US will demand Saudi crude for a long time

Houston: A surge in oil supplies from unconventional resources, combined with a moderation in growth for oil demand, have done away with deep-seated fears about future energy scarcity, Saudi Arabian Oil Co. Chief Executive Khalid Al Falih said on Tuesday.

“Exaggerated concerns about scarcity and security of oil supplies have been dispelled,” the executive said in a speech at the IHS CERAWeek conference in Houston. Oil demand, Al Falih said, has moderated not just as a result of economic stagnation during the financial crisis but also due to long-lasting gains in efficiency. Even though demand will keep growing, it “will not rise to the point it will create market imbalances and stress industry beyond its means,” he said.

At the same time, the development of unconventional sources of oil and gas, especially from shale in North America, has been the main driver behind a rethinking of the global supply situation, he said. Al Falih also said the crisis, as well as the realisation of the massive amount of hydrocarbons that are available to fuel future economic growth, have somewhat lessened the competitive advantage of renewables, although they likely will play an important role in the long term. However, a “better balance between environmental and economic objectives is not only rational, but also necessary” to provide the world with the energy it needs, he said.

At the same time, the energy industry must be always prepared to deal with unexpected adversity — such as the cyber-attacks that last year crippled the company’s computers.

“There are a lot of bad guys out there,” the executive said. “We must fortify our defenses, both physical and virtual.”

Booming crude-oil production in North Dakota and south Texas has helped reduce US dependence on oil imports, and analysts say that in combination with Canadian oil-sands crude, they could dislodge most Middle Eastern supplies by the end of next decade.

But Al Falih said that Saudi Aramco remains committed to serving the US market, especially the refineries in the Gulf Coast that require sour crude.

“The outlook from our customers is that they will continue to require our crude for a long, long time,” he said. In 2012, Saudi Arabia provided more crude to the US than it did in 2011, he said.

Al Falih said Saudi Aramco continues to maintain its maximum sustainable production capacity of 12 million barrels a day and the company is currently sitting on spare capacity of 2.5 million barrels a day.