Saudi Arabia - OilSaudi oil reserves are the largest in the world, and Saudi Arabia is the world's leading oil producer and exporter. Oil accounts for more than 90% of the country's exports and nearly 75% of government revenues. Proven reserves are estimated to be 263 billion barrels, about one-quarter of world oil reserves.
More than 95% of all Saudi oil is produced on behalf of the Saudi Government by the parastatal giant Saudi ARAMCO. In the 20 years since its amicable nationalization, Aramco has developed into one of Saudi Arabia's most efficient and modern institutions, developing several generations of world-class leaders. It is noteworthy that, when the King wants something done quickly and right, like completion of his signature project of the King Abdullah University of Science and Technology (KAUST), he turns to Aramco. It is also noteworthy that Aramco continues to enjoy very close relations with the USG and with American companies, based in part on the fact that many top officials studied in the US.
In June 1993, Saudi ARAMCO absorbed the state marketing and refining company (SAMAREC), becoming the world's largest fully integrated oil company. Most Saudi oil exports move by tanker from Gulf terminals at Ras Tanura and Ju'aymah. The remaining oil exports are transported via the east-west pipeline across the kingdom to the Red Sea port of Yanbu.
Due to a sharp rise in petroleum revenues in 1974 following the 1973 Arab-Israeli war, Saudi Arabia became one of the fastest-growing economies in the world. It enjoyed a substantial surplus in its overall trade with other countries; imports increased rapidly; and ample government revenues were available for development, defense, and aid to other Arab and Islamic countries.
But higher oil prices led to development of more oil fields around the world and reduced global consumption. The result, beginning in the mid-1980s, was a worldwide oil glut, which introduced an element of planning uncertainty for the first time in a decade. Saudi oil production, which had increased to almost 10 million barrels per day (b/d) during 1980-81, dropped to about 2 million b/d in 1985. Budgetary deficits developed, and the government drew down its foreign assets. Responding to financial pressures, Saudi Arabia gave up its role as the "swing producer" within OPEC in the summer of 1985 and accepted a production quota. Since then, Saudi oil policy has been guided by a desire to maintain market and quota shares and to support stability in the international oil market.
Saudi Arabia was a key player in coordinating the successful 1999 campaign of OPEC and other oil-producing countries to raise the price of oil to its highest level since the Gulf War by managing production and supply of petroleum. That same year saw establishment of the Supreme Economic Council to formulate and better coordinate Saudi economic development policies in order to accelerate institutional and industrial reform.
In response to increasing international demand for oil, Saudi ARAMCO engaged in an expansion of its oil production capacity and planned to raise its capacity from 11 million barrels/day (mb/d) to 12 mb/d by 2009. Saudi ARAMCO is also increasing production of associated and non-associated natural gas to feed the expanding petrochemical sector. Notably, Saudi Arabia has awarded contracts to foreign companies to conduct gas exploration in selected regions of the country--the first such foreign participation in the petroleum sector upstream since the nationalization of ARAMCO began in the 1970s.
China recently surpassed the US as the largest importer of Saudi oil. Saudi Arabia's investments in China have increased significantly over the last few years, including a $3.5 billion refinery in Fujian and a $2.86 billion joint-venture petrochemical complex in Tianjin. Additionaly, President Hu Jintao commemorated the opening of a cement plant when he visited Saudi Arabia in February 2009. China is now the SAG's number two trade partner after the US. Saudi-Chinese bilateral trade was estimated at $40 billion in 2008, while Saudi-U.S. trade was estimated at $67 billion during the same time period.
Saudi Arabia is committed to maintaining sufficient reserve capacity to stabilize prices. Aramco is completing its $120 billion worth of projects to increase production capacity towards 12.5 million barrels a day, an investment that Saudi officials have noted the Kingdom made at the peak of prices for engineering and construction services. The Kingdom is also exploring other projects to bring non-conventional oil on line to meet the evolving needs of the international market and expand reserves, such as Saudi Arabian Chevron's project in the Partioned Neutral Zone with Kuwait to steam flood heavy oil in limestone cavities. Thanks to this project, which Al-Naimi strongly supports, Chevron is the only International Oil Company producing oil upstream in the Kingdom.
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