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Thu 30 Nov 2006 08:00 PM

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Al-Khayyal: Dependence on Middle East oil unavoidable


Abdulaziz Al-Khayyal, Saudi Aramco’s senior vice president of refining, marketing and international, has spoken out on the issue of global energy market volatility and energy security. In a speech to the Korean Forum for Progress he said that some of the major factors affecting the oil industry are the investment, regulatory and political environments in which it operates. He also touched on the analyses and policies of government regulators, legislators and international bodies.

“Sometimes [they] owe more to political considerations than economic principles,” said Al-Khayyal, “creating uneven playing fields for competing energy sources and badly distorting energy markets.” He went on to suggest that over the long term, “this situation harms not only the oil industry and its shareholders, but also consumers and end-users, who are hurt by constrained supplies of energy, lagging infrastructure investments, and eventually market volatility.”

According to Al-Khayyal, the basis for continued global prosperity is energy interdependence. “If we accept the fact that interdependence is ultimately preferable to isolation when it comes to developing our economies and sustaining the prosperity of our societies, then how are we to enhance energy security?”

Free markets, he said, enable energy security by providing accurate demand signals. His theory goes that these in turn encourage timely investment in facilities, as well as drive efficiency and technology development.

Al-Khayyal described the potential for diversification of petroleum suppliers as limited, mostly by the fact that almost two-thirds of the world’s proven crude oil reserves are located in the Middle East. “Subsurface geology is not something subject to relocation,” he said. “Thus the premise of petroleum supply diversification begins to break down when it is seen as synonymous with a reduced dependence on Middle East oil.”

According to Al-Khayyal, another factor that contributes to energy security is for oil producers and consumers to maintain strong, mutually beneficial relationships. “Wherever Saudi Aramco does business, we see ourselves not merely as an investor, but rather as a strategic economic partner with that country and its people,” he said.

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