Saudi Arabia to cut spending on refining projects

Mar 18, 2009 01:00 AM

Saudi Arabia, the world's biggest oil exporter, is expected to cut investment in oil drilling and refining projects over the next five years, a senior Saudi oil official said.
The spending cutbacks underscore the extent to which the ailing global economy and weak oil prices are hurting investment in future oil production capacity and clouding expectations about the health of crude demand over the next few years.

Dozens of smaller oil companies, starved of cash and facing stiff financial constraints from low oil prices, have in recent months slashed project spending, though most big privately run oil firms like Royal Dutch Shell have maintained their spending plans for 2009.
The Saudi official spoke following a report that Saudi Aramco -- the world's biggest oil company by production and reserves -- plans to axe spending on drilling and refining projects from 2009-2014 to just $ 60 bn. That would be just half the level that the company expected back in early 2008.

The official said thetheme of the report was basically correct but disputed the accuracy of the numbers in the story.
"There will be a reduction in spending, but the details I am not sure about," the official said.

Saudi Arabia has sunk many billions of dollars into new projects in recent years and is expected to raise its pumping capacity to a huge 12.5 mm bpd, up about 11 % from current levels, by summer. Speaking on the sidelines of an energy conference in Vienna, Saudi oil minister Ali Naimi said the kingdom will continue to invest in oil drilling projects but wouldn't comment on whether Aramco would tighten its purse strings over the next five years.
"We have said we will stay the course (and invest), and we will stay the course," Naimi said. "We (Saudi Arabia) are going to be idling with 4.5 mm bpd of capacity (by summer). That's a lot of spare capacity. So yes, we will invest as needed."

Earlier in the day, Naimi told a packed conference hall that weak oil prices were crimping the global oil industry's spending on new projects.
"Harmfully low prices are creating a damaging ripple effect, with diminished sector investments threatening the availability of much-needed future supplies," Naimi told oil ministers and executives.

IHS Global Insight energy analyst Samuel Ciszuk said the expected cuts to the kingdom's oil project spending were rational to the extent that project development costs are starting to fall after surging in recent years. Those lower costs are helping to decrease the need for added investment dollars.
"Saudi Aramco expects project costs to continue falling sharply... leading to lower investment needs at its projects, and faltering global demand is likely to make it continue its strategy of delaying projects, pushing some of them out of the coming five-year plan," Ciszuk said in a research report.

Like many other energy-producing states, Saudi Arabia is expected to rake in much lower oil revenue in 2009 because of weak oil prices.
This is forcing oil states to roll back social spending and, in the case of Saudi Arabia, run substantial budget deficits.

Source / Dow Jones & Company, Inc.
Alexander's Commentary

Change of face - change of phase

In the period of July 20 till August 3, 2015, Alexander will be out of the office and the site will not or only irreg

read more ...
« July 2020 »
July
MoTuWeThFrSaSu
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31

Register to announce Your Event

View All Events