Minister of Petroleum and Mineral Resources Mr. Ali Al-Naimi, in a keynote address at the second annual meeting of the Saudi-American Business Council in Riyadh, stated that the Kingdom’s oil policy focuses on maintaining secure supplies to consumers while stabilizing global oil markets, noting that Saudi Arabia’s cumulative production exceeds 71 billion barrels to date.
Minister Al-Naimi said: “Saudi Arabia’s vast oil reserves, equivalent to 26 percent of the world’s total, have facilitated the build-up of sizable production capacity, currently equivalent to 10 million barrels a day (mbd). As a result, Saudi Arabia has become the world’s largest oil exporter during the last twenty years, as well as the largest oil producer since 1993. Saudi Arabia, in the process of utilizing and exporting oil at such high levels, has undoubtedly gained substantial economic benefits which are crucial to its economic and social development. These benefits are highlighted by the sizable contribution of the oil sector to the Saudi GNP (Gross National Product), a share currently standing at about 37 percent. In earlier years, the share of the oil sector in the Saudi GNP ranged between 65 percent and 75 percent. The current achievements in industry, agriculture, transportation, communications, trade and other services, bear witness to the rapid pace of development in this country.”
Minister Al-Naimi noted that Saudi oil policy is compatible with and motivated by the longevity of its oil reserves, saying that the Kingdom has adopted a free market stance under which long-term signals of underlying forces of supply and demand can be more clearly discerned. Highlighting the Kingdom’s efforts to meet world oil requirements through market-oriented mechanisms, he referred to joint ventures with refining and marketing companies in a number of countries including the United States, South Korea, the Philippines and Greece, saying: “For Saudi Arabia, these ventures bring about long-term access to markets. Integration downstream further provides the opportunity of bringing a geographically remote source of supply closer to consumer country markets.”
Minister Al-Naimi also noted the importance of direct ownership of a tanker fleet large enough to carry as much of the Kingdom’s oil as possible, saying: “By October 1995, the Kingdom’s tanker fleet comprised 23 crude oil tankers of ULCC and VLCC size and four product tankers.”
On the domestic level, Minister Al-Naimi reported that four refineries had been built or renovated with a total capacity of about 700,000 bd, adding that the Kingdom had built three more refineries with foreign partners with a capacity of about a million bd which are designed for the export market.
Noting its natural gas reserves of 186 trillion cubic feet, Minister Al-Naimi said that the Kingdom consumes domestically about 2.5 billion cubic feet per day of natural gas and exports over 700,000 barrels per day of LPG and natural gas, and remarked: “Our policy in this area is to continue meeting local demand for fuel and feedstock from the light end gases and export the heavy end of the gas stream as liquids.”
Affirming that Saudi Arabia is still a developing country in spite of its wealth of hydrocarbon resources, Minister Al-Naimi stated that consumer countries gain a higher share per barrel from the ultimate value of the oil than the Kingdom does, saying: “During the current decade, consumer countries have on average obtained a share of 70 percent from the value of the oil barrel, which sharply contrasted with our share of 30 percent. In 1994, the share of consumer countries has increased to about 83 percent, of which 64 percent is accruing to governments and the remaining 19 percent accruing to the oil industry. Our share had consequently deteriorated to about 17 percent. This sharp disparity in benefits came about as a result of a 95 percent rise in sales taxes imposed by the industrialized countries on oil consumption since 1985. In the same period, crude oil prices have declined by about 45 percent. We shall continue our efforts to conduct meaningful dialogues with industrialized countries with a view towards persuading them to reverse their taxation policies and adopt economic policies which are more compatible with the new world trends.”
Dealing with the domain of mining policy and activities, Minister Al-Naimi said that no fewer than 4,000 reports, studies and maps about geology and mining in Saudi Arabia had been prepared so far. Six hundred exploitation permits and leases for industrial minerals have been awarded throughout the Kingdom, comprising concessions for cement, ceramics, pottery, gypsum, marble, granite, sand and gravel. He reported that the number of industrial projects utilizing these materials in Saudi Arabia had reached 400 by 1994, representing 20 percent of Saudi industrial projects in the Kingdom, employing about 35,000 workers, and having an aggregate capital investment by the private sector in excess of SR 17 billion (about U.S. $ 5 billion). Minister Al-Naimi highlighted the government’s encouragement of private investment in the exploitation of metallic minerals in the Kingdom. He also remarked that huge reserves of eight billion tons in the north and northwest of the country constituted a solid base for Saudi Arabia to become a substantial producer and exporter of phosphates, saying: “It is well known that Saudi Arabia is already one of the leading exporters of fertilizers. The potential for utilizing locally-produced phosphates will consolidate the Saudi position in this respect.”
Dealing with oil and trade relations between Saudi Arabia and the United States, Minister Al-Naimi said that Saudi-American economic relations are “multifarious, cordial and firm”, adding that “economic cooperation covers many areas, especially oil, manufactured goods and investments”. The value of U.S. oil imports from Saudi Arabia has grown from about U.S. $ 4 billion in 1983 to about U.S. $ 8 billion in 1993, representing an average annual growth rate of 8 percent. By 1995, the number of American companies that had entered into joint ventures in Saudi Arabia had reached 222, with a total investment amounting to U.S. $ 12 billion and accounting for 41 percent of total investment projects executed jointly with foreign capital, most of them industrial and including refining, petrochemicals, lubricants and services.