NEW DELHI, 7 January 2005 — Minister of Petroleum and Mineral Resources Ali Al-Naimi said yesterday that the Kingdom had spare capacity to meet the needs of Asia’s fast-growing economies, calling the region the country’s chief customer.
“I’d like to assure our customers in Asia that Saudi Arabia is both capable of and committed to meeting the petroleum needs of its Asian partners,” Naimi told a conference in the Indian capital.
Riyadh is “dedicated to maintaining spare production capacity in the range of 1.5 to 2.0 million barrels per day to meet additional demand should need arise,” he told the Asian ministers meeting to discuss oil cooperation. The minister said the Kingdom had a “solid track record” as a responsible and reliable energy supplier.
“We closely monitor growth of petroleum demand in Asia to anticipate future needs so we can meet them without delay. At the same time, we watch closely growth in future world demand and fluctuations in supply to maintain suitable spare production capacity.”
To meet customer needs, Saudi Arabia had been producing about 9.5 million barrels a day during the second half of 2004 “and could produce more on short notice,” he said.
He sought to allay concerns sparked by Al-Qaeda-linked militant attacks in the Kingdom over the country’s ability to maintain reliable deliveries.
These doubts “have been and will continue to be proven wrong,” he said. “Saudi Arabia is pledged to absolute reliability in times of scarcity and in times of abundance, and we will not allow any misunderstanding of this sort to affect our relationships,” the minister said.
He said the country served three major consuming regions - North America, Europe and Asia but that Asia was its “number one customer.”
The Kingdom shipped over 4.5 million barrels of oil per day to Asia or about 60 percent of its exports, he said. Saudi shipments represented 20 percent of Asia’s consumption. “Restructuring of the industry in some Asian countries has brought more opportunity for joint investment in downstream activities. Such partnerships provide these countries with reliable, timely delivery of products that meet the requirements of the market as well as other benefits.
“We’re also in negotiations with several local companies in Asia for joint investments in refining and marketing sectors,” he said, adding that such initiatives showed Saudi Arabia’s desire to strengthen ties with the region.
“We’ll continue looking for partners across the continent for refining and marketing investments. We’ve the capacity to supply crude to our joint ventures throughout Asia.”
China and India have emerged as key oil-guzzling nations along with Japan and South Korea. India, which imports 70 percent of its crude needs, was hosting the meeting to explore long-term oil arrangements.
Indian Petroleum Minister Mani Shankar Aiyar called for the development of an Asian petroleum market with trading exchanges to serve the region’s fast-growing economies and soften price volatility.
“It’s essential we develop a sophisticated Asian market for petroleum and petroleum products” to ensure supply stability and reduce price volatility. India, which has a vital interest in stable oil markets as it sources 70 percent of its crude oil needs abroad, hosted the one-day meeting to promote supply security through regional linkages.
Booming economic growth has turned Asia into one of the main buyers of Gulf oil but a lack of partnerships between producers and consumers has made Asian nations vulnerable to global oil price volatility, participants said. But at least one country said there was more oil in the market than needed.
“The market is oversupplied. There is no doubting it,” Iranian Oil Minister Bijan Namdar Zanganeh told reporters after the meeting.
Other key fuel-guzzling nations such as China, Japan and South Korea also attended the forum along with key oil producers such as Kuwait, Saudi Arabia, Iran, Qatar, Oman, the United Arab Emirates as well as Malaysia.
Zanganeh said that with the emergence of giant Asian consumers, the continent was “set to become the gravity center of the world’s energy consumption.”
He added that Asia contained the world’s largest oil reserves.
India’s Aiyar also urged setting up strategic storages and mutual investments to promote supply security. He said a regional market would spur transparent pricing, allow for derivatives trading and reflect “the real role in the global oil economy of Asian production, Asian consumption and Asian trade.”
Zanganeh said an “Asian crude market” could be formed through sustained dialogue.
“It (Asia) is one of the fastest-growth markets for oil in the world, where half of the total incremental oil demand is forecast to take place during the next few years,” said Yousuf Al-Ibrahim, special economic adviser to Kuwait. “Development of partnerships between producers and consumers will go a long way to address mutual concerns about security both of supply and demand.”
China said it was vital to check oil price fluctuations as they hurt both consumers and producers. “The surge in international oil prices leads to higher production costs in oil-consuming nations, and to some extent slows their economic growth. The rise of oil prices may also reduce oil demand,” said Zhang Xiaoqiang, vice chairman of China’s National Development and Reform Commission.
