28-09-05 Saudi Arabia's Minister of Petroleum and Mineral Resources Ali al-Naimi blamed lack of refining capacity to handle sour and heavy crude for the spiralling global prices.
"What the global oil industry confronts today is a challenge of deliverability," said al-Naimi addressing a packed session chaired by India's Petroleum Secretary S.C. Tripathi at the ongoing World Petroleum Congress, being attended by big-wigs and delegates from over 60 countries. "Deliverability is a measure of our capacity as an industry to develop, produce, transport, refine and deliver to end consumers the energy they require in their daily lives," he said.

Al-Naimi pointed out that as against 14 mm bpd of spare capacity a few decades back currently only his country, the world's largest oil producer, had spare capacity to help balance the market. Yet despite Saudi Arabia and the Organisation of Petroleum Exporting Countries (OPEC) offering about 2 mm bpd of extra supplies recently there had been no takers.
"This is because there is a major constraint in the refining system. There is a mismatch between the configuration of refineries and availability of sour and heavy crude," he pointed out.

Outlining Saudi Arabia's plans to step up oil production to meet the additional demand, the minister said from the current capacity of 11 mm bpd the supplies were proposed to be raised to 12.5 mm bpd by 2009, with a spare capacity of 1.5-2.0 mm bpd.
"We are also expanding and upgrading our existing refineries both in the kingdom and overseas. We are building new export refineries in Saudi Arabia and in the key consuming countries which will be able to handle heavy, sour crude," he said.

Suggesting a dialogue between producers and consumers to "find acceptable ways to remove impediments to growth", Al-Naimi urged government to remove impediments to investment in infrastructure as energy remained the cornerstone of development.
Putting the perspective of developing countries like India, Tripathi said there seemed to be a shift in energy demand with the gap widening between producing and consuming countries, which were feeling the pinch of the high global prices.

Rex Tillerson, President of ExxonMobil of the US, estimated a requirement of about $ 200 bn over the next two decades for exploration and production of oil and gas, and development of new technologies. In addition, he estimated an investment requirement of $ 5 tn till 2030 in refining and other infrastructure to be able to handle sour and heavy crude with availability of sweet and lighter crude declining rapidly.
In addition, another $ 10 tn investment would be required over the next 25 years for electricity infrastructure alone, he said.

On a cautious note, Tillerson said: "At the current crude price, the rewards (for producing countries) seem great but what goes up must come down and go up again.”
“But what does not change is the presence of risk."