JOHANNESBURG, South Africa, AP -Saudi Arabia”s oil minister said Tuesday that world oil reserves are more than enough to meet rising future demand but that without new refineries prices will remain high and markets volatile.
"These are turbulent times for oil markets. Prices are under pressure because the petroleum industries infrastructure is stretched thin," Ali Naimi told the 18th World Petroleum Congress in Johannesburg. "Most of the spare capacity of the 1980s and 1990s has disappeared, resulting in a system that has a much smaller margin for error."
Naimi said the havoc and disruptions caused recently by hurricanes Katrina and Rita in the Gulf of Mexico offered visible examples of the fragility of the energy delivery system.
Concerns about refining capacity, heightened by the hurricanes, have pushed the price of oil beyond $60 a barrel.
During periods of low prices, Naimi said low cost fuel encourages consumption but causes investors to turn to other industries that offer greater returns. If prices are too high, global growth suffers and the petroleum industry suffers from reduced demand.
"The current price level is providing the returns needed to attract adequate investment," said Naimi. "We believe spare crude oil production capacity will grow sufficiently in the next 3-4 years to restore some margin of safety to world crude markets."
However, he said higher prices were not enough to assure the necessary investment. He said environmental impact issues and contentious planning regulations will make it more difficult to overcome the bottlenecks in the current energy delivery system. He said an uncoordinated proliferation of regulations was complicating investment decisions and clouding the future.
Rex Tillerson, president of Exxon Mobil Corp., said the damage from hurricane Rita was still being assessed but that Hurricane Katrina had destroyed 40 oil platforms in the Gulf of Mexico and damaged others. It also briefly knocked out 95 percent of the oil production in the Gulf of Mexico and 90 percent of natural gas production there.
"There was a rapid, market-driven recovery. Within two weeks, all but 15 percent of oil and 6 percent of gas production was restored," he said.
The hurricanes, he said, underscored the global interdependence of the oil industry and made it clear that no country can be truly energy independent.
Tillerson said global energy demands would increase by 50 percent in the next 25 years and about 80 percent of that increase will come from the developing world.
"We must invest wisely and continue to make technological innovation to meet the challenge of the next generations energy demand," said Tillerson.
He said although some estimates were as high as 7 trillion, by conservative estimate there were at least 2 trillion barrels of oil yet to be recovered. "That is more than twice all the oil recovered up to now in all of human history," said Tillerson.
Naimi said talk of oil scarcity reminds him of the 1970s, when people also thought the end of the age of oil was at hand.
"But in the intervening years, when we were supposedly facing ap precipitous decline, world oil reserves more than doubled," said Naimi. The increase was noteworthy because the world consumed 800 billion barrels during the period.
Proven oil reserves in Saudi Arabia in 1970 totaled 88 billion. Today, he said they are estimated at 264 billion barrels despite 91 billion barrels have been produced over the 35 years.
New technology as well as new discoveries have raised world oil reserves. He said new technology would soon boost proven reserves in Saudi Arabia by 200 billion barrels. He said a technology that allows the country to recover just 1 percent more from its fields would add a full year to production.