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AOC head leaves Saudi after concession talks end

TOKYO: Arabian Oil Co Ltd's (AOC) president Keiichi Konaga has left Saudi Arabia after holding last-minute talks on its soon-to-expire oil concession with the kingdom, an AOC spokesman said on Sunday.

But the spokesman would not comment on further details including the outcome of the talks.

The 40-year concession AOC holds in the Saudi portion of the Neutral Zone, which is equally shared with Kuwait, expires at 2100 GMT on Sunday. The Kuwaiti portion does not expire until January 2003.

Trade Minister Takashi Fukaya also said on Sunday in a Fuji Television programme that Konaga was on his way to Tokyo, adding he did not know the outcome of the talks.

"I do not know the result, whether good or bad...I'm anxiously waiting for his report" on his return later on Sunday, Fukaya said.

But Fukaya said oil supplies to Japan and the bilateral relationships with Saudi Arabia would not be affected even if AOC failed to renew the concession, although the concession had its importance as Japanese developed oil fields.

"(Saudi Arabian Oil) Minister (Ali al-)Naimi has assured officially that the relationships between the two countries and oil supplies from Saudi would not be affected" because of the concession issue, Fukaya said.

Saudi Aramco has already agreed with Japanese buyers of AOC's crude that the state-run firm will supply crude for loading in March if AOC's concession was not renewed.

AOC's concession in the Khafji and Hout fields is the premier oil production interest of Japan which is almost totally dependent on imports for its crude oil needs.

AOC produces about 270,000 barrels per day (bpd) from those fields of which it exported 156,000 bpd to Japan in 1999, both from the Saudi and Kuwaiti portions, accounting for 3.6 percent of the country's total imports of 4.31 million bpd.

AOC has said its sales would be halved if it lost the concession with Saudi Arabia, depending only on the Kuwaiti portion of production.

"The oil AOC brings to Japan is not surprisingly huge," Fukaya noted, playing down the impact of a possible loss of AOC's oil from the Saudi portion.

Fukaya said the government had done all it could to help AOC renew the concession, considering the importance of ties with the world's largest oil producer and exporter Saudi Arabia, which exported about 813,000 bpd to Japan in 1999.

Crude from Saudi Arabia in 1999 accounted for 18.8 percent of total imports, second to UAE's 25.2 percent.

The Japanese government had offered a loan and aid package to promote Japanese investments in Saudi Arabia for a total of 600 billion yen.

But the major sticking point was Saudi's strong demand that a $2 billion mining railroad be constructed and operated totally at Japan's costs, which Tokyo has rejected.

Tokyo had offered to finance about $1.4 billion of the railroad project with low-interest loans, which Saudi rejected.

"Because AOC is not a state-owned company, what the government could do was to help support through efforts to maintain good relationship with Saudi," Fukaya said.

"But Japan does not have a framework to give away such money," he said, adding that the railroad's profitability is highly in question.

AOC had made its own offers including an offer of $600-700 million to complement the $1.4 billion government loan offer for the railroad project, local media reports have said.-Reuters