RIYADH, 18 October — Saudi Arabia and Iran pledged to stabilize the oil market following a sharp drop in global oil prices since the Sept. 11 terror attacks on the United States. An urgent assessment of the oil market situation was also made during the talks between Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi and the visiting Iranian Oil Minister Bijan Namdar Zanganeh here today.
Addressing a joint press conference after the talks, Al-Naimi and Zanganeh said that “Riyadh and Tehran will do whatever is necessary within the framework of the mandate of the Organization of Petroleum Exporting Countries (OPEC) to maintain stability in the oil market”. The ministers discussed the option to reduce production to shore up prices, which are now below $20 per barrel, well under the price band of $22-$28 per barrel.
“We reviewed the whole gamut of problems including the issue of fluctuation of prices, supply and demand on global level”, said Al-Naimi adding that “the proposal for production cut is one of the options and no specific figure for production cut has been discussed”. The Iranian minister, who brought a message of President Muhammad Khatami to Crown Prince Abdullah, deputy premier and commander of the National Guard, said that there is no difference in opinion among OPEC members.
The OPEC including Saudi Arabia and Iran have mandate to stabilize the oil market, he said. The OPEC members have also the resources to cover incremental global oil demand, which is projected to increase by 1.9 percent annually, reaching 115 million barrels per day by 2020.
The Kingdom has more than a quarter of the world’s recoverable oil reserves, which stand at around 263 billion barrels.
Along with the advantages of this enormous oil reserve base, Saudi Arabia’s cost of production is one of the lowest in the world.
Today in the Kingdom, all-inclusive cost of production is less than $1.50 per barrel, while the global average cost is about $5 per barrel and in some areas more than $10 per barrel. This helps the Kingdom to play an important role in stabilizing the global oil market.
”We also have a great advantage when it comes to adding new reserves or increasing production capacity”, said another Saudi official. It costs Saudi Arabia less than 10 cents per barrel to discover new reserves, while the cost in some other areas of the world can be as high as four dollars. Oil currently accounts for about 35 percent of the Kingdom’s gross domestic product and 75 percent of the state income.
Asked about other subjects of talks with his Iranian counterpart, Al-Naimi said that the meeting also discussed the role of non-OPEC oil producers with an aim to seek more cooperation. He denied any political disputes within OPEC on output quotas, market stability and price band mechanism, saying that there has been no political pressure on OPEC either to reduce or not to reduce their production.
To this end, he noted that a final decision will be made by the oil ministers of the OPEC member countries, who will be meeting in the Austrian capital of Vienna on Nov. 14. He, however, reiterated that the Kingdom along with all the OPEC members are committed to ensure market stability, a balance between supply and demand and to restore the stability of crude prices on global level.
