|
Remarks on �Saudi Arabia and Global Energy Security� to
the Energy Newsmakers series held by the United States Energy Association,
June 20, 2006
Good morning ladies and gentlemen. I will be
sharing with you today some Saudi views of the world oil market.
But I must first warn you: I speak not as an oil man. So I
will be giving you a broad overview, and will not delve into very
specific details.
To begin with, given the size of Saudi Arabia�s reserves and the
length of time they will last, I think we can all agree that the
Kingdom is perhaps the single most important producer of oil in
the world. And, as a result of the growing level of demand
for oil across the globe, it is likely only to become more so as
time goes on. So our perspective necessarily is over the long
term.
Unlike other producers, we have a lasting
interest in ensuring that demand continues to be healthy, but not
excessive, decades down the road. Energy security as defined
by a stable market, a healthy market, an affordable market, is
what we desire. It is in the best interest of the consumers
and it is in our national interest. But energy security
cannot be achieved unilaterally. Cooperation between
consumers and producers is critical. Let me tell you about
some of the things we are doing to contribute to global energy
security:
First, as you know, Saudi Arabia has a record
of unmatched reliability as a supplier of energy to the US and to
the rest of the world. We are committed to maintaining our
role as an important and reliable supplier to all of the world�s
major consuming nations.
Secondly, we are moving aggressively to expand
capacity on many fronts.
We have stepped up our oil and gas exploration
program, and we continue to expand our reserve base. We are
increasing the number of active rigs in the Kingdom by 400% from
what is required to maintain our production. We have been
expanding our production capacity, with half a dozen new
mega-projects in various stages of development. These will
add some 3 million barrels of oil per day by 2009. In total,
when accounting for natural declines, this is intended to bring
our maximum sustainable production capacity to about 12.5 million
barrels per day. We have an enviable record of planning and
executing oil and gas mega-projects on time and within budget,
while meeting the highest standards of worker and environmental
safety.
Moreover, these initiatives are designed to
allow Saudi Arabia to maintain its long-standing policy of having
a surplus capacity of one-and-a-half to two million barrels a day.
This is expensive to develop and maintain, but has proven its
worth on numerous occasions during past decades. For
example, in the fall of 1990, the Kingdom used its spare capacity
to make up for the drop in Kuwait and Iraqi production following
Iraq�s invasion of Kuwait. Most recently in the spring of 2003,
this spare capacity helped compensate for supply shortages during
the invasion of Iraq, the oil worker strikes in Venezuela, and
civil unrest in Nigeria, which combined to create a perfect storm
in oil markets.
In the downstream sector of the market, we are
expanding our refining capacity with partners, both in the Kingdom
and in consuming countries to bring balance back to the market.
We are working with ConocoPhillips and Total to build two major
new export refineries in Saudi Arabia that are designed to process
800,000 barrels a day of heavier crudes into products that meet
increasingly strict environmental standards around the world. Many
of these products will be destined for US markets. We are
also looking to expand refining capacity in China, Korea, and the
Philippines with our partners in those countries. Here in
the US, we are looking to expand one of the three refineries we
operate in our Motiva joint venture with Shell. This may
actually make it the largest refinery in the United States.
These efforts will help address the critical
global deficit of heavy crude refining capability which is so
necessary since most of the world�s current spare capacity is in
heavy crude.
We have also instituted a large domestic
program to substitute some of our crude oil consumption in the
utility and industrial sectors with our large natural gas
reserves. This will also free up more crude oil for global
consumers.
Building capacity, addressing infrastructure
needs: this is what Saudi Arabia is doing to meet the challenges
of today�s global energy market. However, Saudi Arabia
cannot solve the world�s energy problems by itself. Other
producers need to invest to increase their production capacities
and consuming nations need to invest in additional refining
capacity as well. Consumers must also do their part by
consuming energy as efficiently as possible. A BTU saved
through conservation and improved efficiency is equivalent to a
BTU produced.
So where does that put us today, and do we
believe that oil today is overpriced? Well, yes, we do
believe prices are too high. But our oil experts, who know
the industry as well as anyone, also believe the markets are being
well supplied.
So it is clear that geopolitical concerns have
heightened fears over energy security and put upward pressure on
prices. Some of these political concerns are far from our region,
such as the poor state of US-Venezuelan relations and problems in
Nigeria. Addressing these issues would clearly enhance the
world�s energy security.
Other concerns are in the midst of our region,
most notably Iraq and Iran. When oil traders look at the
situation in Iraq and see continued violence and instability, it
affects the decisions they make regarding the price of oil.
The same can be said about the tensions between Iran and the
international community regarding Iran�s nuclear program.
Further, conflicts that may not be directly
related to oil have an impact on its price. Added tensions
between Palestinians and Israelis and terrorism add to the fears
of oil traders about instability in an important region and cause
upward pressure on prices.
Thus whatever we, as Saudis, do to build a
stronger energy industry, it can only be complemented by our
continued cooperation with the United States and other countries,
as we work to reduce tensions � and prospective conflicts � in
the Middle East.
This is the job of leaders and diplomats, not
oil men. And it is where my job comes in to play � as the
oil industry is not my focus. Now, if you have any
questions, please bear that in mind. But I would be glad to
provide you with answers.
Thank you.
Source:
|
