A transcript of the highlights of the Financial Times interview with Saudi Arabia’s oil minister, Ali Naimi, conducted in Riyadh on November 12.
Financial Times: Crude oil is near $100 a barrel. How much of a problem is that for you?
Ali Naimi: We have nothing to do which where the price is today. It is very important to understand this. This is a message that I always try to convey to the market. When I say Saudi Arabia I also mean Opec. We are really focused on the fundamentals of the market. We do our best, whether in investment, upstream, downstream, midstream, to make this market comfortable, that the supply is going to be there when needed.
We also focus on economic growth. We work very hard and consciously to be sure that whatever actions we take that we are responsible do not dampen economic growth, especially in developing countries. And I think this is extremely important to understand.
FT: On supply and demand, what is the Saudi Arabian view on where the market is? Why the prices are so high?
AN: I cannot answer why the prices are so high. Prices are determined by a market that is influenced by many factors. We are assuring reliability of supply, we are investing a lot of capital in expanding our producing capacity. We are today not producing all our capacity because it is not needed. The demand is not there, the customers are not there. I believe that no-one will argue with us that inventories levels are today still within the 5-year average and in a comfortable place. We are watching that very carefully. You saw what we did in the last conference, we moved the ceiling up and we have no problems to move up or down to guarantee the integrity and stability of the market.
FT: But this discussion on the ceiling is not for this meeting. Should people expect an announcement on production?
AN: Absolutely none. This is a summit that is dealing with strategic issues and longer views. You have seen the themes. And you will get a declaration after it. Opec ministers are not going to meet to discuss supply and prices and the head of states definitely are not going to discuss it.
FT: How worried are you about the state of the world economy? Analysts say the combination of financial problems and oil prices at these levels are compounding the fears of recession. Do you share this view?
AN: I don’t like the word worried, I can be concerned. Everybody is concerned about the world economy. We are interested in making the world economy grow because prosperity ensues from that growth. We have no interest in seeing the world economy regress.
But you know there are other factors which are contributing to this price. It is very important how people view the market. There are very pessimistic views, that we do not share, about supply, adequacy of supply, and there are also pessimists who keep saying that we are going to run out of fossil fuels, especially oil.
And it is these gatherings, these statements, these articles in the press from allegedly gurus of the industry, that have negative impact which causes funds and speculators to run to the market and say that oil is a better place to make money. This is very unfortunate.
These pessimists about the adequacy of supply and adequacy of reserves in the future, I think they are doing a lot of damage to the stability on the market.
FT: Some of these statements are not from unknown analysts, but came just last week from the International Energy Agency. Are you suggesting the IEA is helping to promote instability?
AN: I don’t want to go on criticising the accuracy of anyone. All I want to say is responsible people need to be extremely responsible as to what they say with respect to the adequacy of supply. When I look at what Saudi Arabia is doing in investing. Why we are doing it? Of course, we make money, we invest in infrastructures. But we also do it because of our responsibility toward the international community.
We’ve had crunches, disruptions, crises - and have we had genuine shortage of supply over the last 30 years? Yet, the pessimists are all there saying, aha!, this winter we are going to have a shortage. We are all looking at the same data, we have the resources to respond. We have responded in crises. Why are people so pessimistic?
FT: But are other Opec members also investing? Isn’t it mostly Saudi Arabia?
AN: Others also are investing. Kuwait, Emirates, Libya, Nigeria. Everyone is investing according to their reserves. The intention is there. Now, countries do have problems, Iraq, for example. Do you think that Iraq does not want to invest? Of course they want to, but the situation is difficult. And it is also in a number of countries, Iraq, Iran, Nigeria. I know that the willingness is there, but there are other factors. And we should understand it. But today there is no shortage.
FT: What do you want to achieve in this summit? Is everyone is on the same wavelength, both politically and on oil strategy? What would you consider a success?
AN: We need solidarity and this conference, at the heads of states level, enhances solidarity. There is going to be discussion among the heads of states on growth, environment, reliability of supply, investment in future supplies to guarantee the integrity of the system. They are not taking about today, they are talking about the longer term view.
FT: One of the issues from some countries is the concept of security of demand. How much the future investment depends of assurances of demand?
AN: We are realist, pragmatic. We know that there are policies, actions and programmes that been taken to move away from fossil fuels. Those are ongoing. Now, what will these policies realise from here to the next 30 to 50 years? Some say 10 per cent, some say 20 per cent, some say 30 per cent. But none of them say in the next 10 years we do not want fossil fuels.
Although we watch those developments, and being as realistic as we are, we are not going to stop our investment in production capacity because of these actions until they prove to be effective and sufficient. Then, we may need to move towards these alternative fuels.
FT: The pessimists might be getting the facts from the International Energy Agency. They say you need to produce about 18m b/d in 2030 and that this is impossible for you to achieve.
AN: The may say whatever they want to say. My concern is what these statements are doing to the market. I don’t want to say that they are irresponsible statements, but they are suddenly very pessimistic. But people who are speculating with funds say, well this is good business to be in. Fine, I don’t have a problem. But, I hate to say this, I don’t want to say baseless, but it is inaccurate pessimism.
FT: What has been the impact of shortages of skills, labour. Are the shortages causing delays in projects?
AN: It has not slowed us down but the costs have gone up. And there are many reasons for that. It is the sophistication of our industry. It is our human resources programs that we established many, many years ago. We have no problem to go to the international market to bring know-how, but we are also developing our own know-how. We recently broke ground of a new university research centre that Saudi Aramco is building.
FT: But if the costs have gone up, does not mean that you will face delays?
AN: We have no delays right now, and do not foresee any delays. What are the nature of such delays? You do not have the manpower, you do not have the materials or you do not have the managing systems. Fortunately, we looked some time ago at the potential of this happening and we took action to mitigate it.
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