Saudi Arabia is probably best known outside the Middle East as a huge producer of oil. But international oil companies hoping for a piece of the action have so far been disappointed. For more than 20 years, the Saudi oil industry has been off-limits for foreigners, with exploration and production entirely in the hands of one national company, Saudi Aramco.

This year, however, the door to Saudi energy has been stretched open. In a high-profile initiative, eight firms — five American, two British and one French — have been handed the chance by the Saudi government to develop projects involving the extraction and use of not oil, but natural gas. According to official sources, investment over the next 10 years in these projects will total more than $30 billion.

Unlike some other states in the Arab Gulf region — Qatar, Oman and Yemen for instance — Saudi Arabia does not intend to export its gas. Although it has the fourth largest reserves in the world, after Russia, Iran and Qatar, its plans for gas use lie closer to home. Saudi Arabia has a pressing need for more electricity and drinking water and clean-burning gas is the most desirable fuel for firing the necessary power stations and water desalination plants.

The Saudi government is also keen to expand the country's already substantial petrochemicals industry — which has gas as its main raw material — to lessen the economy's dependence on oil.

The attraction of involving international companies is threefold. First, the government, no longer in the cash-rich position of the early 1980s, doesn't have to come up with the money for these huge projects itself; second, the companies will bring the latest technology and create badly-needed jobs; and third, permitting international corporations to build up commercial interests deepens the government's relationship with global business.

For the international oil companies, the opening to gas investment has obvious attractions too, although these may be less about what is up for grabs now and more about what might be in prospect later — oil exploration and production, for example — if the Saudi government deems the initiative a success. For the moment though, any oil discovered alongside the gas would have to be handed over to the state oil and gas company, Saudi Aramco.

"We would be very happy if the companies discovered oil but it would have to come back to us, although they will get compensation for their discovery," Foreign Affairs Minister Prince Saud al-Faisal commented after a signing ceremony in June. That said, the chairman of oil giant Exxon Mobil, a key player in the initiative, is on record as saying he expects a rate of return of at least 15 percent from the projects.

Under the plans already announced, consortia are being formed to develop three so-called core ventures, with definitive agreements due to be in place by the end of the year. The first venture, viewed as the most attractive investment opportunity, entails exploiting gas reserves in eastern Saudi Arabia at South Ghawar, estimated at 30,000 billion cubic feet, and building two petrochemical plants, two power stations and four desalination plants. The consortium is being led by Exxon Mobil, with the Anglo-Dutch Shell, the UK's BP and Phillips Petroleum all taking smaller roles. Initial investment is estimated at $12 billion to $16 billion.

The other ventures cover the west coast (Red Sea) area and Shaybah in the far south-east, near the border with the United Arab Emirates. These projects are likely to require investment of $5 billion to $10 billion each and are being led by Exxon Mobil and Shell respectively, with Marathon, Occidental, Conoco and France's TotalFinaElf also involved. The role of Saudi Aramco in the projects remains unclear but official sources have said it will be closely involved in what it describes as a co-operative effort. In all, the three projects will cover 170,000 square miles, an area about the size of Sweden.

The effect the gas deals have on the structure of the Saudi economy will be considerable. For the past five years, the government has looked seriously at the idea of privately-owned power projects but none has yet been built. The gas initiative implies a sweeping away of state control, and the rapid introduction of a new legal and regulatory framework that supports foreign investment in utilities.

"These ventures are of unprecedented scale and they represent a new way of doing business in the Kingdom," Prince Saud said in June.

Some local economists are predicting that, taken in its entirety, the gas initiative will add one percentage point a year to Saudi economic growth — which, if realized, would be a considerable achievement. And Saudi officials are already talking up the idea of greater investment inflows after the initial spending — taking the total, they say, to more than $50 billion.

For the investors, one of the first tasks is closer study of existing data on the gas fields compiled by Saudi Aramco and then further seismic investigations of their own. After that, possibly in about two years' time, the drilling will begin in earnest. And the international oil companies, kept out of Saudi Arabia for so long, will finally be back in business in the world's biggest energy producing country.

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