POWER POINTS:Great News! Long-Term Contracts Jeopardized
Dow Jones Energy Service, 05/18/01

Options Report: Investors Sell Options As Flat Mkt Looms
Capital Markets Report, 05/18/01

Shell "Pleased" On Selection For Saudi Gas Projects 1 & 3
Dow Jones Energy Service, 05/18/01

USA: U.S. pleased American firms win Saudi natgas deals.
Reuters English News Service, 05/18/01

UK: Shell says happy to participate in Saudi gas venture.
Reuters English News Service, 05/18/01

Saudi To Announce Gas Proj 1 & 3 Leaders By Jun 5-Source
Dow Jones Energy Service, 05/18/01

Shell, Exxon Score Big in Historic Saudi Gas Initiative, Energy Intelligence 
Group Reports
PR Newswire, 05/18/01

Saudi Arabia Selects International Oil Companies for Three Major Projects
Dow Jones Business News, 05/18/01

Saudi Arabia Picks Foreign Partners for Gas Projects (Update4)
Bloomberg, 05/18/01



POWER POINTS:Great News! Long-Term Contracts Jeopardized
By Mark Golden

05/18/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

A Dow Jones Newswires Column 

NEW YORK -(Dow Jones)- Those looking for even the slightest bit of good news 
for the state of California can find it in Friday's San Jose Mercury News. 
"California is in danger of losing more than 40% of the power it has lined up 
in long-term contracts," says the lead of a major article, because 
Republicans in the state legislature didn't back the $12.5 billion bond deal 
last week.
Getting out of most of those contracts would be the best thing to happen to 
California in a long time. 
Since the state went on its long-term buying binge, forward prices for power 
in the western U.S. have been falling steadily. Gov. Gray Davis announced $43 
billion in purchases lasting up to 20 years on March 5. Contracts for summer 
power at Palo Verde, Ariz., a key western trading hub that feeds a lot of 
power into California, have fallen to $390 a megawatt-hour from a high of 
$600/MWh in late March. Further out, power for 2004-2006 at mid-Columbia 
River, a key trading hub north of California, has fallen from $58/MWh in 
February to $49/MWh today. 
Companies like Calpine Corp. (CPN) and Dynegy (DYN) that took advantage of 
the state's buying binge are looking pretty fat and happy. In fact, they have 
affectionately started calling the governor Gravy Days. Enron Corp. (ENE), 
which has been selling aggressively for two months, according to traders, is 
looking like a genius as usual. Generators that held out, like Reliant Energy 
(REI) and Duke Energy (DUK), may be sorry that they did. 
It's been a long time since those long on western power have felt serious 
pain in the markets, but that time has come. Power generators may not make as 
much profit this summer as last, and power traders that have taken long 
speculative positions may liquidate supplies for far less than they bought 
them. As was seen in the eastern U.S. power markets last summer, long 
positions can turn out just as painful as short positions. 
For California, the good news is that maybe spot purchasing costs this summer 
won't be as bad as once expected. The bad news is that the state government 
is by far the biggest "long" in the bearish forward market. It's safe to say 
that the $43 billion in contracts signed in March have declined in value by 
15%, or $6.5 billion. That's almost as big of a financial disaster going 
forward as everything that has gone on since last summer until now. 
Granted, this is a sort of damned-if-you-do-damned-if-you-don't situation. 
Barring the utilities from the forward market during the first three years of 
deregulation was one of the most expensive public policy mistakes in U.S. 
history. California should do some forward purchasing now, and it's such a 
behemoth that it will move the market up when it does so. And, when it gets 
done buying, prices will come down simply because it stopped. 
But that's a footnote to the mismanagement of the financial side of the 
energy crisis. Early this year, when the state started down the path of 
mega-purchasing, there was no shortage of advice not to do so. Long-term 
prices were embedded with too much of today's supply-demand imbalance. The 
state would have been much better off dealing with the imbalance first - 
since it would have to do that anyway - and gradually securing forward power 
as declining prices reflected the improving situation. 
Since then, the state has done a great job of crushing demand. Electric usage 
is already down 9% from where it was expected to be thanks to a conservation 
efforts and a slowing economy, and people haven't even seen their 30% higher 
bills yet. Similar reduction has been seen in power consumption in other 
western states and in natural gas usage nationally. This is likely what has 
been behind much of the downturn in forward power prices in the West. 
This column started with a false "good news" lead. It would be great for the 
state if, after the state's credit rating sinks further, sellers exercised 
their option to tear up the five- and ten-year contracts. But they won't do 
that. The prices are too good from the sellers' perspective. Calpine, which 
has signed three such contracts for the state, said immediately that it has 
no intention of reneging on its agreements. And Gary Ackerman, director of 
the sellers' association, told the Mercury News that he didn't expect power 
companies in general to back out of the deals. 
But there may be some real good news for California. The Davis administration 
hired dozens of people that have little or no experience in energy trading to 
purchase billions of dollars of power. Perhaps they are quick learners. This 
week presented an excellent opportunity for the state to pick up what it 
needs - summer power for this year only - on sale. Low prices in the daily 
market Monday and Tuesday drove the summer contract prices down to $325/MWh, 
which is cheap by recent standards. The contract price moved up to $390/MWh, 
but the state took advantage of the opportunity while the window was open. 
"The week's condition in the market place helped. We were able to procure 
some energy for June through September," said state spokesman Oscar Hidalgo. 
And, hey, there were no blackouts this week. 
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Options Report: Investors Sell Options As Flat Mkt Looms
By Kopin Tan
Of DOW JONES NEWSWIRES

