Saudi, US officials pledge response to tight oil markets

Nick Snow
Washington Correspondent

WASHINGTON, DC, May 18 -- Saudi Arabian and US government officials expressed their determination May 17 to respond to tight oil markets that have pushed prices above $50/bbl. But they emphasized that their countries wouldn't be able to solve the problem by themselves.

"Let me assure you that Saudi Arabia is responding to the challenges we face in today's oil market," said Ali I. al-Naimi, Saudi minister of petroleum and mineral resources.

Efforts include offering additional crude oil as needed, expanding production capacity to meet future demand and maintain spare capacity, building refineries while expanding existing plants domestically and abroad, upgrading the Saudi tanker fleet, and investing in new technology, he said.

Achieving stable oil prices and balanced markets requires a global effort, Naimi told a Washington conference sponsored by Saudi Aramco, Chevron Corp., and the Center for Strategic and International Studies (CSIS).

"I want to emphasize that the problem is not a lack of resources. Remaining world oil reserves are abundant," he declared. "Rather, the current impediments include, for example, the proliferation of product specifications, a myriad of regulations, infrastructure bottlenecks, and a lack of accurate and timely data needed to improve market transparency."

Worldwide oil demand grew by 2.5 million b/d in 2004 alone, noted US Energy Sec. Samuel W. Bodman, who appeared with Naimi.

"High oil prices are affecting consumers across the board. Tight oil markets also reveal the need to expand infrastructure," he said.

Price effects
Bodman also said there is still a substantial amount of oil in the world.

"Much of the challenge involves its location in countries that are wrestling with their future," he said. "Many oil experts say it will take another 7-10 years, but I believe high oil prices will help stimulate supply and dampen demand."

While the administration of US President George W. Bush is not happy that the US has more than 30 different motor fuel specifications, he emphasized it would not impose additional federal regulations because of their possible unintended consequences.

"We will continue working with states to get them to reverse many of these specifications," Bodman said.

James Schlesinger, who became the first US energy secretary nearly 30 years ago, observed that the present oil crisis, "if it is a crisis," is the first that resulted not from political actions or upheaval but from "steadily increasing demand pressing against supply."

He questioned Bodman's assertion that high oil prices would stimulate development of new fields outside countries that currently are the world's production leaders.

"At $50/bbl, countries may be less interested in bringing in outside capital than at $20/bbl," Schlesinger said. "Part of the problem is their desire to retain more domestic control over their resources."

Noting that he was leaving for Russia in a few days, Bodman said, "These countries have had trouble attracting investment because their rules keep changing. In my judgment, they would be better off by attracting more investment from international oil companies. That is the message I intend to deliver."

Investment concerns
David J. O'Reilly, Chevron's chairman and chief executive, disputed the idea that publicly traded, multinational oil companies are not aggressively investing in resource development.

"We have a $50 billion program in our company alone. Much of it is outside the United States because opportunities here are limited. But we are committed to finding and producing more oil and gas," he said.

Tight markets won't loosen overnight by companies' simply spending more money on exploration and production, he maintained.

"There is investment. But there also is lag time," O'Reilly said, noting that projects can take 7-10 years to move from approval to initial production.

There is a role for national oil companies, suggested Luis E. Giusti, a former chief executive of Petroleos de Venezuela SA and now a CSIS senior advisor.

"International oil companies have to answer to their shareholders," he said. "A lot of the money that they have taken in with higher prices has gone to the shareholders because opportunities are limited."

Abdallah S. Jum'ah, Saudi Aramco's president and chief executive, disputed the notion that national oil companies will monopolize development opportunities.

"There are a lot of resources open to international oil companies," he declared. "The issue of access is more apparent that real."

Giusti, who headed PDVSA from 1994 through 1999, said Venezuela has about 78 billion bbl of reserves, 38 billion bbl of which is Orinoco heavy crude. Venezuelan production has fallen to about 2.6 million b/d due to lack of investment "and other things you have heard about," he went on. But he nevertheless expects the US to remain Venezuela's primary market.

So does O'Reilly. "It makes sense because the refineries here are better suited to heavy oil," he said.

US, Saudi Arabia
The only indication that there might be problems between the US and Saudi Arabia came from Jum'ah, who cited toughened US security precautions and their effects on visas since the terrorist attacks of Sept. 11, 2001.

"The US has provided us with a lot of education. I have at least 4,000 people on my workforce who went to school here. But today, that link has weakened," he said.

The Saudi Aramco chief said he recognizes US concerns over security. But he also has at least 400 employees who are students in other parts of the world now who he would rather have getting their education in the US.

"This issue is extremely important. That link has been weakened in the last 4 years," he said.

Contact Nick Snow at nsnow@cox.net.

Related Articles

WAFWA: Aerial survey finds lesser prairie chicken population grew

07/06/2015 A recent range-wide aerial survey found the lesser prairie chicken population rose 25% from 2014 to 2015, the Western Association of Fish & Wil...

Buru awarded onshore Canning licenses

07/06/2015 Buru Energy Ltd., Perth, and Mitsubish Corp. have been granted two production licenses for Ungani oil field in the onshore Canning basin of Western...

Cenovus sells royalty business for $3.3 billion

07/06/2015 Cenovus Energy Inc., Calgary, inked an agreement to sell its wholly owned subsidiary Heritage Royalty LP to Ontario Teachers’ Pension Plan for gros...

CERI: Energy, operational efficiencies possible in Canadian oil, gas

07/06/2015 Measures can be taken by operators in the expanding resource-intensive Canadian oil and gas sector to improve both energy efficiency and operationa...

AGL Energy to scale back upstream gas operations

07/06/2015

Gas retailer AGL Energy Ltd., Sydney, says it will exit the oil business and massively scaling back its upstream gas operations.

Macondo settlement seen ‘positive’ for BP

07/06/2015 BP Exploration & Production Inc.’s recent agreement to settle federal and state claims related to the 2010 Macondo blowout and spill improves t...

Court to EPA: Costs matter

07/06/2015 Oil and gas groups did not respond immediately when the US Supreme Court ruled on June 29 that the US Environmental Protection Agency acted unreaso...

Emerging producers offered guidelines for governance

07/06/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done-especially where oil and gas never before...

Innovation addresses US environmental regulations; more needed

07/06/2015 Technology spawned the recent boom in US oil and gas production which in turn led to new regulations that keep the environment and people safe.
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected