Q: Your Royal Highness, the Saudi government has recently set up the Supreme Council for Petroleum and Minerals. What is the purpose of this move, and does this reflect a shift or change in Saudi oil policy?
A: The initiative taken by my brother, the Custodian of the Two Holy Mosques, comes in response to the tremendous transformations now taken place in the oil and gas industries world-wide. We believe that these developments present us with vast opportunities, as well as challenges. Saudi Arabia would like to be in a position to take advantage of these transformations and to deal with them effectively.
As you know, Saudi Arabia has the largest proven oil reserves in the world and is the largest exporter of oil. While this privileged position gives us a unique competitive edge, it also places a heavy responsibility on us. Hence, we are always concerned to maintain demands for oil at healthy and sound levels within a stable and growing world economy. On the domestic side, we are working to create a solid and integrated oil industry founded on sound and competitive economic bases that will enable us to realize full benefit from the Kingdom's oil and gas resources.
Q: Internationally, Your Royal Highness, what should we expect from the Council? Will Saudi Arabia continue to pursue the same policy it has pursued in the past?
A: Well, we want an oil strategy that is founded on firm bases, including complete transparency because I really believe that complete transparency is the only way to limit volatility, in prices as well as in supplies; volatility is harmful to producers and consumers alike. We have always maintained that stability of both supplies and prices is critical and that any imbalances would be harmful to both producers and consumers.
Q: Your Royal Highness, last year you extended an invitation to major oil companies to invest in the Saudi energy sector. And a few weeks ago, it was reported that negotiations would begin between the Kingdom and these companies. Would you shed some light on this issue and what was the background of the initiative? And what is the latest on this?
A: Well, in 1998 I had a chance to meet with a number of executives from major oil companies. We discussed investment opportunities in the Kingdom especially in light of its stability and the availability of huge oil and gas reserves. I indicated to them, at that time, that we welcome, and we will be willing to look into, any investment ideas that might be of benefit to both sides. Following that, we received preliminary proposals for investment in various areas within the energy sector from 18 international companies including the top 10 companies in the world. We were heartened by the tremendous interest generated by our initiative. And these companies' willingness to commit billions of dollars to projects in the Kingdom reflects the favorable investment climate available in Saudi Arabia.
The companies' preliminary proposals have been studied by specialists, and some of them have been ruled out, either because we did not see a need for them or because they were not suitable for the Kingdom. The Supreme Council for Petroleum and Minerals has formed a ministerial committee, which has issued invitations to companies, and negotiations will begin during the second half of April. The committee will then submit a full report to the Council.
Q: Your Royal Highness, what do you look to achieve from opening up the gas and downstream oil sectors to foreign investment?
A: As I indicated earlier, we have received preliminary proposals from 18 of the top oil companies in the world. These proposals cover a wide range of areas from production, processing, transporting and distributing of gas to refining, transporting and marketing of oil and building the required infrastructure. The financing of these investments, which will be provided by the companies if deals are reached, exceeds one hundred billion dollars. These investments are huge by any standard and I believe they will benefit all segments of the Saudi economy, enhance economic growth, create new job and training opportunities and facilitate the transfer of technology. All this will take us a long way towards the creation of a solid and integrated economy that realizes the full economic potentials of the oil and gas industry and will open new and wide investment opportunities for the Saudi private sector.
And it is important to keep in mind that money invested in projects in Saudi Arabia means less money available for investment in competing projects elsewhere.
Q: Your Royal Highness, what about Saudi Aramco? Will it assume a new role following the formation of the council and the invitation to the international oil companies?
A: We are proud of Aramco's achievements over the years, and our dealings with foreign companies will never be at Aramco's expense. I believe the presence of these companies will strengthen Aramco and sharpen its competitive edge. Aramco, has, I believe, the administrative and technical expertise and know-how that enable it to compete effectively with these companies. And we should keep in mind that most of the proposed projects include major roles for Aramco, either as a supplier of oil or gas, or as a full partner in the projects. In addition, the infrastructures and facilities that Aramco has will be valuable to the foreign companies. This will benefit Aramco greatly by enabling it to make full use of these facilities, thereby maximizing the return on its investment.
Q: Your Royal Highness, how will the negotiations with the companies be conducted?
A: The negotiations will be held directly between the companies and the relevant government agencies. And we oppose the involvement of middlemen or brokers. I have made this emphatically clear to the companies' executives in our meetings. This issue is very important to me and I will not tolerate or accept any proposal that does not meet the highest ethical standards. Each company will be asked to sign an undertaking to the effect that it will deal only, and directly, with the relevant government agencies. And all dealings must be completely transparent.
Q: Your Royal Highness, I would like to go back to the issue of prices and current market conditions. You mentioned that maintaining a proper balance between supply and demand is crucial to the stability of the oil market and that upsetting this balance would be harmful to the interests of both producers and consumers. Do you believe, Your Royal Highness, that there is at the present, an imbalance in the market? And does Saudi Arabia intend to intervene to restore equilibrium to the market?
A: Yes, at the present, there is an imbalance in the market. And I would like to stress what I have just said about the importance of the stability of supplies and prices at reasonable levels and that any shift in the supply-demand balance will not be in the interest of either the producers or consumers.
Last year, when prices reached unacceptably low levels due to over-production, we worked to restore balance to the market through coordinated action. One result of that was the relative stability that the market has enjoyed over the past few months. Oil exporting countries, both OPEC and non-OPEC, appreciated the role that Saudi Arabia assumed during the crisis. And consequently, a consensus developed among exporting countries to the effect that whenever the supply-demand equilibrium is upset, producers would step in collectively and restore balance to the market. I should add here that oil-consuming countries, both industrial and developing, showed complete understanding of the action taken last year by the exporting countries.
Now clear signs of imbalances in the other direction have emerged in the market. And regardless of the amount of imbalance or its causes, we are strongly convinced that just as extremely low prices are not in the interest of consumers, a sudden and sharp increase in prices does not serve the interest of producers. Because of this realization, we will work, through coordinated action, just as we did in the past, to restore stability to the market in a way that safeguards the interests of exporting countries, and does not harm the global economy.
As you know, that issue will be discussed during the upcoming OPEC meeting that will be held on the 27th of this month. And I am convinced that the member states will study carefully all the information available to them and will reach the proper decision that will restore stability to the market, thereby protecting the interests of exporting countries and not harming the world's economy.