05/18/2001
Capital Markets Report
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- Options volatility, already at its lowest level in 
some months, edged down further amid the busy trading of Expiration Friday. 
But while lower volatility typically means reduced and more attractive 
premium for option buyers, many investors continued to sell options. With 
market observers expecting stocks to be flat or range-bound for a while as 
the economy gropes toward a recovery, these investors were selling options to 
generate income upfront and hoping the sold contracts will expire unexercised.
Many investors sold out-of-the-money calls as part of strategies like covered 
call writing to help lower their cost of buying stock and the break-even 
points for their investments. 
In Ericsson Telephone Co., for instance, the June 7.50 calls traded more than 
29,000 contracts, with much of Friday's volume accounted for by investors 
selling these out-of-the-money contracts. Investors, who earn about $25 for 
each contract sold, likely were selling these as part of their covered call 
writing strategies. 
Ericsson's American depository receipts most recently gained 43 cents to 
$6.83. At the Chicago Board Options Exchange, the June 7.50 calls rose 15 
cents to 30 cents on volume of 19,967 contracts, compared with open interest 
of 7,291. Another 9,415 contracts traded at other exchanges. 
In Microsoft Corp., the October 50 puts traded robustly, as they had earlier 
this week. It appeared investors were selling these out-of-the-money calls, 
earning about $150 for each contract and betting that Microsoft stock will 
remain above $50 by mid-October (or they were willing to buy stock at that 
price). 
With Microsoft edging down 66 cents to $67.51, the October 50 puts traded 
20,437 contracts, adding to open interest of 20,297. These puts were up 5 
cents to $1.50 at the American Stock Exchange. 
Because options volatility already had fallen significantly, some investors 
think it is risky to sell options - selling volatility in trader speak - at 
this time, since a sudden stock selloff could trigger anxiety and raise 
option premium and make it more costly to buy back these sold options. 
But with no major economic events on the calendar until well into June, and 
with a long holiday weekend coming up later this months, investors also are 
wary about being long volatility. 
This is one reason why it makes sense for option sellers to focus on selling 
longer-dated options that expire more than six months in future, noted 
Michael Schwartz, CIBC Oppenheimer's chief options strategist. These 
longer-term options pack a greater dollar premium, which translates to a 
lower break-even point when sold as part of covered call writing strategies 
and give investors more downside protection. 
The CBOE's market volatility index, or VIX, fell 0.52 to 25.00. 
The options market's tech-sector fear gauges or Nasdaq volatility indexes 
also eased to their lowest levels in nearly eight months - a sign of 
gathering investor complacency toward tech stocks. 
The CBOE's Nasdaq volatility index, or VXN, fell 4.28 to 54.41. VXN has not 
reached this level since it closed at 54.25 on October 19 last year. 
The American Stock Exchange's Nasdaq volatility index, or QQV, lost 4.35 to 
46.20 - its lowest level since it closed at 45.12 on September 29 last year. 
Elsewhere in the options market: 
- Cree Inc.'s stock and options are active Friday with investors appearing to 
make bullish bets on the maker of semiconductor materials. 
It isn't clear what drove these optimistic trades, but the company has 
indicated it isn't currently in active talks with potential acquirers. Cree 
stock was up 12.1% or $3.73 to $34.53 on heavy trading volume, after rising 
11.4% Thursday. In the options market, at least one investor was buying 
near-month, out-of-the-money calls and selling long-term options that expire 
in 2003 - usually a sign he expects stock to appreciate in the near term. 
- Enron Corp.'s June options were active as a large spread traded. An 
institutional investor bought more than 5,000 contracts of the June 55 calls 
and sold a roughly equal number of the June 50 puts to help offset the cost. 
The investor likely is bullish about Enron and does not expect the stock to 
fall below $50 by mid-June, or is willing to buy stock at that price. 
Enron most recently was up $2.02 to $54.24. At the Philadelphia Stock 
Exchange, the June 55 calls were up 60 cents to $2.05 on volume of 7,001 
contracts, compared with open interest of 4,674. The June 50 puts were at 
$1.05 on volume of 5,000 contracts, compared with open interest of 2,353. 
-By Kopin Tan, Dow Jones Newswires; 201-938-2202; kopin.tan@dowjones.com 
(Kaja Whitehouse contributed to this report.)

