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Arabia

Saudis plan to increase oil production and refining

2007-01-19

NEW DELHI: Saudi Arabia plans to increase its crude oil production capacity nearly 40 percent by 2009 and double its refining size over the next five years to keep pace with growing global demand, the country's oil minister said Thursday. The minister, Ali Naimi, said the plans were part of a $80 billion commitment that Saudi Arabia the world's biggest oil exporter had made to increase oil supplies in the global market. "Saudi Arabia is committed to increasing the availability of energy to global markets," he said.

The country's priority is in investments to increase sustainable oil production capacity to 12.5 million barrels daily by 2009, from 9 million barrels now, Naimi said. "Additional projects have been identified for implementation after 2009, if warranted by market conditions."

Naimi blamed the sharp rise in global crude prices over the past two years mostly on "insufficient investment and rising energy demand," especially from the booming economies of Asia. "The rise has been a wake-up call for the industry and for producers and consumers alike, who are now beginning to address deliverability problem head on," he told delegates to an international energy conference in New Delhi.

Saudi Arabia, which has a quarter of the world's proven oil reserves, has a significant stake in ensuring stable markets, Naimi said.

Saudi Arabia is also making substantial investments in refineries within and outside the country so to double its refining capacity to 6 million barrels a day over the next five years, he said. He said he believes there are enough oil resources to meet energy demands for the next 30 years.

The best thing about this is that if the Saudis keep production up, the fall in oil prices virtually guarantees that neither Chavez or Ahmadinejad can survive in power.

Posted by:Steve White

#13 I was under the impression that Venezuelan production was down somewhere between one quarter and one third since Chavez took power.

Posted by: trailing wife 2007-01-19 20:21

#12 Note that production for both Venezuela and Iran is flat to down and that domestic consumption has risen in both coutries. Therefore they both have less oil to deliver to the international market.

Since both have less oil to deliver, neither have anything to lose by OPEC cut backs and both have been big supporters.

Chavez'z latest moves to increase state ownership in oil operations and in other public companies is an attempt to make up for revenue lost due to falling international sales and falling prices. With his new abilities to rule by decree he will continue down that road until the golden goose and every other bird he can get his hands on is dead.

Iran's economy is already a basket case.

Posted by: DoDo 2007-01-19 17:55

#11 One other point, the Iraqis are pumping oil onto the open market as quickly as they can. The only reason they have not pumped more is the condition of the fields, and sabotage of their oil pipelines. Iraq's need for cash and the profitability of the existing oil fields means that the Iraqis can afford to go the volume sales route, so $20 a barrel oil does not hurt them. All selling more oil for less per barrel does is reduce the per barrel payments to Kuwait for the 1991 Gulf War.

Posted by: Shieldwolf 2007-01-19 15:54

#10 Add to the Saudi and Kuwaiti production improvements, that of Iraq : the Iraqis are looking to have another 500K barrels a day flowing in the next 8-9 months. Plus, all of the oil production facilities in Iraq are now getting much needed maintenance and upgrades, so the Iraqis are digging themselves out of the hole Saddam condemned them to by not investing in the oil fields.
Never forget one point : Iraq has the second largest proven oil reserves in the world, and it was only Saddam's greed and stupidity that resulted in a much diminished oil industry for Iraq. With the new refineries planned, the increased oil production, and the new security plans in place for the oil pipelines, Iraq looks to max out its OPEC quota for the next several years. Plus the in-country refiners will slowly eliminate Iraq's need to import gasoline and other refined petro products.

Posted by: Shieldwolf 2007-01-19 15:49

#9 What mhw said; if Iran's oil producing capability goes TU, then there is a fallback for other oil-needy clients and SA is in the driver's seat. Maybe this is the sound of another piece falling into place.

Posted by: USN, Ret. 2007-01-19 14:54

#8 I second what ed said, this needs to be stressed over and over. If the rest of the world didn't depend on Islamic oil, the WOT would be very, very different, possibly no problem at all.
Knock out Iranian oil production & the rest of the Islamic oil producers will be sitting very pretty indeed, plus the "price shock" for the rest of us will not be so severe.

Posted by: Anguper Hupomosing9418 2007-01-19 13:22

#7 Actually there is quite a difference between production capacity and actual production.

Probably the Saudis are looking at the potential opportunity to replace some of Iran's exports in case something was to happen to that country.

Posted by: mhw 2007-01-19 11:37

#6 The Sauds do not want to maximize revenue at this time. They see a great threat in Iranian expansion and the most effective weapon the Sauds have is to strangle Iranian revenues, therefore ability to dominate the Persian Gulf.

It's a good time to enact variable oil import duties to keep oil prices high enough (~$40/barrel) for alternative sources (nuclear electricity, coal based fuels, renewables, hybrids and electric cars) to replace the imported 60% of US oil consumption. Otherwise with the pricing power OPEC has, they will kill any competitor to oil by lowering oil prices and then jack it back up again when the competition is bankrupted.

Remember, the quoted price per barrel is only a fraction of the price Americans pay for Persian Gulf oil. Add in miliary spending ($50 billion/year pre 9/11, additional $200 billion/year just in DoD spending post 9/11, domestic security) and the price of muslim sourced oil is over $200/barrel with additional costs of dead Americans, internal strife and loss of security. Better to wean America off the muslim oil tit and completely remove all islamic interaction with our economy and society.

Posted by: ed 2007-01-19 07:58

#5 bigjim-ky, the saudis can survive a drastic drop in oil price. The Iranians and Venezuela can't.

Posted by: Deacon Blues 2007-01-19 07:52

#4 I hate to inject a sour note here, but how is OPEC going to keep prices high and have SA increase production by 40%? They want sell more oil and at higher prices, it can't work like that. Oil is going to slide back down to 20$ a bbl. again and they are all going to cry. This doesn't make sense to me. Not that I don't like cheap gas, but it doesn't fit the arab/opec strategy very well. Also, if they are going to pump more, so are all the other opec members. Nobody will want to get stuck with a huge inventory of unsold oil.

Posted by: bigjim-ky 2007-01-19 07:22

#3 Tsk, tsk, tsk, where's your Islamic solidarity

Posted by: gromgoru 2007-01-19 06:54

#2 Mike, methinks that's exactly the point here. Betcha Kuwait is coordinating in the same direction, for the same reason. And while it's quite plausible it wasn't part of the puzzle, coordination with the US on this would be no surprise either. Me like.

Posted by: Verlaine 2007-01-19 02:24

#1 Not that I like the magic kingdom, but the more oil they sell, they smaller the market is for Iran. Or at the very least it brings the cost of oil down. Either way, Iran takes a hit.

Posted by: Mike N. 2007-01-19 01:57

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