27/2016

Saudis Strive to Save $25Bln Gas Project

DUBAI, United Arab Emirates -- Saudi Arabia has made a last-ditch bid to rescue its landmark gas investment opening, at breakpoint after a yearlong battle between the kingdom and the world's leading oil majors over commercial terms.

Riyadh has made some concessions on contract details, but Western executives said it was too soon to say whether the new stance will lead to a breakthrough in talks on the verge of collapse over the amount of gas on offer and rates of return.

Saudi Foreign Minister Prince Saud al-Faisal "sent the companies a letter last week, which definitely offered some concessions," said a Western oil executive.

"They are worth considering, but we need some time to run all the scenarios before we respond by early October, as per his request."

Eight oil firms, led by ExxonMobil and Royal Dutch/Shell, had been uncertain about their fate in the $25 billion gas project after Riyadh called time on the talks and ordered them to submit final proposals by late July.

Some executives now poring over the kingdom's response said Riyadh has made concessions on both the upstream and downstream elements of the projects to develop gas and build petrochemical, power and desalination plants.

Sources say the Saudis addressed a prime gripe, that Riyadh is short changing the firms of gas, by offering access to other acreage outside the Saudi Arabian Reserved Area if adequate volumes are not found in the area now allotted them.

Companies most vocal about the lack of natural gas are those in the prize package, the $15 billion South Ghawar development, led by Exxon and including Shell, BP and Phillips.

But it is as yet unclear how each of the companies will rate Riyadh's latest proposals. The next few weeks will see the eight firms debating the merits among themselves.

"This is all part of the negotiations," said a Western industry executive. "We have to sit down and discuss things."

The $5 billion Shaybah development, led by Shell, includes Conoco and TotalFinaElf.

The $5 billion Red Sea development, led by Exxon and including Occidental and Marathon, has been rumored to be off the table.

Industry sources say already fraught contract negotiations have become more complicated given the growing scrutiny of the U.S.-Saudi alliance in the wake of the Sept. 11 attacks.

Western executives in the kingdom, which straddles the fourth-biggest gas reserves, say elements in Riyadh and Washington bent on harming the bond between the two countries have created a uniquely stressed business environment.

For oil majors seeking access to the kingdom's upstream gas -- off-limits since nationalization in the 1970s -- it has been an uphill battle ever since Crown Prince Abdullah unveiled the outlines of the integrated gas scheme nearly four years ago.

Analysts say any setbacks to the kingdom's initiative will only delay efforts to liberalize its economy and create jobs for the huge number of unemployed Saudis.