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Shell "Pleased" On Selection For Saudi Gas Projects 1 & 3

05/18/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LONDON -(Dow Jones)- The Royal Dutch/Shell Group of Companies is very pleased 
to have received notification from HRH Prince Saud al-Faisal, Minister of 
Foreign Affairs and Chairman of the Ministerial Committee overseeing the 
Saudi Natural Gas Initiative, that it will play a major role in Core Ventures 
1 and 3, the company announced in a press release Friday. 
These are two of three Core Ventures awarded to international oil companies 
as part of Saudi Arabia's multibillion dollar gas value chain investment 
program, comprising exploration and production, power generation, 
desalination and chemicals projects, the company said.
Sir Mark Moody-Stuart, Chairman of the Royal Dutch/Shell Group, said: "Shell 
is honored to be given such a significant role in this historic development. 
We are delighted to have been selected to participate in both Core Venture 1 
and Core Venture 3". 
Phil Watts, CEO Exploration and Production, added: "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." 
Shell has been active in the Kingdom of Saudi Arabia since the 1940s and has 
invested over $7 billion with its partners in petrochemicals, refining, and 
other downstream business ventures, the company said. 
Earlier Friday. Saudi Arabia announced its selection of international oil 
companies that will participate in its three gas core ventures. 
Exxon Mobil Corp. (XOM) was been awarded leadership of Core Venture 2, the 
Red Sea project. Occidental Petroleum (OXY) and Enron (ENE), who were bidding 
jointly in this initiative, were awarded a stake in the Red Sea project. 
No leaders were announced for the other two projects, Core Ventures 1 and 3. 
However, Saudi Arabia said the consortium for the South Ghawar project - Core 
Venture 1, estimated at $15 billion - was awarded to ExxonMobil, Royal 
Dutch/Shell (RD), BP Amoco (BP) and Phillips Petroleum 
Core Venture 3, the Shaybah project, was awarded to a consortium comprising 
Shell, TotalFinaElf (TOT) and Conoco (COCA).

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


USA: U.S. pleased American firms win Saudi natgas deals.

05/18/2001
Reuters English News Service
(C) Reuters Limited 2001.

