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

Canada Briefs

12/12/2014

Chevron, ONGC among companies awarded 15 exploration permits by New Zealand

12/09/2014 New Zealand’s government has awarded six onshore permits across the Taranaki, West Coast, and East Coast basins, and nine offshore permits across t...

CSB releases final report on Chevron Richmond refinery fire

11/17/2014 The US Chemical Safety Board (CSB) has issued the final regulatory report on its investigation of the August 2012 pipe rupture and ensuing fire at ...

Hess to develop deepwater gulf oil field

10/29/2014 Production is to begin in 2018 from deepwater Stampede oil field in the Gulf of Mexico under a development plan approved by operator Hess Corp. and...

NGSA forecasts lower winter gas prices on a combined analysis

10/13/2014 In its 14th annual Winter Outlook assessment of the natural gas market, the Natural Gas Supply Association (NGSA) expects downward price pressure o...

Chevron Canada to sell 30% in Duvernay shale to Kufpec Canada for $1.5 billion

10/06/2014 Chevron Corp. said its Chevron Canada Ltd. unit plans to sell a 30% interest in its Duvernay shale play to Kuwait Foreign Petroleum Exploration Co....

Bahamas: Gravity data suggest existence of Triassic-Jurassic syn-rift

10/06/2014 Recent analyses of gravity, magnetic, and seismic data in the southeastern region of the Bahamas provide clear evidence for the presence of a salt ...

EnLink Midstream to purchase Gulf Coast gas pipeline systems

09/29/2014 A subsidiary of EnLink Midstream Partners LP and EnLink Midstream LLC has agreed to acquire Gulf Coast natural gas pipeline assets, including the B...

Western gulf lease sale attracts $110 million in high bids

08/20/2014 Gulf of Mexico western planning area Lease Sale 238 drew 93 bids from 14 companies over 81 blocks covering 433,823 acres, totaling $109,951,644 in ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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