Doris Leblond
OGJ correspondent
PARIS, Apr. 26 -- Large projects recently completed or under way in Saudi Arabia represent production capacity of 3 million b/d of crude oil, the kingdom's energy minister said at an Apr. 21 meeting in Paris.
At the 6th International Oil Summit, Saudi Petroleum and Mineral Resources Minister Ali I. al-Naimi also pointed to the growing influence on oil prices of factors other than supply, demand, and inventories.
Other speakers noted the complexity of the current oil market and the need in a growing market for large exploration and production projects.
The summit was organized by Institut Français du Pétrole, Petrostrategie, Pétrole & Gaz-Etudes et Conseil, and Poten & Partners Inc.
Saudi projects
Estimating his country's proved, probable, and possible reserves at 361 billion bbl, al-Naimi said Saudi Arabia has "aggressive exploration program in place to assess the vast areas" that are relatively unexplored. Additional undiscovered resource potential, he said, is at least 200 billion bbl of oil in place.
At current production of 9.5 million b/d, al-Naimi said, the country's reserves-to-production ratio is about 80 years based on proved reserves alone and 100 years if probable and possible reserves are considered, "without even considering the vast undiscovered resource potential."
In 2004, al-Naimi said, Saudi Arabia brought on stream two "crude oil increments" in Abu Safah and Qatif fields with a combined capacity of 800,000 b/d. In mid-2006, a further 300,000 b/d of Arabian Light crude will be brought on stream from Haradh field. Also, development of Khursaniyah field is due for completion in 2007, which will bring on about 500,000 b/d of Arabian Light crude.
Al-Naimi also reported plans to bring on stream an additional 300,000 b/d of production of light crude through expansion of Shaybah and the Central Arabian fields during 2008. And production of 1.2 million b/d of Arabian Light crude is to start up from Khurais field in 2009.
"Additional projects have been identified and can be advanced, if necessary, to meet any new supply requirements," he said. "In fact, the kingdom has evaluated a production capacity scenario of 15 million b/d, which can be implemented when dictated by market demand."
Al-Naimi said Saudi Arabia "has sustainable crude production capacity of about 11 million b/d, which represents a spare capacity cushion of about 1.5 million b/d." This total excludes the kingdom's production of 1 million b/d of natural gas liquids and condensate.
Prices, projects
Al-Naimi said oil prices "are influenced by factors beyond production decisions" and that the ability of members of the Organization of Petroleum Exporting Countries to influence prices has been limited since 1998.
"What decides and influences the price of an important commodity such as oil?" he asked, noting the growing importance of "perception" in the oil market.
"The perception of market participants can be affected by many different things, including geopolitical risk, industrial accidents and other disturbances affecting supplies, unanticipated changes in demand, regional product imbalances, commercial inventories, policies regarding the use of strategic reserves, bottlenecks in the refining and oil infrastructure around the world, and the totality of positions taken by traders not only in the futures but in many nonoil markets, including stocks, bonds, foreign exchanges and other commodities," Al-Naimi said. "The direction of prices is heavily influenced by the degree to which bullish or bearish sentiment prevails."
Asserting that oil has become "a financial investment asset," he added, "There is a widespread feeling in the industry that this activity will continue to push the market higher despite OPEC's and Saudi Arabia's strong efforts to stabilize prices...even banks are jumping on the bandwagon."
Nordine Aït-Laoussine, president of Geneva-based Nalcosa Consultants, said market fundamentals show no cause for the alarm apparent in the market, noting that OPEC and the International Energy Agency agree that the world is well-supplied with oil.
Planned investments in exploration and production over the next few years by important producing countries and international oil and gas companies will fortify supply, he and other speakers pointed out.
Projects of the future need to be much larger than those of the past, said Jeroen van de Veer, Royal Dutch/Shell Group chief executive and president of Royal Dutch Petroleum Co.
"As global demand for energy continues to grow," he said, "oil companies are going to need to develop more and bigger projects. These projects are also increasingly going to present significant technical, social, and environmental challenges, and the oil company of the future will need to be able to execute several of these projects at once."
OPEC Sec. Gen. Adnan Shihab-Eldin said, "Investments [by OPEC members] are being made for over 60 projects to the tune of $90 billion." While citing a "need for cooperation with international oil companies," he insisted the cooperation doesn't necessarily mean access to member countries' reserves.
Norway's potential
Norway's Minister of Petroleum and Energy Thorhild Widvey voiced surprise that "there is yet no strong indication that high oil prices are driving investments."
Insisting that Norway's experience with international oil companies developing its resources shows "that it can be done without losing national control and also without loss of income," Widvey said her country is "still a promising petroleum province with large resources to be discovered."
She added that less than one third of recoverable oil and gas has been produced and said she hopes Norway will sustain production of 3 million b/d "for a few years."
Widvey announced that the Barents Sea will be included in a license round to take place before summer this year.
Products market
At present, the oil market is "product-driven," said IEA Executive Director Claude Mandil.
"Product demand strength is keeping crude prices high," he said, adding that pressure on prices "reflects end-user demand for lighter transportation fuels and refinery limitation in upgrading crude to meet that demand."
Total SA Chairman and CEO Thierry Desmarest said the group was trying to satisfy product demand by investing €500 million in new conversion capacity in France and by increasing its overall refining investments to €600 million during 2005-08 from €400 million during 2001-04.
Desmarest said investments would be for additional conversion capacity and debottlenecking at existing refineries.
"Experience drawn from grassroots refineries over the past 15 years show that there were more bad years than good years" in terms of return on investment, he said.
Qatar's Minister of Energy and Industry Abdulla Bin Hamad Al-Attiyah said that by 2012 his country's gas-to-liquids industry will produce 400,000 b/d of diesel, lube oil, and naphtha.
