JEDDAH: Saudi Arabia may increase its oil production beyond a planned 200,000 barrel-a-day increase in July if the oil market requires extra supplies, said Minister of Petroleum and Mineral Resources Ali Al-Naimi at the Jeddah Energy Meeting yesterday.
“I would like to state that for the remainder of this year Saudi Arabia is prepared and willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed,” he said. The Kingdom’s capacity will be 12.5 million barrels a day by the end of 2009 and may rise to 15 million after that if necessary, he said.
According to the minister, Saudi Arabia has identified a series of future crude oil mega-increments totaling another two-and-a-half million barrels per day of capacity that could be built if and when crude oil demand levels warrant their development. “Among these prospective programs are a 900,000 barrel-per-day increment in Zuluf, a 700,000 barrel-per-day increment in Safaniyah, a 300,000 barrel-per-day increment in Berri, a 300,000 barrel-per-day increment in Khurais and a 250,000 barrel-per-day increment Shaybah,” said Al-Naimi.
He said the Kingdom would press ahead with its planned investments in the refining sector “which over the next five years total some two million barrels per day of new refining capacity both in Kingdom and abroad.” He referred to the shareholders agreement Saudi Aramco signed with Total of France for the 400,000 barrel-per-day export-oriented refinery in Jubail. “It is a facility which will be configured to process Arab Heavy crude, and will therefore help to close the gap between existing refinery configurations and global crude oil slate,” said Al-Naimi.
He termed the investments as massive. “They will over the next five years total some $129 billion between the upstream and downstream segments of the industry. We are putting our money where our mouth is,” he said, adding: “The Kingdom has undertaken these projects and investments in the interest of global markets and in order to meet the needs of consumers around the world.”
Al-Naimi felt record prices were not reflecting the true state of market supplies. The price of a barrel of crude has doubled from about $70 to nearly $140 over the past year.
“Between the second quarter of 2007 and the second quarter of 2008, global demand rose by an estimated 800,000 barrels to 1.2 million barrels per day.
“At the same time, global oil supplies rose between 1.4 and 1.6 million barrels per day, substantially more than the increase in demand.”
He added that forward cover — a key market measure for how long oil inventories would last if production stopped — had increased from 52 days to 54 days over the past 12 months.
“Clearly something other than supply and demand fundamentals is at work here, and a simplistic focus on supply expansion is therefore unlikely to tame the current price behavior,” Al-Naimi said.
Al-Naimi said this was not the time to cast blame, point fingers or play a waiting game. “This is the time to stand up, step up and be part of the solution. The challenges before us require commitment, cooperation and a lot of courage. The issues at stake are too big and too complex for any one entity to resolve, for any one sector of our industry to tackle alone.”
He assured the world’s oil ministers that there were enough petroleum resources. “Yes, there are enough petroleum resources, both conventional and nonconventional, to meet oil demand for many, many decades to come,” said Al-Naimi. “What is required over the long-term is not more oil in the ground, but rather the assets to bring it to the surface, to process it, and to supply it to markets around the world.”