WASHINGTON, May 18 (Reuters) - The U.S. Energy Department on Friday welcomed 
Saudi Arabia's decision to award contracts to several large American energy 
firms to help develop the kingdom's vast natural gas resources, and said the 
move fits in with the Bush administration's new comprehensive energy plan. 
Earlier in day, Saudi Arabia opened its natural gas sector to eight leading 
international firms, including U.S.-based ExxonMobil , Phillips Petroleum , 
Enron , Occidental Petroleum and Conoco .
"We're pleased that these American firms have been chosen to lead these 
natural gas development projects," Energy Secretary Spencer Abraham said 
through a department spokeswoman. 
President George W. Bush's plan to overhaul U.S. energy policies includes a 
recommendation to support initiatives by Saudi Arabia, Kuwait and other 
Middle East countries to open portions of their energy sectors to foreign 
investment. 
"This decision is right on target with the president's energy plan...that 
identifies the opening up of energy producing countries to foreign 
investment, an important way to broaden our shared commercial and strategic 
interests," Abraham said. 
The spokeswoman said it is too early to determine if Abraham would travel to 
Saudi Arabia for the formal signing of memorandums of understanding (MOUs) 
for the projects, which will take place in a few weeks. 
"At this point I don't know what his schedule is going to be in two weeks. I 
don't have anything definite on that," the spokeswoman said. 
ExxonMobil and Royal/Dutch Shell won big roles in three Saudi projects that 
are estimated to require combined initial investment of $25 billion. 
Saudi Foreign Minister Prince Saud al-Faisal said Exxon, Shell, BP and 
Phillips were given stakes in the biggest of the projects on offer, the $15 
billion development in South Ghawar, known as core venture one. 
Exxon also secured the leading role in the big natural gas project, on the 
Red Sea coast, with Enron and Occidental taking smaller shares. 
Shell, TotalFina Elf and Conoco won stakes in the third project, for 
development of natural gas at Shaybah in the empty quarter of southeast Saudi 
Arabia. 
The awards mark the biggest advance in the kingdom's efforts to develop its 
gas reserves, the world's fourth largest, since Riyadh unveiled the energy 
opening more than two years ago.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


UK: Shell says happy to participate in Saudi gas venture.

05/18/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, May 18 (Reuters) - Royal Dutch Shell said it was pleased to have won 
a significant stake in major gas ventures unveiled by Saudi Arabia on Friday. 
Supermajors Exxon Mobil and Shell won starring roles in three projects that 
are estimated to require combined initial investment of $25 billion, the 
kingdom's biggest opening to foreign investors for 25 years.
"Shell is honoured to be given such a significant role in this historic 
development. We are delighted to have been selected to participate in both 
Core venture 1 and Core Venture 3," group Chairman Mark Moody-Stuart said in 
a company statement. 
Saudi Foreign Minister Prince Saud al-Faisal said Exxon, Shell, BP and 
Phillips were given stakes in the biggest of the projects on offer, the $15 
billion development in South Ghawar, known as core venture one, the Saudi 
Press Agency (SPA) announced. 
Exxon also secured the leading role in core venture two, on the Red Sea 
coast, with Enron and Occidental taking smaller shares. 
Shell, TotalFinaElf and Conoco won stakes in core venture three, for 
development of gas at Shaybah in the empty quarter of southeast Saudi Arabia.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Saudi To Announce Gas Proj 1 & 3 Leaders By Jun 5-Source

