Saudi Minister of Petroleum and Mineral Resources Ali Bin Ibrahim Al-Naimi yesterday addressed the 76th annual meeting of the American Petroleum Institute (API), held this year in Washington DC, to discuss the changes and challenges for the oil industry in the coming years for all segments of the industry, explorers, producers, refiners and distributors. In his speech he emphasized that the Kingdom of Saudi Arabia's policy remains founded on market stability and oil supply reliability, and stated: "Saudi Arabia also recognizes its role among the world's other oil producers and consumers. We have sought good relationships with our competitors as well as customers, and have assumed a leading stance in creating new partnerships. These have the objective of improving efficiency, sharing technologies, and ultimately serving the consumer with better products."
Stating that "the last century of experience has placed oil squarely at the forefront of major global issues, from economics to the environment", Minister Al-Naimi turned to the example of Saudi Arabia, where "the impact of oil has indeed been profound". He went on to say:
"Like all responsible nations, Saudi Arabia seeks every viable means to assure its economic future. Our self-managed oil industry remains at the core of those efforts. One recent move, for example, was to integrate the Kingdom's entire domestic downstream operations into Saudi Aramco. At the same time, we have been developing strategic alliances with strong companies in the United States, Europe, and Asia.
"As you can see, our perspective has also changed over the years. Once a provincial net exporter of crude oil, Saudi Aramco has become a fully integrated, international firm. Our basic challenge, like yours, is to serve the world's needs for petroleum while earning a respectable return on our investment. A simplistic approach, perhaps, but still the essence of our business.
"What do I see as immediate needs? First, I believe our industry could do more to assure accurate information. Despite instant access to market reports, there lags behind fully reliable data on global consumption, production, supply and inventory. In April of 1995, for example, Saudi Arabia's true production rate was 7.6 million barrels per day. But some sources reported we were producing 8.2 million - a difference of about 600,000 barrels a day.
"Improved mechanisms to gather, verify and send out data will foster better decision-making. And each of us knows the value of correct information."
Referring to the Kingdom's pioneering stand under the leadership of Custodian of the Two Holy Mosques King Fahd Bin Abdul Aziz and of Crown Prince Abdullah Bin Abdul Aziz, in establishing good relations with oil producers and consumers, and highlighting that low-cost producers like Saudi Arabia have an economic advantage, Minister Al-Naimi stated: "If world oil prices fall below expectations, we can still maintain production. If disruption of other supply sources creates a major shortage, we have excess capacity to fill the gap. This ability is, in our view, critical to the stability of world oil supply and prices."
The Kingdom of Saudi Arabia has been discovering and producing oil for nearly sixty years, and holds about one quarter of the world's proven oil reserves. At present, it has more than two million barrels per day of reserve production capacity. In this respect, Minister Al-Naimi observed, "One need only recall the Gulf Crisis when we were called upon to increase production by more than three million barrels per day. And we marshaled company teams during the Gulf War to recover more than one million barrels of polluting oil spilled in the Arabian Gulf." He also noted: "Today, world oil consumption is more than 70 million barrels a day. But new discoveries and improved production methods have added reserves estimated to last more than a hundred years."
Minister Al-Naimi underlined the need to work together for the well-being of the industry as a whole. Referring to certain regulations on prices of oil products, he noted that price controls and import restrictions are gradually being lifted by countries like Japan, and privatization has created new opportunities for public and foreign investment in markets like the Philippines. He also touched on the expansion of global oil trading, and the changing patterns of oil consumption and production, saying: "While petroleum has fueled the engine of progress throughout the twentieth century, its importance in the next century will hinge largely on the world's acceptance of petroleum as both the economic and environmental fuel of choice. We as an industry have already responded to this challenge with our massive efforts to improve both our products and the processes which manufacture them. And we need to remain responsive to popular concerns in this area.."
Minister Al-Naimi, saying that it was a special privilege for him to join the distinguished gathering, thanked API, its chairman, and its president, for inviting him to share his thoughts with them, and added: "We share a strong sense of responsibility for our future in the oil industry. We indeed serve the world community as stewards of this most valuable natural resource."