Rising demand may outpace Saudi output capacity

Dammam: The world's only oil superpower boosted output last month, launching a pair of projects that are part of a massive $55 billion endeavour to keep pace with the world's ever-intensifying thirst for oil.

But demand for the world's premiere source of energy is rising so fast by about 2 million barrels per day each year that even Saudi Arabia's vast resources will be unable to cope without drastic help, oil executives and analysts say.

Remarkably, even Saudis, who control over a quarter of the world's known oil, are calling for relief from relentless consumption.

"The current out-of-control demand is not good for us," Ghazi Al Rawi, head of private equity at Gulf One Investment Bank, said in a recent interview.

"When you have this kind of demand, you're forced to supply beyond the optimal rate. That's not a positive thing."

Most urgently needed is energy conservation, especially in the United States, which now burns up a quarter of the oil sold to the world, said Saddad Al Hussaini, the former head of production at state-owned Saudi Aramco.

Also critical is the development of fuels from oil sands or natural gas that can be substitutes for oil.

Other producing countries especially Opec's No 2 and 3 leaders Iran and Iraq could ease the crunch by boosting exports to handle a greater share of the surging demand in China and India, Saudi experts said.

"We need some help," said Nawaf Obaid, a Saudi petro-leum adviser with close ties to the government.

If such help does not materialise and Saudi Arabia maxes its output cranking out perhaps 35 per cent more oil than it does today the kingdom's proven reserves might only sustain those gushing flows for a couple of decades before starting to dwindle, Al Husseini said.

"Can (global consumers) afford to keep increasing demand by almost 2 million barrels a day each year? Is it Saudi Arabia's role to meet that demand?" asked Al Hussaini, who retired in 2004 after working 32 years in the kingdom's oil sector. "You're leading yourself to having to find an alternative source of energy very quickly."

Few analysts believe oil worldwide is actually running out. But experts differ on whether the current soaring oil demand will outstrip the current supplies, and how quickly.

Many blame today"s tight market on 20 years of low oil prices that stifled investment in new wells, refining and exports.