05/18/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

DUBAI -(Dow Jones)- Saudi Arabia will announce its selection on who will lead 
core gas projects 1 and 3 by June 5, an industry source familiar with the 
process told Dow Jones Newswires Friday. 
Memoranda of Understanding will also be signed in the first week of June and 
by June 5 at the latest, he added.
Earlier Friday. the kingdom announced its selection of international oil 
companies that will participate in its three gas core ventures. 
Exxon Mobil Corp. (XOM) was been awarded leadership of Core Venture 2, the 
Red Sea project. Occidental Petroleum (OXY) and Enron (ENE), who were bidding 
jointly in this initiative, were awarded a stake in the Red Sea project. 
No leaders were announced for the other two projects, Core Ventures 1 and 3. 
The consortium selected to develop the South Ghawar project - Core Venture 1, 
estimated at $15 billion - was awarded to ExxonMobil, Royal Dutch/Shell (RD), 
BP Amoco (BP) and Phillips Petroleum 
Core Venture 3, the Shaybah project, was awarded to a consortium comprising 
Shell, TotalFinaElf (TOT) and Conoco (COCA). 
The source said the companies selected for ventures 1 and 3 now have to 
"recommit" to the projects at hand, essentially reconfirming their 
willingness to participate in the ventures, after which the Saudis will make 
their leader selection. 
Once the MOU's are signed, a clearer outline of what form the projects will 
take will begin and a comprehensive project development program will be 
"signed" by the end of this year, the source added. 

What stake each company will get in each consortia hasn't been decided yet, 
the source said. 
The Saudis may leave it to the project leaders to direct negotiations with 
its consortium members on how to divide up both the stakes and management of 
the whole project. But, he added, the Saudis will have to give final 
approval. 
The source said the downstream segments of the projects will be 100% operated 
by the consortia. The upstream segments will be operated by the Saudi 
national oil company, Aramco, but may involve participation of the foreign 
companies, he added. 
And which Saudi governmental bodies will be involved in each project is also 
still unclear. Potential participants include Aramco, The Saudi Electricity 
Authority and the kingdom's petrochemical giant, Sabic. 
Finally, the source said that the project drafts received by the companies 
selected Friday, were more detailed and constructive than expected at this 
stage. 
Saudi Arabia invited international oil companies in October 1998 to make 
proposals for what are mostly downstream gas projects, as well as upstream 
gas enhancement. 
Saudi Arabia currently has around 2.5 billion cubic feet of gas a day in its 
system, and is working toward increasing this to 4 billion cubic feet a day 
by 2003. By 2025, it will need an estimated 14 billion cubic feet a day to 
meet its own consumption requirements. 

By Dyala Sabbagh, Dow Jones Newswires; 00-9714-3441-857; 
dyala.sabbagh@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Shell, Exxon Score Big in Historic Saudi Gas Initiative, Energy Intelligence 
Group Reports

05/18/2001
PR Newswire
(Copyright (c) 2001, PR Newswire)

NEW YORK, May 18 /PRNewswire/ -- Exxon Mobil and Royal Dutch/Shell are the 
big winners in today's announcement by Saudi Arabia of the companies selected 
to participate in its so-called Gas Initiative, Energy Intelligence Group 
reports in an analysis of the historic decision. The announcement by Foreign 
Minister Prince Saud al-Faisal marks the first extensive reopening of the 
country's upstream hydrocarbon sector to international investment since 
nationalization in the 1970s. 
Both Exxon Mobil and Royal Dutch/Shell are in the most coveted Core Venture 1 
involving the South Ghawar field, along with BP and Phillips. And each is in 
one other venture. Exxon is to lead Core Venture 2, in the Red Sea area, with 
an Enron/Occidental consortium as a participating partner. No leader has yet 
been selected either for venture three, the Shaybah Area development deal in 
which Shell will be grouped with Total Fina Elf and Conoco or -- most 
critically -- the giant South Ghawar project, EIG reports in the latest issue 
of its Energy Intelligence Briefing service.
Chevron, the company that originally discovered oil in Saudi Arabia, has been 
dropped from the participants list, as have Italy's ENI and US Marathon. 
Initial agreements defining the scope and duration of the projects are to be 
finalized over the next two weeks, with signing due early next month. After 
that, attention will turn to hard questions of pinning down precise financial 
terms. 
BP and Phillips are unlikely to be selected for the leadership role at South 
Ghawar, EIG understands. The competition is essentially between Exxon and 
Shell. The choice at Core Area 1 may depend in part on the decision in Core 
Area 3, where any one of the three partners could yet be selected as 
operator. Conoco has the advantage of being the first one to propose a 
project in the area. The fact that Total is French is said to operate in its 
favor. 
FOR MORE GO TO http://www.energyintel.com 
http://www.energyintel.com is home on the web for Petroleum Intelligence 
Weekly, Oil Daily, Natural Gas Week, and other services from Energy 
Intelligence Group. The site is perfect for both EIG's clients and newcomers 
looking for the best business intelligence on the world of oil and gas. The 
site combines the high quality news, analysis and data you expect from EIG 
with cutting-edge Internet technology. 
MAKE YOUR OPINION COUNT -- Click Here 
http://tbutton.prnewswire.com/prn/11690X75636851


