Saudi Aramco sees oil market as balanced and 'reasonable'

Saudi Aramco has spare crude production capacity of 3 million b/d to meet any increase in oil demand, although the market is currently seen as being balanced and "reasonable," CEO Amin Nasser told an Energy Intelligence Forum in London on Oct. 17.

The company can ramp up oil production if needed "in a couple of weeks," Nasser said, adding the more spare capacity that is used up, the more concern there will be in the market.

"What we are seeing now is balanced in terms of what we are supplying and it's reasonable in terms of economic conditions we're seeing today," he said.

Oil demand in the second half of the year will be about 103 million b/d, he said, even with China's economy slowing and jet fuel demand still about 95% of what it was before the coronavirus pandemic. Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $93.05/b on Oct. 16, after hitting this year's high of $97.77/b on Sept. 28 following production cuts by OPEC and allies.

Equatorial Guinea's oil minister, Antonio Oburu Ondo, said OPEC "has been fighting this past month to make sure that there is market stability." Speaking at the Africa Week conference in Cape Town on Oct. 17, he added: "And this is a market stability that is benefitting all oil and gas producing countries."

Equatorial Guinea is one of 13 countries in OPEC.

Nasser added that high energy prices have prompted some buyers to switch to using coal where possible. Since 2010, oil demand has climbed 17% while coal is up 15%, he noted.

Aramco is investing in oil, natural gas and petrochemicals, hydrogen and "clean" fuels along with carbon capture and storage. "Everybody's asking the industry to accelerate the transition -- this is exactly what we did in terms of new hydrogen projects," Nasser said. The company's hydrogen project to produce 150,000 barrels of oil equivalent of hydrogen "is close to completing engineering," he said. "The issue is offtake -- why? Because prices are high." Green hydrogen is the equivalent of $400/b. "Customers around the world are finding it difficult to cope with high prices" and are still waiting for government incentives to encourage more use of alternative fuels, he said. "As soon as government incentives come to customers, we will start signing offtake agreements. The issue is affordability." Renewables are not yet ready to meet all of the demand, he noted.

"LNG, petrochemicals, refining are all priority areas for expansion and investment," he said.

China is central to Saudi Aramco's strategy to diversify into more specialized high-value chemical products and less carbon intensive hydrocarbon usage, under which it has said it plans to convert up to 4 million b/d of crude oil to chemicals by 2030. "We're looking at the markets and where the demand is for additional chemicals, and we are making these investments," Nasser said. Potential refinery investments include projects that have the potential to convert 50%-70% of liquid products to chemicals, he said.

Even with high prices, Aramco has been able to maintain its share of the market, Nasser said. "Our reliability has a lot to do with maintaining our customer base," he said, saying that Aramco has a 99.9% reliability rate in meeting demand of customers.