Good Morning, Ladies and Gentlemen.
I would like to express my thanks and appreciation for inviting me to this symposium and to the Institute of Energy Economics of Japan for organizing this business gathering ahead of the International Energy Forum. It is always a delight to visit Japan, reminding me of our two nations' common desire to develop strong relations in all fields.
For many years, Japan's investments in oil and petrochemical projects in Saudi Arabia have contributed to the growth and diversification of our economy. Likewise, the Kingdom's exports of crude oil and LPG to this country have contributed to the energy security of Japan and fueled expansion to help attain its highly influential ranking among the world's industrial powers. So we are brothers in the desire to advance our respective nations' economic as well as political and cultural identities, at the same time aware that leadership in any field carries both challenges and responsibilities.
I greatly respect Japan for its role in furthering the dialogue between energy producers and consumers and between governments and industry. This symposium and convening of the Eighth International Energy Forum in the next two days are manifestations of its leading role in world energy affairs.
With your indulgence, my remarks today will center on the reaffirmation of Saudi Arabia's long-standing energy policies. This is necessary, I believe, because recent world events and oil market conditions have seemed to create some confusion as to our standing in the global energy scene and our commitments to a stable world oil market and to supply security, regardless of political uncertainties anywhere on the globe.
This confusion and misinformation about the role of Saudi Arabia has unfortunately been widely disseminated in published articles, some policy statements and reports in the mass media of some consuming countries in the past few months. Articles that speak of some coming energy battle between Saudi Arabia and Russia, or statements about the reliability of Saudi Arabia as an oil exporter, or media reports about the perceived dangers of reliance on Middle East oil, are just manifestations of either confusion or outright misinformation about the realities of the oil market and the stand and record of Saudi Arabia in that market.
Our energy policies in Saudi Arabia emanate from our global oil role in terms of reserves, production and exports. They emanate also from the role of the oil sector in our economy and rest on the underlying philosophy of our economic development that is of open and free market. Therefore, our energy policies whether in domestic or the international arenas are guided by the long lifetime of our reserves, our continued role in world oil trade and our endeavor to diversify our economy. We have acted upon such pillars over the years.
As the world's premier producer and exporter of crude oil, Saudi Arabia does have a vested interest in the affairs of this industry, and is concerned that misinformation is only adding to the current anxieties. To assuage any doubts about our position, I would like to review the Kingdom's approach to our key policies and hopefully lay to rest the non-issues.
Saudi Arabia has long recognized its prominent role as a world oil supplier. This role has two important implications: one is to afford strength in and stability to the world oil market, and the other is to provide an economic base for our own domestic growth. Both must operate in tandem. Nevertheless, the abundance of our petroleum reserves and our capacity to serve the global market place special expectations on Saudi Arabia.
Let me discuss this unique role in light of the current confusion. Oil, liked any commodity, follows the laws of supply and demand. Were it not so, there would be no active trading market nor competition among the thousands of producers, wholesalers and retailers operating worldwide. That any single entity - whether nation or organization - can control the price of oil is erroneous. Their influence at best can only support a scenario of fairness, realistically balanced between both consumers and producers.
That has long been our position in Saudi Arabia. While there is competition in the marketplace among all producers - inside and outside OPEC - we believe there is room for everyone. Unfortunately, collusion is often mistaken for cooperation when major oil-producing nations respond to precarious market conditions and coordinate policies when the market fails to maintain equilibrium on its own.
We view our relation with non-OPEC producers, including Russia and the Caspian nations like Kazakhstan, within this context. They currently supplement, not supersede, existing world oil supplies and are not fundamentally altering the world's energy landscape. Normal demand growth has absorbed the approximately 18 million barrels per day of non-OPEC oil over the past 25 years.
The market's ability to accommodate new production is encouraging, as is the prospect of closing ranks between OPEC and non-OPEC producers to avert market volatility and assure stability. OPEC still holds about two-thirds of global oil reserves, moves half the exports and maintains the bulk of the world's spare production capacity. Even so, the emergence of substantial new reserves from Central Asia is not seen as a threat but as further hope that future world economic health can depend on petroleum as a pre-eminent energy source. I believe there will be more common ground found between the ultimate major producers. We in Saudi Arabia have always consulted and coordinated our policies with the major non-OPEC producers and will continue to do so not paying attention to those who would like to create a wedge between us and other important oil and gas producers.
