Oil giants in Saudi crisis talks
Sunday 27 September 1998
Officials from the oil companies, including Exxon, Chevron, Texaco, Amoco and Mobil, have been summoned to the Saudi embassy in Washington to discuss "co-operation" between the big oil power and the oil giants.
Industry insiders and analysts are divided over what the Crown Prince could want to talk to them about, but the move highlights the growing alarm in the Middle East about the low oil price, which threatens to ruin the region's economy. Crude oil is currently trading on the world markets at around $14 a barrel, higher than its low point earlier in the year but still $5 below last year's average. Oil prices have been hit by a number of coinciding factors - the crisis in Asia, last year's warm winter in the Western hemisphere and high company inventories.
According to some industry sources, the Crown Prince would like to ask the oil companies to share the burden of cutting back oil production in co-operation with the Organisation of Petroleum Exporting Countries (OPEC) in a bid to shore up prices on the world market. However, any such move would certainly fall foul of strict US anti-trust laws, which are designed to prevent price-fixing cartels and would make such a move by the Crown Prince impossible.
"It is such a matter of public law in the US that you can't even talk about such co-operation," said one industry source. "My guess is the meeting will have more to do with investment opportunities in Saudi Arabia," he added. The big oil companies have long sought to tap into Saudi Arabia's huge exploration and production oil sector.
Although no British company will be present at today's meeting, British Petroleum will be represented by Amoco, the US oil firm with which it recently agreed to merge.
Their merger, which is expected to reap up to $2bn in cost savings for merged venture, will also concentrate BP and Amoco's oil production in the Western hemisphere, making it less reliant on the politically unstable Middle East.
Other companies are also eyeing potential partners in a bid to survive the crisis. Last week British-Borneo announced it was to merge with Hardy Oil & Gas, creating a company worth pounds 900m. However, the current price crisis means a lot of oil firms are having to concentrate all their energies on getting through the current environment.
Shell recently announced it was to close one of its London headquarters, with the loss of about 200 jobs.
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