THE RETURN OF THE SEVEN SISTERS©

20 October 1998

By Adel Darwish

Arab Press and Middle Eastern Media organs who gave acres of column space and endless air time to Saudi Crown Prince Abdullah bin Abdel Azziz's tour of Europe and the United States, either did not notice, or were instructed to 'ignore' a side show by the crown prince.

Prince Abdullah, in his Washington visit, signalled the large American oil companies that they are now welcomed into the desert kingdom, quarter of a century after his older brother, the late king Faisal kicked them out.

Now the world's largest oil producer, suffering for massive budget deficit has swallowed its pride: Prince Abdullah opened the opened the way for discussions about recalling them American oil companies back to help develop the kingdom's energy resources.

American and Saudi sources confirmed on strictly off the record basis.

The meetings, which Prince Abdullah, and Saudi Oil minister Abraham al-Nuaimi held - and were not attended by US Energy Secretary Bill Richardson - were confirmed by oil industry and Saudi government sources.

During a private, hour-long meeting on Saturday 23 September at the house of Saudi Ambassador Prince Bandar bin Sultan. in McLean- Virginia, with senior executives representing seven American oil companies: The four American oil giants Mobil Corp, Exxon Corp, Texaco Inc. and Chevron Corp. (which established the Arabian American Oil Co now known as Saudi Aramco, in the 1930s) .the other three were Atlantic Richfield Co., Conoco Inc. and Phillips Petroleum Co 

According to sources close to the meeting, Prince the executives to submit directly to him a study of "recommendations and suggestions" about the role their companies could play in the exploration and development of both existing and new oil gas fields, said one participant in the meeting, which was held at the home

The same source said that the executives appeared "shocked" by the major policy reversal. Saudi Arabia began nationalising its oil industry in 1973 and has adamantly excluded foreign oil companies from production operations ever since. It was the policy of the late King Faisal who sided with the late Egyptian president Anwar Sadat in the run up to his surprise attack on the Israeli army across Suez Canal on Yum Kippur in 1973. Faisal cut oil supplies to the west prompting an oil crisis and sharp in crease in prices then.

The following decade witnessed Saudi Arabian downstream investments in oil refineries and urban filling stations in the West; following in the footsteps of their smaller, but shrewder Kuwaiti neighbours.

American economic analysts cited economic and political reasons for the unexpected Saudi shift in foreign policy.

Persistently low oil prices worldwide also have meant that the Saudis, like their Iranian rivals) are strapped for cash needed to invest in their energy sector.

''Saudi Arabia faces increasing competition in the U.S. oil market from Mexico, Canada and Venezuela,'' said one Saudi official off the record, ’’and it hopes that a renewed alliance with producers in the US will give the kingdom a larger market share.''

The Saudis also wanted to show the world that they are actively shoring up their strategic links to the United States, which seven years ago fought a major war against Iraq in part to safeguard Persian Gulf oil supplies. 

Yehya Sadowski, associate professor of Middle East studies at Johns Hopkins School of Advanced International Studies, noted that the kingdom has used up the bulk of its capital assets to pay off the United States for fighting the Persian Gulf War. 

"Once Saudi Arabia is in a position that it is no more important [to America] than Mexico, Venezuela or Canada, then you don't need to make the case you have to be especially attentive to the kingdom," said Hamid Mazher, a Saudi American consultant to U.S. firms on Saudi energy and political affairs.

Oil industry consultant Daniel Yergin told inquiring journalists that he predicts that any return of U.S. companies to the desert kingdom would be gradual. "It's part of a process of discussion that will go on for a while," 

Analysts also see the Saudi move as recognition that competition for investment in the oil sector worldwide is increasing.

Saudi Arabia is believed to have the largest reserves -- more than 260 billion barrels -- and the cost of extracting oil there is among the lowest in the world. Saudi Aramco currently produces all 8 million barrels a day in the kingdom.

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