Saudi Arabia is putting new concessions on the table in the hope of averting the collapse of year-long negotiations over a landmark gas production deal, the Reuters news agency reports.

The $25bn agreement would allow Western oil giants to extract oil or gas in Saudi Arabia for the first time in a quarter of a century.

Firms involved

Exxon Mobil Shell BP TotalFinaElf Occidental Philips Conoco Marathon

But conflict between de facto ruler Crown Prince Abdullah and foreign minister Prince Saud al-Faisal on one hand, and princes connected to the state oil company Aramco on the other, has meant that in the past the companies have been offered unfavourable terms.

Now, Reuters quotes government sources as saying, new concessions are on the table, relating to the return on investment and the expansion of exploration rights.

"This is a starting point which hopefully will put the government on the road to final agreement," the source told Reuters.

The companies, however, remain cautious as to whether the new terms will make any difference.

"The concessions are worth considering," one executive told Reuters, "but we need some time to run all the scenarios before we respond by early October as per (Prince Saud's) request."

Open and shut case

The deal was meant to mark a new era in the Middle East energy business.

Since Aramco was nationalised in the 1970s and outside companies have been barred from the so-called "upstream" part of the business: the discovery and extraction of hydrocarbons.

Instead, they have been limited to refining and then transporting oil and gas.

The pressure from Aramco to guard its monopoly is therefore intense.

And the increasingly uncomfortable relationship between Saudi Arabia and the US since 11 September 2001 has added to the complications, bringing the internal politics of the kingdom into sharp relief.