Saudi Arabian petroleum minister Ali Al-Naimi on Wednesday sought to quell fears of volatility in crude oil prices. Addressing a special plenary session of Petrotech 2007, currently being held in the capital, he said Saudi Arabia has been trying to bring stability to world markets and has committed $ 80 billion (Rs 36,000 crore) for capital projects to increase energy supply and remove infrastructure bottlenecks. He also sought closer cooperation with Indian oil companies.
"Our first priority is a massive investment programme to increase our sustainable production capacity to 12.5 million barrels per day by 2009. Additional projects have been identified for implementation after 2009, if market conditions require them. This expansion programme will make a significant contribution to meeting the world’s increasing energy needs,” he said.
The Saudi minister invited Indian engineering companies to bid on the many new projects available in the petroleum, natural gas, petrochemicals and mineral sectors. "We would also like to see more of Indian manufactured products and equipment used in our projects sourced from India," he added.
“The price rise in the last two years has been driven largely by the combination of insufficient investment and rising energy demand over a 15-year period starting from the mid-1980s. The increase has been a wake-up call for the industry and for producers and consumers alike, who are now beginning to address the deliverability problem head-on,” he stated.
He said long-term market stability required a steady flow of capital into projects to expand supply and infrastructure. This occurs only when prices reflect long-term demand and supply fundamentals, he observed.
Outlining five-point long-term agenda, Naimi referred to Saudi Arabia’s commitment to work for ensuring oil prices providing an adequate return to producers while assuring consumers of continued supplies and sustainable economic growth.
Other issues included “proactively increasing our ability to deliver crude and product to consumers in anticipation of rising global demand; maintaining 1.5-2.0 million barrels per day of spare capacity; improving market transparency through dialogue; and giving special attention to the needs of developing countries,” he added.
“However, we also know from experience that oil markets are subject to frequent price volatility and short-term imbalances in demand and supply. Prices reflect tangible factors like demand, supply and commercial inventory levels. But they are also influenced by a variety of intangible factors such as weather, geopolitics, interest rates, the value of the dollar and even age-old human characteristics of fear and greed,” Saudi minister said.
As part of its special relationship with Asian countries Saudi Arabia is expanding crude oil exports to dynamic economies in accordance with their growing requirement, said Naimi.
“We are working together with key Asian consuming countries. We are developing closer ties through a variety of information exchange activities such as technical cooperation committees and visits to energy facilities,” he stated.
Email Deepak Joshi: