'Oil hikes due to resource crunch'

Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Niami today said oil prices were under pressure because the infrastructure was stretched and there was lack of resources in the supply chain.

Addressing the 18th World Petroleum Congress here, Niami said the unforeseen challenges had eroded most of the spare capacity of the 1980s and the 1990s. "Our system is under pressure from rising demand, insufficient investment in capacity, a mismatch between crude quality and the existing refining base."

Refuting theories that petroleum resources were drying up, he said, "The problem we face is not one of availability, but of deliverability."

Maintaining that Saudi Arabia's policy was to continue with the 1.5-2-million barrels-a-day spare capacity, he said the upstream projects now underway in Saudi Arabia represented a combined production capacity addition of around 3 million barrels a day.

Part of this would be utilised to offset natural decline and the rest to expand capacity, he added. "By 2009, Saudi Arabia's maximum sustainable capacity will reach 12.5 million barrels per day," he said.

While Saudi Arabia has prepared a production capacity scenario of 15 million barrels per day which can be implemented in response to growing market demand, the country cannot meet the "deliverability" challenges of tomorrow by itself.

"The international community, under the International Energy Forum, should undertake a study of the global oil supply system, identifying bottlenecks and proposing possible solutions," Niami said.