Shura member calls for oil production curbs in Saudi

[FarCenter]

http://www.business24-7.ae/Articles/2008/6/Pages/06042008_9c3b2fe49a4a41b6b505463693ecd67a.aspx

Saudi Arabia's Shura council (parliament) will hold a series of meetings over the next two weeks to discuss a controversial proposal by a key member to curb oil production to save reserves for better prices, Saudi media reported. The council will listen to a report by deputy chairman of the Shura water and public utilities committee, Salim bin Rashid Al Marri, who will argue for cutting crude supplies to maintain the Kingdom's underground reserves.

"Marri will seek to persuade council members that the oil production must be linked to the country's actual development needs not the needs of foreign consumers," Alriyadh newspaper said in a report from the capital Riyadh. "He will tell the Council that keeping sufficient oil quantities underground is a good investment for the future as oil prices will then be higher…he will argue that this will be better than producing more oil and generating financial surpluses on the grounds these surpluses are causing inflation."

Saudi Arabia is the world's top oil exporter and its crude policy is normally determined by the King as the oil minister's job is mainly to implement that policy.

According to analysts, any major increase or decrease in the Gulf Kingdom's crude production must be approved by the Monarch, who was reported last week to have heeded a call by US president George Bush and agreed to lift output by nearly 300,000 barrels per day to cool down boiling crude prices. Saudi Arabia, which controls nearly a quarter of the world's total extractable oil deposits, has pumped an average of nine million bpd over the past year but its sustainable output capacity is almost two million bpd higher.

To face an expected increase in global demand, Riyadh is investing heavily in projects to boost its oil production capacity to 12.5 million bpd at the end of 2009 and maintain its traditional spare capacity of more than two million bpd.

"The price of oil under ground is actually higher than its current market price because it will become a unique commodity by time and demand will continue to rise because of a steady growth in the world's population," Marri told Alriyadh.

"The level of oil production in Saudi Arabia must be linked to the country's actual development and financial needs not to market prices and the need of foreign consumer. It is not wise to sap this resource just to satisfy the demand of foreign markets. Therefore, we need to revise our oil production policy before it is too late. Preserving our oil reserves is better than investing our financial surpluses which could lead to inflation."

According to the newspaper, Marri scoffed at what he called fears that the price of oil will decline after the development of more energy sources. "These fears are unjustified because they come from the consumers who are only benefiting from higher production and from the country's enemies who do not like to see prosperity and progress in Saudi Arabia," he said."Even if other major sources of energy are developed, they will remain costly and oil will remain a strong rival in the energy field. "

[bahrbearian]

1. What happened to the Carter Doctrine

We wouldn't be in this mess now,, Thanks RayGun, :banghead:

[jimshoes]

2. Better prices?

Go ahead kill that golden goose and lets be done with it. I always wanted a horse anyway.

[Ezlivin]

3. When you are up against a physical limit, curbing is always easier than increasing production

As Matthew Simmons and others have pointed out, the Saudis have most likely lied about the quantity of their oil reserves.

Currently, at near maximum production, Saudi Arabia is producing about 9mbpd, though recently they claimed they could potentially produce 12mbpd or even as much as 20mbpd. A claim Simmons called "pie in the sky".

"The faster you pull a reservoir, the faster you pull out all of the easy-to-produce oil," explains Simmons. "What happens is that you lose massive amounts of what the oil industry calls oil-left-behind still inside the field. These issues, as you can see, have been known about for years."

So it is a lot easier for the Saudis to speak of curbing oil production as opposed to raising it; they no longer can raise production.

[Lex]

4. Sounds like they are worried about "development of more energy sources"

They say they aren't worried but that usually means they ARE worried.

[FarCenter]

6. They are weighing whether to call our bluff on that

I think it is a safe call. New sources of energy take time to develop. By the time anything significant comes on stream, the declines in Mexico, the North Sea, and elsewhere will offset any newly developed energy sources.

[opihimoimoi]

5. But Chimpy said he would make them do as he wants.like increase production so we can have our Nascar