/CONTACT: Energy Intelligence Group, 212-532-3405, fax: 212-532-4479/ 12:28 
EDT 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Saudi Arabia Selects International Oil Companies for Three Major Projects

05/18/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Saudi Arabia announced its choices of international oil companies from both 
sides of the Atlantic for three huge natural-gas projects, marking the 
reopening of its energy sector to Western investment, a quarter century after 
it was nationalized. 
Together, the three projects will require investment of some $25 billion.
A consortium comprising Exxon Mobil Corp. (XOM), Royal Dutch/Shell Group 
(RD), BP PLC (BP) and Phillips Petroleum Co. (P) won the plum Core Venture 1 
contract, which is projected to require about $15 billion in investment. No 
decision has yet been made on who will lead Core Venture 1, also called the 
Ghawar project after the world's largest onshore oil field. 
Exxon Mobil will lead Core Venture 2, on the Red Sea Coast. Occidental 
Petroleum Corp. (OXY) and Enron Corp. (ENE), which were jointly bidding for 
the contract, received a stake in the project. 
Core Venture 3, in Shaybah, was awarded to a consortium made up of Shell, 
TotalFinaElf (TOT) and Conoco Inc. (COCA). Shaybah is a recently developed 
oil field in Saudi Arabia's southeastern region bordering the United Arab 
Emirates. No leader has been selected for the Shaybah project either. 
Negotiations have been under way for the three projects since Saudi Crown 
Prince Abdullah invited major oil companies to return to the country in 1998. 
The talks until now focused on broad issues, such as the scope of the 
projects. 
Other issues are still to be negotiated, and it is expected to be months 
before final agreements are signed. 
Exxon Mobil, leader of Core Venture 2, the only project for which a leader 
was announced Friday, said in a written statement that the project includes 
development of discovered gas resources in Northwest Saudi Arabia, power and 
desalination facilities in that region and exploration in the Northern Red 
Sea with the opportunity for additional investment in chemicals, power and 
desalination facilities on the West Coast. 
Exxon Mobil also hopes to become project leader for Core Venture 1, which 
will expand Saudi Arabia's power, water desalination, petrochemical and gas 
systems and provide for exploration and development of gas resources in the 
Northern Rub Al-Khali region. 
Saudi Arabia will announce its selection of leaders for core projects 1 and 3 
by June 5, an industry source familiar with the process told Dow Jones 
Newswires Friday. Memoranda of understanding will also be signed in the first 
week of June and by June 5 at the latest, he added. 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Saudi Arabia Picks Foreign Partners for Gas Projects (Update4)
2001-05-18 13:56 (New York)

Saudi Arabia Picks Foreign Partners for Gas Projects (Update4)

     (Adds analyst comments in eighth, 10th and last paragraphs.)

