Al-Naimi calls for joint action by Arab states over energy
Minister of Petroleum and Mineral Resources Ali Al-Naimi called for “joint action” among fellow Arab energy producers to increase trade, investments and partnerships, amid a period of uncertainty over oil prices and fears of global oversupply.
“The challenge which we are facing in the Arab world is representing our need for more joint action in the field of the oil and energy, and try to have more trade partnerships in between the states,” Al-Naimi said at Seminar on Future of Energy in the Middle East and North Africa organized by Arab Petroleum Investments Corporation (APICORP) in Bahrain on Thursday.
The cost of new oil and energy projects around the region requires “huge” capital, which can obtained by the issuance of bonds from regional financial institutions, and by both regional and global development funds, he added.
This in turn would “preserve the positive role of oil” in the Arab world, Naimi said. The oil minister said that despite the global economic slowdown, he expected demand to continue increasing year-on-year.
Meanwhile, Bahrain’s energy minister hinted at the conference that Iran’s projected increases in oil exports — pending the removal of sanctions sometime next year — would not have a significant impact on prices.
“At the same time, the demand for oil in the future will rise and some of the non-conventional producers may get out of the market, because it may not be viable for them if the price drops below a certain level,” said Abdul Ali Mirza.
“Some people say that there will be more balance in the market (in the future),” he added.
Al-Naimi, while thanking Mirza and Dr. Abid ibn Abdullah Al-Saadoun, chairman the Arab Petroleum Investments Corporation (APICORP), said: “With its huge discovered and undiscovered reserves, the Arab world is a major player in global oil production and consumption. Arab countries need to invest in the various stages of the oil industry, especially since these countries, whether oil-producing or non-oil-producing, are all in need of energy sources to fuel the continued economic growth and provide the basic needs of life.”
“The Arab world consumes about nine million barrels of oil per day, almost 10% of the total global consumption. At a time when some Arab countries are experiencing political unrest, joint Arab action in economic fields, assumes much greater importance, since the Arab world has more than 56% of the world’s proven oil reserves and more than 27% of the world’s natural gas reserves. These reserves are expected to rise over the coming years with new discoveries and improved technologies that help increase recoverable oil volumes,” Al-Naimi added.
“As you know, the economies of all Arab countries, including non-oil-producing countries, are closely interconnected in various areas such as trade, investment, tourism, and the movement of labor, which means that these economies are correlated to oil and gas production and price levels.
“This correlation is expected to continue for several decades, bringing into focus the importance of the development, as well as the vertical and horizontal expansion, of the oil industry, including the continuation of new oil discoveries. This requires the development of appropriate financing solutions that would maintain and raise the level of production and increase oil reserves.
“As you know, energy sources, most notably oil and gas, are among the fundamentals of modern global economy. In addition to their various uses as a source of energy, oil and gas are also used as feedstock for the manufacturing of hundreds of essential and luxury end-products that are part of modern life. They provide, on the one hand, energy for transportation, refrigeration, heating, power generation, agriculture, industry, and many other areas; and are used, on the other hand, as feedstock for intermediate and downstream industries, such as clothing, cars, and even food, “ Al-Naimi said.
“The world economy, including oil and energy economies, has been shaky and sluggish over the past year and this year. However, demand for oil and energy continues to rise year after year, with annual demand growth expected to average above 1 million barrels per day during this decade.
“Productivity of oil fields around the world declines naturally at a rate of four million barrels per day, which means that the oil industry needs to add new capacity of about five million barrels per day each year to compensate for the natural decline and meet the growing global demand. This capacity increase requires substantial and continued funding both at the international level and in the Arab region.
“To meet this growing need for funding, we have to continue, and even increase, investment in the oil industry to ensure market stability in the short and long term. However, this investment must include all the stages of production, processing, transportation, refining, distribution, and sale of end-products; and environmental conservation must be taken into account in all these stages.”
“Energy projects, in general, and oil projects, in particular, need substantial capital and; thus, require investors in them to look for the best possible funding solutions; including; most importantly, self-generated funds from companies’ savings, commercial banks, bond issue, and global and local industrial and development funds; as well as international state-owned development banks that are based on clear developmental objectives; such as the International Finance Corporation (IFC), the Islamic Development Bank (IDB) and the company we are today celebrating its 40th year of existence; the Arab Petroleum Investments Corporation (APICORP), which is considered a successful model of Arab initiatives that aim at strengthening trade relations between Arab countries, contribute to the support given to them and develop and help them make use of their important natural resources,” he said.
“The fact that the funding needed for energy projects in the Middle East is estimated at $700 billion over the next 10 years shows how important it is to provide adequate funding for such projects. It is also important to note the role played by APICORP in giving priority to successful and developing joint Arab projects, and energy projects that adopt advanced technology and to the training and development of Arab talents and doing everything that will enable it to play an important and influential role in the future of the Arab energy industry,” Al-Naimi said.
“In the field of funding, APICORP plays an important role in supporting the various operations of oil companies and their related activities. Last year, the company entered into three funding agreements with Maaden Phosphate Company and Rabigh Refining and Petrochemical Company (Petro Rabigh) in the Kingdom of Saudi Arabia, and Oman Oil Refineries and Petroleum Industries Company in the Sultanate of Oman. APICORP also focuses on medium term funding and reducing reliance on short-term funding.
“I would like to point out the important future role assigned to our countries and companies in the development of the energy sector and the oil industry in the Arab region. This development requires billions of dollars for funding new discoveries, sustaining and seeking to increase the current production level, maintaining excess production capacity in order to stabilize the market, in addition to supplying funds for downstream projects, the creation of added value, and the development of human resources through education, training and qualification of Arab youth.
“Perhaps it would be fitting here to mention the role of the Kingdom of Saudi Arabia in the stability of the oil market, and its continued willingness and prompt, assiduous efforts to cooperate with all oil producing and exporting countries, both from within and outside OPEC, in order to maintain market and price stability. The Kingdom remains a highly reliable and major oil exporter, and it invests domestically in all the stages of the oil industry, in the fields of exploration, production, and refining; and internationally in the areas of transportation, storage, and downstream activities such as refining, distribution, and manufacturing.
“I hope that this seminar will succeed in exploring the future of energy in the Arab world and discussing the attractive investment opportunities, and be a driver in supporting inter-Arab cooperation on commercial basis while discussing possible financing, as represented in the mission and objectives of APICORP,” he added.