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Saudi Oil Minister Discusses Increasing Production, Call for Demand "Road Map"

Posted on: Friday, 3 February 2006, 09:00 CST

Saudi Oil Minister Ali al-Nu'aymi has said that Saudi Arabia plans to increase production and that there is no need for OPEC to reduce production. Speaking in an interview with London-based newspaper Al-Hayat, Al-Nu'aymi said that he had called on France and Britain to draw up a "road map" outlining their oil demands, adding that as major consumers demanding an increase in supply they ought to provide an accurate picture of demand. The minister also spoke about Iraqi production, noting that stability would increase the likelihood of it starting to reach expected production levels and that the demand exists for its supply. The following is the text of a report by Randah Taqiy-al-Din in Vienna headlined "OPEC ministers meet in Vienna today. Al-Nu'aymi tells Al-Hayat: No reduction of production because fluctuation in prices harms everybody", published by London-based newspaper Al-Hayat website on 31 January; subheadings inserted editorially:

[Organization of Petroleum Exporting Countries] OPEC ministers will hold an extraordinary conference in Vienna today [31 January]. The conference is expected to result in freezing the level of production, in view of the rise in prices and given that the OPEC members, except for Saudi Arabia, are producing at maximum capacity.

The meeting [conference] will not be attended by Kuwaiti Oil Minister Shaykh Ahmad Fahd al-Sabah and Iraqi Oil Minister Ibrahim Bahr-al-Ulum for reasons that have to do with the internal situation in the two countries.

In an interview with Al-Hayat in Vienna yesterday, Saudi Oil Minister Ali al-Nu'aymi said that there is "no need to reduce OPEC's production" even if some sides are asking for this. He added: "We say that this [reducing production] is unreasonable and that the oil market is tense because of psychological factors. Production should not be reduced, while the price is around 70 dollars per barrel and the demand for oil is high."

Al-Nu'aymi said that OPEC seeks to avoid what he described as "a fluctuation in prices from 40 to 50 to 70 dollars because this is harmful". He noted that "if the price is stabilized at between 50 and 60 dollars per barrel, this will be satisfactory for everybody, including the producing and consuming countries and investors".

The Saudi minister said that OPEC should maintain a stable price as much as possible and avoid fluctuation through taking a step to understand the reason for this fluctuation and whether it is economic recession or another reason. He added: "Once we understand the reason [for the fluctuation in prices], we will be able to take the required step."

On the demands of Iran and Venezuela to reduce production, he said: "We do not accept reducing production at this time. I have not heard the Iranian oil minister say this. We have heard this from officials at the Iranian Oil Ministry, but not from the minister."

Increased production

On the reason why Saudi Arabia plans to increase its production capacity to 12.5 m b/d, Al-Nu'aymi said that Saudi Arabia has a certain policy and it has chosen to have a spare production capacity of 1.5-2m b/d for emergencies. He noted that "the kingdom now produces 9.5m b/d. It has a production capacity of 11m b/d. Therefore, the spare capacity totals 1.5m b/d. We have noticed that there will be growth in the world from now until the year 2009. We must build up our production capacity and maintain the spare capacity in anticipation of emergencies, like incidents, wars, environmental disasters or anything that could lead to a shortage in the supply of oil, so as to use our spare capacity to curb the rise in prices. For this reason, we have said that we will reach a production capacity of 12.5m b/d."

Iraqi oil

On whether Saudi Arabia takes into consideration the return of Iraqi oil to the [international oil] market in larger quantities, he said: "When we draw up our production plans, we consider models. One of the models specifies when factors affect the market. Of course, Iraq's oil is among these factors. In the beginning of the Iraq war it was said that Iraqi production would reach 5m b/d in 2006, but this has not happened. The production of Iraq will return [to the market], but the question is when?"

Al-Nu'aymi said that Iraq will achieve reach a high production capacity as time goes by because the reserve is there. There is also a willingness to invest in Iraq once stability in it is achieved.

He pointed out that Iraq will one day produce 5, 6, or 7m b/d. He said: "We don't know when [this will happen]. The later it is [in increasing its production], the higher the world demand for oil will be." He added: "When the production of Iraq returns [to the market], there will not be a surplus in supply because oil [production] will drop in other producing regions, like the North Sea."

Alternative energy sources

On the possibility that consuming countries will succeed in diversifying sources of energy and reducing their use of oil in the long term, Al-Nu'aymi said that all studies from around the world indicate that oil and gas will remain the main source of energy until after the year 2030 and that oil will continue to account for around 40 per cent of this energy. He added that all studies point to an increase in the percentage of its consumption.

"Road map"

On Saudi Arabia's request from the consuming countries, like Britain and France, to provide a "road map" of the demand for oil in these countries, Al-Nu'aymi said that during the Riyadh meeting of consumers and producers, "we heard from British Chancellor of the Exchequer Gordon Brown and French Finance Minister Thierry Breton that OPEC should do something, and so we told them: Do not ask us to increase supply, without providing us with a road map of the demand for oil in your countries. This is in spite of the fact that we know that this would be difficult for them. It is easy for them to ask us to increase investment. But demand is determined by major parties, and we want a moral obligation with an accurate forecast of demand."

Meanwhile, Iranian Oil Minister Seyyed Kazem Hamaneh told Al- Hayat that his country does not want to reduce production. On the contrary, it seeks to increase its production.

On the other hand, it was learned from OPEC's sources that [Iraqi Deputy Premier] Ahmad al-Chalabi will arrive in Vienna this morning to represent Iraq.

Source: BBC Monitoring Middle East

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