JEDDAH/RIYADH, 13 September 2006 — The Kingdom will invest over SR262 billion ($70 billion) in its oil and gas sector over the next five years as part of its commitment to keep a spare oil output capacity cushion of 1.5 to 2.0 million barrels per day at all times. This announcement was made by Minister of Petroleum and Mineral Resources Ali Al-Naimi at an OPEC seminar of oil ministers and industry leaders in Vienna yesterday.
The minister said that as part of its commitment to keep the energy market well supplied, crude output capacity would be raised to 12.5 million bpd by 2009 through an investment of around SR67 billion ($18 billion).
“While the world does need continued improvement in energy efficiency, some government policies which artificially curtail demand and create demand uncertainties irrespective of market signals will have economic ramifications that could jeopardize the global energy future,” Naimi observed.
He pointed out that there was a role for different energy sources, but warned that some projects might not achieve their end of securing future supplies. “Without a doubt, the world still needs contributions from a wide range of energy sources and regions to meet the growing energy demand of a rising world population in the future,” he said.
According to him, “impractical energy policies, unrealistic timeframes to bring some alternatives on stream, or the inefficiencies that come with inputting more energy to produce some of these alternatives due to energy security concern do nothing to secure the world’s energy future.”
He was referring to the ongoing efforts to tap alternative sources of energy, including reliance on hydrogen economy, subsidized renewables such as bio-fuels, and the increased market penetration of hybrid cars.
Geopolitical issues and bias regarding energy imports from the Middle East in some countries add to this climate of uncertainty, the minister said.
Speaking in the context of the changing scenario in the international oil market, Naimi said that over the past three decades, the developing countries of Asia, the Middle East and Latin America have accounted for half of the increase in the global oil demand, and are expected to account for 75 percent of the 30 million barrels per day projected increase in the global oil demand by 2025. The transportation sector was forecast to account for 60 percent of oil use due to the increase in vehicle ownership worldwide, which will grow from 135 vehicles per 1,000 inhabitants today to 190 vehicles by 2025.
He said forecasts suggest that regardless of energy security concerns and various policy measures, OECD oil imports will grow from 55 percent today to 66 percent of consumption by 2025. Even more dramatically, China’s oil imports are projected to increase from 35 percent to 75 percent over the same period.
Referring to the role of the Middle East in meeting the anticipated surge in demand, production and trade, he said the region was forecast to boost its production share from 30 percent today to 40 percent of the projected world oil production in 2025. This will contribute to an increase in its share to half of the projected global oil trade of 70 million barrels per day in 2025. Similarly, the region’s share in the global natural gas trade was expected to double by then, reaching 30 percent of the total.
The minister said the underlying uncertainties of the demand and supply outlook dictate the need for prudence. Producers and the industry at large should entertain alternative business scenarios when they make long-term decisions regarding production and refining capacity expansions and upgrades — programs that involve large-scale investments.