ECONOMIC NEWS ...... 

GCC MINISTERS REACH AGREEMENT ON FORMATION OF A CUSTOMS UNION

Ministers of finance and economy from the six Gulf Cooperation Council (GCC) countries reached agreement during the GCC Economic and Financial Committee meeting in Oman on March 9 on a new mechanism that will eliminate the last hurdle for the formation of a customs union. The ministers reached agreement for the collective distribution of import duties and a possible compensation fund that will allow the implementation of the customs union on schedule by January 2003. “We have reached agreement on the distribution of customs revenues among member states after the customs union is set up,” Omani Minister of National Economy Ahmad ibn Abdulnabo Makki said after chairing the committee meeting. He gave no details of the distribution mechanism but said revenues would be shared proportionately on the basis of the size of imports, GDP and the population of each member country.

SAUDI ARABIA TO PRIVATIZE SOME OPERATIONS OF NATIONAL OIL COMPANY

Saudi Arabia is looking at the possibility of privatizing some of the operations of Saudi Aramco, Minister of Petroleum and Minerals Resources Ali al-Naimi said on April 27. Addressing Saudi Aramco staff in Houston, he did not elaborate, but officials at the national oil company, which is the world’s largest oil-producing entity, said they believed he was referring to Saudi Aramco’s non-core, ancillary operations and not the Kingdom’s key oil and gas facilities. “We are studying the possibility of privatizing some of Saudi Aramco’s operations,” Minister al-Naimi said in his speech.

Minister Al-Naimi also spoke of the Kingdom’s decision, unveiled at an energy conference in Riyadh in November, to set up a publicly-held energy services company. The holding company, which could draw initial investment of 160 million to 220 million dollars, would be similar, but not identical, to the Saudi Arabian Basic Industries Corporation (SABIC). He said Saudi Aramco currently outsources many support services to the Saudi private sector to help spread the wealth generated by its oil production. “We in the ministry are embarking on establishing a publicly-owned company, which will provide support services to the petroleum and energy sector that covers engineering, seismic surveying, drilling, manufacturing of some products and others,” al-Naimi said. Majority ownership in the company would be held by the Saudi private sector, while the government would participate via two existing oil services companies — Arabian Drilling Company and the Arabian Geophysical and Surveying Company.

NEW OIL AND GAS DISCOVERIES

The Ministry of Petroleum and Mineral Resources on March 20 reported three new discoveries of oil and gas southeast of Riyadh. Natural gas in commercial quantities was found in association with Jafin-One oil well located 150 miles southeast of Riyadh, close to the vast Ghawwar field. Crude oil was discovered at Wared-One oil well in the area of Khurais, located 100 miles southeast of Riyadh. The third discovery was at Takhman Well Two, located 250 miles southeast of Riyadh.

SABIC TO ACQUIRE DUTCH PETROCHEMICAL BUSINESS

The Saudi Arabian Basic Industries Corporation (SABIC) announced on April 3 that it is in the process of acquiring the petrochemicals business of the Dutch company DSM-NV for two billion U.S. dollars, half to be paid on closing and half in 2006. The transaction will involve the transfer of the shares of all companies in the DSM group’s petrochemical operations, and of all associated sales activities and related technology positions, patents and trade names, retroactive to January 1, 2002. Final agreements are to be signed on June 30, 2002, following approval by the European Commission. SABIC’s Managing Director Muhammad Al-Mady said the acquisition will provide entry into the European market and facilitate SABIC’s goal of becoming a global leader in the petrochemical sector.

RENEWED INTEREST IN RAILWAY EXPANSION

Minister of Communications Dr. Nasir Al-Salloum said on April 9 that a group of German, French, Korean and Japanese companies had expressed an interest in participating in Saudi Arabia’s railway expansion project. He said there is a plan to establish three new railroads connecting the Riyadh-Jubail rail line to the western parts of the Kingdom.

NEW LAW TO ENCOURAGE GREATER PRIVATE INVESTMENT IN MINING

Saudi Arabia is finalizing a new mining strategy that will encourage greater private investment for developing the country’s mineral resources, Minister of Petroleum and Mineral Resources Ali Al-Naimi announced on April 2. “We are now in the final phase of preparing the new strategy, which has been subjected to extensive studies over the past months,” he said, adding: “The new mining law is in its final stages and we expect it to be formally issued before the end of the year.”