READ ME: Oil goals difficult for Saudis to meet
Feb 16, 2005 (The Kansas City Star - Knight Ridder/Tribune Business News via COMTEX) -- HOUSTON -- Meeting U.S. projections for increased Saudi Arabian oil production by 2025 would be a "difficult battle," the head of Saudi Arabia's oil company said Tuesday.
The U.S. Energy Information Administration, in its most recent long-term forecast, has pegged Saudi Arabia's eventual production at 22.5 million barrels a day. Some analysts say failing to reach that level would be serious because demand from China and the rest of the world is increasing and there is no plan to meet any shortfall in Saudi production.
Abdallah Jum'ah, chief executive officer of the Saudi Arabian Oil Co., said the company had developed scenarios to increase production to 15 million barrels but not to 22.5 million barrels a day. Though such an increase would not be impossible, he said, it would require the right oil price and the discovery and development of more reserves.
"At that level we would have to find additional oil, and it's going to be a difficult battle at that stage," Jum'ah said in an interview with The Kansas City Star.
Saudi Arabia's role in the world oil picture is crucial. It has 25 percent of the world's reserves and is the largest net oil exporter. It supplied the United States 1.5 million barrels of oil a day in 2004 -- 15 percent of the country's oil imports. Overall, it produced 10.4 million barrels of oil a day in 2004.
Jum'ah was in Houston to speak Tuesday evening at an energy conference sponsored by Cambridge Energy Research Associates. The conference was attended by 1,600 energy executives and officials from 25 countries, who were told often by various speakers that an important shift had occurred in the energy markets over the last year.
"The time of cheap oil and cheap natural gas is clearly ending," said one conference speaker, ChevronTexaco chief executive officer David O'Reilly.
He said the continuing decline in U.S. oil production, even as demand is increasing, meant that calls for energy independence were not grounded in reality. Instead, there is a growing interdependence among nations that use energy and those that produce it.
Jum'ah said the dependence was mutual: Saudi Arabia needs the income from its oil, and the consuming nations are short of oil, so there is a need to work together.
He said he would like to hear less political rhetoric about cutting dependence on Mideast oil and more talk about reality, which includes that the Mideast has 70 percent of the world's oil supplies.
"The U.S. needs us badly and we need the U.S. badly," he said. "I think the idea of not depending on others is losing its ground."
Jum'ah declined to say specifically where he thought oil prices should be, but said they needed to be more stable.
A key Saudi policy in the past was to have sufficient surplus capacity so it could produce more oil to prevent prices from being volatile. A surge in demand last year virtually wiped out Saudi Arabia's current surplus capacity.
"We don't want to see gyrations, so producers and consumers can plan well," Jum'ah said.
He also said Saudi Arabia was considering building more refineries to export gasoline to countries that have struggled to keep up with demand, and to countries where obtaining permits to build refineries is difficult.
"We will be eyeing the U.S. market," he said.
Jum'ah said that he saw a future for alternative fuels, but that fossil fuels such as oil would be depended on for some time. The Energy Information Administration is even predicting in its 2025 forecast that the use of fossil fuels will climb slightly, to 86 percent of worldwide energy supplies. And on Tuesday, a Chinese energy official said he expected his country to shift in the next five years from relying mostly on coal to meeting more than half its energy needs with oil.
Work should continue on fuel cells and other alternatives, Jum'ah said, but the world will still rely on oil.
"Or as they say in Texas, 'You dance with the one that brung you,';" Jum'ah said.
By Steve Everly
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