Saudi oil official sees rising dependence on Middle East oil

Potsdam, Germany (Platts)--8Jun2006

The world is becoming increasingly dependent on oil from the Middle East,
whose share of global oil trade is set to rise from 19.8% now to 25.2% in 2010
and 35% by 2020, a senior Saudi oil official said Thursday.

Majid al-Muneef, Saudi Arabia's OPEC governor, told the International
Association of Energy Economists conference in Potsdam, Germany, that in all
oil crises over the past 25 years, whether in the Middle East or elsewhere,
the "only alternative to interrupted oil came from the Middle East."

Al-Muneef said further demand growth from both developing and developed
countries, combined with increasing concentration of world oil reserves in
areas such as the Middle East, Russia and Africa, meant that oil markets would
become increasingly interdependent and that energy security was linked to
recognizing this interdependence.

"Globalization should reduce the importance of import dependence," he
said.

Al-Muneef said producers could contribute to increasing energy security
by expanding their crude production capacity and investing in the downstream
in order to ensure supply continuity.

The Saudi official emphasized the importance of market-related pricing
and the role information plays in markets.

Markets, al-Muneef said, "have been instrumental in efficiency gains and
in the diversification of resources." He added: "Markets should lead energy
policies."

Al-Muneef also talked of "demand security" for producers, stressing that
"the key is investment," and highlighting the uncertainty that policies
impacting on oil demand growth in consuming countries might have on investment
levels. He defined energy security for producers as "predictable, consistent
demand at reasonable prices to support economic diversification and
development."

Oil producers' club OPEC, of which Saudi Arabia is a leading member, will
increase its collective spare crude production capacity by 3.2 million b/d
over the next five to six years. Of this, 1.5 million b/d would come from
Saudi Arabia, al-Muneef said.

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