The Saudi government has offered state-owned oil company Saudi Aramco a 40-year concession term for the kingdom’s oil reserves, replacing its current evergreen contract which permits it indefinite exclusive rights to the resources, an informed source told Bloomberg.
The agreement overturns norms in place in since the 1930s when the government first allowed private companies to drill in Saudi territory, the source said.
Saudi oil minister Khalid al-Falih said earlier in August that the government had reissued “a long-term exclusive concession,” to Aramco, however the company has declined to comment on the latest information.
Aramco has retained the same legal conditions since it was reformed in 1988, which allowed them the same terms as the original 66-year concession agreement signed with several US oil companies in 1933.
Aramco has operated through an evergreen contract since the end of the original agreement in 1999. This allows the company to continuously renew the contract at the end of every term in perpetuity.
The new concession agreement marks an end to the evergreen contract. This will impose a finite concession term on Aramco, although Aramco will be able to renew the contract at the end of the term, according to the Financial Times.
The changes came as part of the government’s IPO preparations, which have recently been put on indefinite hold.
Falih stated that the kingdom remains “committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum.”