Seoul (Platts)--15May2008

Saudi oil minister Ali Naimi Thursday said Asian oil consumption was
projected to increase by 20 million b/d by 2030, accounting for 60% of the
growth in world demand.

Some 80% of this increase in demand will be met by supplies from the
Middle East, Naimi said in a speech to the students of South Korea's Seoul
National University, where he was awarded an honorary doctorate.

"The economies today are more energy-efficient than any time in history.
This is why irrespective of oil price levels and movements the world economy
witnessed robust growth for the past decade."

The global economy expanded by 3.2% and emerging markets by 4.1% annually
when oil averaged only $17/barrel, Naimi said. At an average crude price of
$30/barrel over 2000-2007, the global economy grew by 6.7%, he noted.

To meet its growing oil demand, Asia will need $150 billion investments
in setting up new refineries and upgrading existing ones, the minister said,
adding that investment was needed all along the oil and gas value chain and in
all regions, especially in Asia and the Middle East.

Saudi Arabia is carrying out investment plans worth a total of $90
billion for the next four years to boost oil and gas production capacity as
well as refining facilities, Naimi said.

FINANCIAL MARKETS TO BLAME
The Saudi minister reiterated that current oil prices were being
influenced by the financial markets rather than fundamentals.

"Financial markets have a logic and mechanism of their own. Such markets
are influenced by ever-changing factors and parameters that transcend markets
and boundaries and are often unregulated. Therefore, the short-term oil prices
are more closely tied to the internal logic of the financial markets than to
underlying supply/demand fundamentals."

The rising cost of oil and gas production, refining, and other related
infrastructure bottlenecks, as well as the "rush into costly alternatives such
as bio-fuels in some countries" were also increasing the cost of the marginal
barrel worldwide, the minister said.

"There are some fundamental factors that governments and the industry
could address to bring long-term balance and reduce volatility," Naimi said.
"Increasing capacities and channelling and facilitating investment in the
upstream and downstream segment, in both the producing and consuming regions,
is one."

Saudi Arabia will increase its sustainable production capacity to 12.5
million b/d by end-2009 "through a succession of capacity increments."

"We are also actively pursuing plans to build three in-kingdom refineries
in partnerships with the international oil industry, with a total capacity of
1 million b/d. Our overall downstream investment drive will double domestic
and international refining capacity by 2012," Naimi added.

HIGH PRICES A CHALLENGE FOR PRODUCERS
High oil prices, meanwhile, also posed a challenge for producers "whose
economies are highly dependent on the finite source," Naimi told the
university students.

For such producers, the prices underlined "the consequences...of
over-dependence of their economies on oil and the necessity for achieving
sustaining economic growth," he said.

The Seoul National University said it had decided to award Naimi the
doctorate because he had served to "promote world peace and common wealth by
efficient redistribution of energy." The minister had been instrumental in
stabilizing South Korean oil imports from Saudi Arabia, it noted.

Saudi embassy officials said Naimi had canceled a meeting with the South
Korean energy minister that had been slated for Friday, and would be leaving
the country after the university event.
--Charles Lee, newsdesk@platts.com