Ladies and Gentlemen:
Another area of confusion or misinformation swirls around our relations with the consumers. It seems odd to me that this is a media target given our record of reliability and deliverability. I can't think of any producing nation that has gone to the extent of the Kingdom in servicing its dedicated customers and shoring up any weaknesses in the global oil market. We certainly don't claim to shoulder all the efforts in this regard, but we do have a significant track record. We have invested billions of dollars to build production capacity and to construct export routes. We continue to keep some thirty percent of our production capacity unutilized to be ready at times of supply interruptions and in addition to the over 10 million b/d export facilities in the Eastern province ports, we have 5 million b/d of export capacity from the Red Sea ports to contribute to oil supply security. The importance of the excess production capacity of Saudi Arabia have been demonstrated in more than one supply crisis in the past two decades such as the Iranian Revolution of 1978-1979, the Iran-Iraq war in 1980, the invasion of Kuwait in 1990 and the supply infrastructure crisis of 2000. Along with all these, Saudi Arabia has worked over the years to make the Middle East a region of peace and tranquility. The peace initiative adopted in the last Arab Summit to resolve the longstanding Palestinian-Israeli conflict is the latest manifestation of this commitment.
Furthermore, we have worked with OPEC to ensure the stability and continuity of oil supply to the world. The statute of the Organization states clearly that one of its objectives is "to secure an efficient, economic and regular supply to consuming countries". This was reiterated again in the solemn declaration of the heads of state of OPEC in the Caracas Summit in the year 2000. We have also spearheaded the efforts to transform the old antagonistic relation between OPEC and the IEA to a more harmonious one. Today the two organizations meet and consult regularly on matters of common interest such as oil data transparency. We continue to nourish and advance the producer-consumer dialogue to new frontiers.
After hosting the Seventh International Energy forum, Saudi Arabia launched an initiative to establish a secretariat for the Forum to ensure its continuity. We have worked with the producers and the consumers in the past two years to see to it that the initiative find wide acceptance and commitments. We look forward to the announcement of the creation of the secretariat for the forum in the conclusion of the Eighth International Energy Forum.
Yet despite all our policy pronouncements and our actual record with regards to our relations with the consuming countries and our commitments to supply security, some still cast doubt on the dependability of our region as a source of reliable oil supplies to the world. To those we say that the region that has supplied the world with its energy needs for most of the last century is destined to continue this role into this century also. The resource endowment as well as the commitment of its producers to continued oil supplies to the world will ensure such a role. The drive of the world community to find a just and durable peace in the region will cement this future role.
Ladies and Gentlemen:
This leads me to a third area of confusion related to our energy policy - that is, the use of our oil revenues. Some political rhetoric following the tragic events of September 11 went so far as to cast doubt on Saudi Arabia's efficient utilization of its oil revenues. This came out of ignorance or outright hostility towards Saudi Arabia.
While we do not take special pride of our economy's reliance on oil and have endeavored through successive development plans to reduce that reliance, we have utilized the oil revenues to develop our economy, and elevate the living standards of our people. We have spent around 1.3 trillion dollars over the past three decades on economic and human resources development. We have extended economic aid to other developing countries of more than 75 billion dollars, which if viewed relative to our GDP is in excess of that from many industrialized countries.
Thanks to the judicious use of our oil revenues and the free market approach of our economic policymaking, our economy today is the second largest in the Middle East and the twentieth worldwide. The openness of our economy and the soundness of our policies helped make Saudi Arabia the largest recipient of foreign investment in the area and largest provider at the same time in the past few years.
The use of oil revenues in social and economic development and diversification has also contributed to increasing the share of the non-oil sector in our economy from one third in 1975 to two thirds of our GDP today. In real terms, while our economy was growing at 3.2 percent annually in the past twenty-five years, the non-oil sector was growing by more than 5 percent annually.
To me that says oil is still very important but not the sole source that seems to stick with some viewers. In the larger picture, Saudi Arabia fully recognizes that its abundant resources of petroleum serve two constituents. They include the markets of the world eager for the efficiencies of hydrocarbon energy, and the people of Saudi Arabia who see it as a means to develop a healthy, diversified economy fit to compete in the global arena.
Ladies and gentlemen:
We live in a truly dependent world, with integrated economies and open markets. Energy and specially oil are beneficiaries and drivers of this new world setting. No country in the world, be it a net energy importer or exporter, can achieve the objective of sustainable development independently. What should be kept in mind is that energy will remain the key driver of economic prosperity the world over. Oil and natural gas are among the prime movers, and those who both produce and consume them have obligations of careful stewardship.
Let me take this final opportunity to reaffirm that Saudi Arabia is committed to maintaining a stable worldwide oil market, free of disruptive price swings yet responsive to changing conditions. To that end we will continue our long-standing policy of keeping excess production capacity on standby, developing new reserves, applying better technologies to increase efficiency, safeguarding the environment, and working closely industry-wide to achieve our common goals.