WASHINGTON: Saudi Arabia’s daily oil production capacity will soon reach 12 million barrels per day, Khalid Al-Falih, president and chief executive officer of Saudi Aramco, the country’s oil giant, announced here yesterday.
Speaking at the Center for Strategic and International Studies, Al-Falih said Saudi Arabia could increase oil capacity beyond current expansion plans if the government decided it was necessary.
He added that oil markets were well supplied and that supply looked set to outpace demand for the next several years. However, he said producers needed to maintain a cushion of spare capacity.
“In terms of production, Saudi Aramco is on the verge of attaining its goal of a 12 million-barrel-per-day crude oil production capacity, once we complete our Khurais oil field program a few weeks from today,” he said.
“This project is the largest single crude oil increment ever commissioned, and will be capable of producing as much oil as the entire State of Texas — something I don’t say too loudly when I am in Houston, I might add,” he said.
But Khurais is only one aspect of our overall crude oil development program, and Saudi Aramco alone will ultimately account for more than half of the grassroots crude oil production capacity brought on-stream worldwide this decade.
“We will also be expanding our natural gas production capability, which is important given the role that gas plays in the Saudi economy, supplying utilities and a wide range of industries, fueling greater economic development and diversification, and encouraging the development of value-added enterprises based on gas and its associated feedstocks,” he said.
He emphasized the inter-dependence of countries in the world.
“One of the most significant and enduring lessons from this painful downturn is the reminder that ours is one, highly integrated and mutually dependent world. What impacts one country, business or industrial sector ultimately touches us all, and whether we realize it or not, we’re all navigating the same rough seas in the same boat,” he said.
The Saudi Aramco chief emphasized the need for a pragmatic approach toward the energy and oil sector. “Given the need for wise and timely investments in all segments of the petroleum industry, I believe we must collectively adopt a more pragmatic approach to energy and oil, particularly when it comes to long-term prospects for global energy security and environmental stewardship.”
He said he was optimistic that the global demand for oil would increase considerably in coming decades. “The combination of a growing global population and greater prosperity and affluence in developing economies point the way toward a relentless increase in petroleum demand over the next several decades,” he said.
If six out of every seven units of energy the world will consume over the next two decades will come from fossil fuel sources, it is clear that the world will be looking to producers like Saudi Aramco for significantly more petroleum than is the case today, he explained.
Al-Falih said the petroleum industry should be kept ready to meet the growing demand in the future by investing more in the sector. “The economic cost to the world will be considerable if the industry is not well-prepared for future growth in consumption: We all know that potential supply-demand imbalances have the potential to trigger another cycle of steep price rises and debilitating market volatility,” he said.
He said the talk in some quarters about moving away from oil and toward energy self-sufficiency and unproven alternatives which still face significant technical, economic and environmental hurdles, were creating greater uncertainty about the future prospects for fossil fuels in general and petroleum in particular.
“Capital dislikes uncertainty, and indecision related to energy policies may serve to exacerbate the trend of underinvestment — which is particularly dire in an extractive industry like petroleum. The underinvestment risk is especially worrying because large, timely oil investments are necessary to meet not just one but three requirements,” he said.
“First, as you produce resources, you have to continue to invest simply to maintain current capacity, or in other words, you have to keep running just to stand still. Second, you need to build new capacity as well as infrastructure to meet future growth. And third, we also need to maintain a cushion of spare production capacity, the very existence of which plays a vital role in tempering market volatility,” he said.
Elaborating his viewpoints on a pragmatic, less risky and more assured approach, the Aramco president said, “Let us expose the most promising alternative sources to the rigors of market competition and consumer preferences, and compete on a level playing field with other sources. Thus we will increase the variety of options available for the long term without premature commitments, and maximize the range of viable approaches to realizing greater global energy security.”