     Riyadh, May 18 (Bloomberg) -- Saudi Arabia picked Exxon Mobil
Corp., Royal Dutch/Shell Group, BP Plc and five other oil
companies for $25 billion of investments, opening its natural-gas
fields to foreigners for the first time in two decades.
     Total Fina Elf SA, Conoco Inc., Phillips Petroleum Co.,
Occidental Petroleum Corp. and Enron Corp. were also selected to
help Saudi Arabia convert its utilities from burning oil to gas.
Saudi Arabia nationalized its oil fields in 1975.
     The investments are designed to spur Saudi Arabia's economy
and provide jobs for the estimated 15 percent of the population
who are unemployed. While the projects initially involve gas, the
winners will have a lead should the country open access to its
crude oil reserves, the world's largest.
     ``I don't think it's going to be spectacularly lucrative, but
there are other, pressing reasons to be there,'' said Julian Lee,
an analyst at the Centre for Global Energy Studies in London,
which was founded by former Saudi oil minister Sheikh Zaki Yamani.
``It's part of a long-term play by the oil companies who want
ultimately to get access again to Saudi crude.''
     Saudi Arabia took over its oil fields following the Arab oil
embargo that started in 1973. The awards culminate three years of
talks and lobbying by the companies with Saudi Arabia, whose
natural-gas reserves are the world's fifth largest.
     The South Ghawar project is the centerpiece of the kingdom's
plan and will include Irving, Texas-based Exxon Mobil, Shell, BP
and Phillips, SPA said. No decision has been made on a leader for
the project, which is expected by analysts to cost $17 billion.
     Shell, Conoco and Total were chosen for the Shaybah project,
which may cost $4 billion. Exxon Mobil will lead an estimated $4
billion project, including Occidental and Enron in the Red Sea
development, the official Saudi Press Agency said, citing Saudi
Foreign Minister Prince Saud al-Faisal.

                         Agreements

     The partners will soon sign preliminary agreements in the
next few weeks, the government said, though terms have yet to be
decided. Fahnestock & Co. analyst Fadel Gheit expects the
companies to see a return on investment of 10 percent to
15 percent.
     Foreign companies had hoped to regain access to Saudi
Arabia's oil fields, though the government instead sought gas
developments.
     ``The ultimate objective is to get a better seat at the table
in terms of the oil,'' said Jurjen Lunshof, an analyst at Credit
Lyonnais Securities Europe. ``But you wonder whether the terms
will make sense.''
     Even so, Exxon shares rose as much as $1.45, or 1.6 percent,
to $90.18, while Phillips advanced $2.13, or 3.2 percent, to $68
and Enron gained as much as $2.20 to $54.40. In London, BP rose
10.5 pence to 625p and Shell Transport & Trading climbed 15 pence
to 615p.
     Three companies -- Chevron Corp., Eni SpA and Marathon-USX
Group -- also bid for projects. Those who aren't participating
either submitted inappropriate proposals or rejected the
government's invitation, SPA said. Also absent is Texaco Inc.,
which Chevron is buying.

                         Economic Woes

     Saudi Arabia has been running budget deficits for most of the
last two decades and has a public debt some 10 percent bigger than
its $120 billion economy. The country needs foreign investment to
help create enough jobs for the 100,000 men entering the market
each year.
     ``The construction of an energy superhighway will provide a
spurt of growth that should carry the kingdom for many years,''
said Brad Bourland, the chief economist at Saudi American Bank,
before the results were announced. ``The spin-off benefit will be
the creation of thousands of new jobs for Saudis.''
     The kingdom's state-owned energy company, Saudi Aramco, will
hold equity and oversee the projects, though it is expected to
bear none of the costs.
     Exxon has already invested more than $5 billion in the
country, including a 50 percent stake in the Yanbu Petrochemical
Co., when more than $2 billion was raised from more than 30 Saudi
Arabian, regional and international banks. Shell has already
invested more than $7 billion.

                         Power Demand

     Saudi Arabia needs about $120 billion for power generation
projects during the next 20 years, with the annual demand growth
for electricity in the kingdom estimated at 4.5 percent, reported
King Fahd University in Dhahran.
     To meet this demand the country must increase power
generation to 70,000 megawatts by 2020 from 21,000 now.
     Saudi Arabia produces 4.5 billion cubic feet of gas a day,
equal to 800,000 barrels of oil a day, all for domestic use. By
using more gas at home, the country will free up about 300,000
barrels of oil a day for export.
     Drilling and production costs for Saudi gas wells will be
30 percent to 50 percent more than for Saudi oil wells, a boon for
service companies already active in the kingdom such as Nabors
Industries Inc. and BJ Services Co.
     ``This is the most significant development possible for the
oilfield-services industry, outside of burgeoning new activity off
Angola and Brazil,'' Robert W. Baird & Co. analyst George Gaspar
said.