Fueling the Economy

How important is Saudi Arabia’s investment in refining and petrochemicals?

For countries with crude oil reserves, it is important to look at ways and means to gain further value beyond just exporting crude oil. In recent years, Saudi Arabia has taken significant steps to diversify its petroleum sector with a major focus on establishing synergies between upstream and downstream businesses and becoming a major supplier of high-quality refined products. This expansion of its refining and petrochemical business is taking place both at home and overseas. For example, there are the start-ups of large refineries in Jubail and Yanbu, the development of a new grassroots refinery in Jazan Industrial City, as well as an expansion at Saudi Aramco’s Petro Rabigh complex and the development of a clean fuels project at its Riyadh refinery. These projects will not only help to meet the growing demand for petroleum products in Saudi Arabia, they will also increase the country’s export capabilities. Overseas, it has refining and petrochemical joint ventures and interests in countries such as China, Japan, South Korea, and the US. These strategic international business relationships give the country more opportunities for growth and diversification in petrochemicals and refining, as well as other related industry sectors.

How important has Saudi Arabia’s spare production capacity been and how important will it be in the future?

Over the decades, Saudi Arabia has maintained significant levels of spare production capacity as a means to help balance and stabilize the market. On many occasions this—and spare capacity elsewhere—has proven to be important in terms of helping overcome any supply disruptions caused by such issues as weather-related or geopolitical events. OPEC has always looked to ensure that there is ample production and sufficient spare capacity, benefiting producers and consumers alike and enhancing stability. The important role of spare capacity will no doubt continue in the future.

How does Saudi Arabia benefit from being part of OPEC and how does the organization benefit from having Saudi Arabia among its members?

All our member countries benefit from being part of OPEC. The organization helps with coordination and cooperation among all of its members. It provides data, information, and analysis on the oil market outlook and other key industry issues. It also helps to ensure the stabilization of oil markets in order to secure an efficient, economic, and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry. Saudi Arabia is a founding member of OPEC, has hosted a number of OPEC ministerial conferences, has held the OPEC Conference Presidency on several occasions, and afforded the organization a secretary-general in the 1960s. It also hosted the Third Summit of OPEC Heads of State and Government in 2007. It has contributed much to the organization. We respect and appreciate its support and input. And this goes for all member countries, each of which has a voice and whose views are important to the organization’s present and future.

How do you see the oil market outlook for 2016?

We expect to see a more balanced market in 2016. We anticipate stronger economic growth next year, including oil demand growth of well above the 1 million barrels a day (bpd) level, a contraction in non-OPEC supply growth, and much stronger demand for OPEC’s crude. We need to remain aware of challenges, including potential developments in the global economy and the overhang of stocks, which at the end of 2015 were well above the five-year average. It will also be important for all stakeholders to continue to work toward a more balanced market: producers and consumers, OPEC and non-OPEC suppliers, national oil companies, and international oil companies. This is essential for our industry’s future and for all those consumers around the world who rely on hydrocarbon resources for their everyday needs. It will be vital to the future of those currently without access to modern energy services.