Saudi Aramco, the world’s largest oil producing company, is planning to pump nearly $90 billion (Dh330.3bn) into the hydrocarbon sector in the next five years to expand crude and refining capacity, according to its chief executive officer.
Abdallah Jumah said the projects would double the Kingdom’s refining output and add nearly three million barrels per day of crude to capacity. Addressing a conference on energy security in Houston, Texas, on Tuesday, he said the investments are part of Saudi Arabia’s commitment to ensuring long-term supplies to consumers but stressed this would not be enough to tackle global security concerns about crude supplies.
He listed many factors for such concerns and the oil price volatility, including speculation, the sub-prime crisis, a surge in demand and geopolitical tensions.
“In my opinion the world simply cannot afford to leave massive quantities of oil, gas and coal in the ground and move precipitously to unproven alternatives, while still hoping to satisfy future growth in global energy demand,” he said, referring to ongoing global efforts to find alternative source of energy. “At Saudi Aramco, we are putting that belief into action, and I would like to reiterate the role that Saudi Arabia plays in supplying energy to the world, and the commitment that Saudi Aramco is making to the future with its ongoing investment programme and plans... Over the next five years, we plan to invest some $90bn in our upstream and downstream projects in Saudi Arabia and around the world,” he said in his speech, published by Saudi Aramco yesterday.
He said these projects would add about three million bpd to be used in raising the country’s production capacity and at the same time offsetting the natural decline in some oil fields.
By 2009, Saudi Arabia’s sustainable oil production capacity will grow to around 12 million bpd from 11 million bpd, he added.
On the downstream side, Saudi Aramco’s worldwide refining capacity will almost double from three million bpd presently to about six million barrels per day, which should help alleviate the tightness in global refining capacity, Jumah said.
“Despite the wide range of uncertainties I have noted, including confusion and uncertainty over energy policies; continuing worldwide shortages of manpower, materials and services; as well as rising costs; we have stayed the course with our investment plans for oil production capacity expansion and a variety of related initiatives that will help increase the energy supply capacity.
“Such tangible investments and continued commitment to harnessing proven sources of energy are the key to strengthening energy security amid growing demand. However, market confusion and uncertainty about the future make such investment decisions more difficult than they should be, instead of reinforcing our ability to meet future energy demand in a responsible and responsive manner.”
Turning to the oil market, Jumah said prices over the past year had been buffeted by the combination of relatively healthy demand, concerns for supply interruptions, stretched refining capacity, world and regional events, and a continued debate about the role of speculation in oil price volatility.
More recently, the effects of the debt problem have rippled through global markets.
“To achieve the goal of energy security, the world currently employs a variety of what I will call conventional strategies, such as beefing up the security of the world’s energy infrastructure; stockpiling oil; pursuing source diversification; and boosting the degree to which alternatives contribute to energy supplies, etc. Let me first say that these strategies make positive contributions to enhancing supply security and should be continued. However, in my view, they offer only part of the answer. The remainder of the solution requires us to look at these concerns from a different perspective, and also consider the underlying causes that give rise to these supply security issues in the first place.
“That is to say, if we could proactively address the fundamental causes of our energy security challenges, many of the most pressing concerns would diminish in intensity and relevance, and in some cases would dissipate altogether. If we are indeed serious about developing more effective and more enduring energy security solutions for the long term, then surely we should be targeting the root causes of our supply concerns rather than simply battling with their various manifestations like the many heads of the Hydra.
“Imagine, for a moment, that the primary causes of conflict and tension in the key production areas of Latin America, the Middle East, Central Asia and Africa were effectively addressed, and that stability and tranquillity were to prevail in those regions. Clearly, many of our supply concerns would be alleviated to a great extent, and those of us in the oil business could focus on geology rather than geopolitics, and get back to analysing seismic data rather than worrying about
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