February 18, 2000

SAUDI ARAMCO ESTABLISHES A NEW COMPANY TO TAKE OVER KHAFJI FIELD FROM THE JAPANESE COMPANY. DURING THE TALKS, TOKYO DISREGARDED THE KINGDOM'S INTERESTS AND ITS OFFERS DID NOT MATCH THE SAUDI CONDITIONS. Saudi Aramco has established a company to take over the Khafji oilfield in the neutral zone shared by Saudi Arabia and Kuwait. The company will assume responsibility for the oilfield on February 27 when the drilling rights of the Arabian Oil Company Limited (Japanese) expire. Saudi Aramco has established a firm named Aramco Company for Gulf Operations to take over the Kingdom's interests in the neutral zone with Kuwait, high-level sources at the Commerce Ministry said. The new company, fully owned by Aramco, has been registered with the ministry, the sources said. "It will take over all oilfields and installations from AOC as per the articles of an agreement," they added. It was also said that Aramco experts would inspect the Khafji facility in preparation for the take over which comes following the failure of talks between the Kingdom and Japan to renew AOC's oil concession in the zone. AOC has been carrying out operations in the neutral zone based on an agreement originally signed in 1957. The Saudi-Japanese talks failed when Tokyo refused to invest in a major $2 billion railroad project. Japan's Minister for International Trade and Industry Takashi Fukaya was in Riyadh last month in a last ditch attempt to negotiate an extension of AOC's concession. Sources said that an estimated 1300 AOC employees working in the Khafji field would be transferred to the new Aramco company, adding that all their interests and rights would be protected.