JEDDAH, 18 December 2003 — Minister of Petroleum and Mineral Resources Ali Al-Naimi, yesterday said the OPEC’s basket of crude oil should reflect the value of the commodity, illustrating the Kingdom’s concerns about the loss of purchasing power from a weakening US dollar.
He said the world prices rose after the Organization of Petroleum Exporting Countries met in Vienna earlier this month and added that they were targeting a higher price to offset the declining value of the US currency. OPEC’s basket of crudes is priced in dollars.
Speaking in Washington where he addressed an international conference on liquefied natural gas which opened yesterday, Naimi said “there is a difference between price and value. Focus on value.”
When asked if he thought the current price of OPEC oil is too high, Naimi told the conference that based on US Department of Energy’s own projection annual global demand for energy will grow by 58 percent by the year 2025. This is equivalent to adding the oil production of 15 new producers like that of Saudi Arabia.
On the Kingdom’s plans for natural gas, Naimi said the government has launched an ambitious program of economic reforms the underlying goals of which are to realize the country’s vast economic potential; to create new investment opportunities which will benefit both investors and the Kingdom; to expand and diversify the Saudi economy and to create new jobs for a growing population.
“Saudi Arabia’s current Economic Plan sets aggressive targets for the economy and for individual industries. Private sector annual growth is expected to exceed five percent, while foreign investment is anticipated to grow at a rate of almost seven percent per year. The industrial sector is set to grow in excess of five percent per year; electricity and water demand at four and half and five and half percent respectively; petrochemicals and other downstream industries at more than eight percent; and the energy-intensive mining sector is forecast to grow more than nine percent annually. These growth rates which are expected to continue into the future are indicative of strong growth in gas demand.”
He said that the Kingdom Gas Strategy forecasts domestic gas demand to exceed 12 billion cubic feet per day by 2025. With demand for gas rising rapidly, and an extensive gas infrastructure already available in the form of the Master Gas System, the stage is set to economically expand the supplies of natural gas Kingdomwide.
He said it is expected that new natural gas resources discovered as a part of the new initiatives to be consumed locally to provide energy and feedstock for an expanding Saudi economy. “There are no plans currently to enter the LNG export market. However, these plans could change if our efforts in combination with our foreign partners, find sufficient reserves in excess of our local needs. At that point we would evaluate all options, including LNG export.
Naimi said there are sufficient reserves to meet projected future energy demands while stressing there is no question of running out of energy. The reserves in the Kingdom and the Gulf are massive and can be called upon to meet the world’s growing energy needs.
“However, finding and developing new reserves, especially in regions outside the Gulf, will be more difficult and more expensive than in the past. The development of such sizable new energy resources will require large capital investment.
The International Energy Agency recently estimated that we would need to invest $16 trillion from 2001-2030 to develop the energy supply infrastructure necessary to meet projected global energy demand. We believe financial markets will respond to these needs and that sufficient capital will be available to develop the required resources.”
Naimi said he couldn’t say with any certainty whether the road ahead will be smooth or rough for trading natural gas internationally but added that stability, predictability and an adequate return for producers are vital to ensure a healthy and steady stream of investment capital necessary to expand supply.
He said the Kingdom’s spare production capacity is a necessary component for maintaining stability in oil markets, but it alone is not sufficient to achieving that goal. “We believe that to achieve better stability, we must cooperate closely with other OPEC and non-OPEC producers, not only to insure that we do not oversupply markets, but to also make additional supplies available in times of shortage.
Saudi Arabia prefers to play a quietly constructive role in maintaining stable oil markets, one which is often overlooked by the media and some opinion leaders. It is not in our nature to publicly trumpet our successes.”