Russia-Ukraine among supply risks monitored by Saudis
RIYADH, Saudi Arabia (Bloomberg) -- Saudi Arabia sees the crisis over Ukraine and possible changes in oil shipments from Iraq and Libya as the biggest risks to its production strategy this year, a person with direct knowledge of the kingdom’s policy said.
The country, with the world’s largest unused capacity for crude output, has kept production steady in recent months to meet strong demand, especially from buyers in Asia where it sells as much as 70% of its exports, said the person, who asked not to be identified because the matter isn’t public.
U.S. President Barack Obama and European Union officials will hold a summit in Brussels on March 26 that may consider more sanctions against Russia over its role in Ukraine, an EU official said today. The EU is considering limiting imports of natural gas from Russia, the official said. World leaders gathered in The Hague amid growing concern over a Russian buildup on Ukraine’s border as pro-Kremlin troops seized a Ukrainian base in Crimea.
The Organization of Petroleum Exporting Countries, which supplies 40% of the world’s oil, raised its forecast in the group’s monthly report on March 12 for the amount of crude it will need to provide this year as the economic recovery stokes global fuel use. Saudi Arabia is the world’s biggest crude exporter and the largest producer in OPEC, pumping 9.85 MMbpd in February, according to the Paris-based International Energy Agency.
Iraq, OPEC’s second-largest producer, pumped 3.62 MMbpd last month, the IEA said. The country is boosting output and export capacity and plans to pump as much as 9 MMbpd by 2020.
Libya, with capacity to produce 1.5 MMbpd, is currently pumping 150,000 bpd, Mohamed Elharari, a spokesman for the state-run National Oil Corp., said by phone today from Tripoli. As ports and fields are shut amid political unrest, Libya’s oil production is at the lowest level in six months, Ibrahim Al Awami, the Oil Ministry’s director of measurement, said by phone.
Burning crude to generate electricity during the summer months, when demand for air conditioning is highest, will not limit Saudi Arabia’s ability to meet customers’ needs because it has stepped up efforts to make more natural gas available, the person said. The country’s domestic demand won’t increase by more than 1 MMbpd from current consumption, the person said.
With Saudi output already near 10 MMbpd, the usual demand upswing of 1.2 MMbpd from winter to summer could cut global spare oil production capacity to near zero in the third quarter, Energy Aspects, a consultancy based in London, said in a report on March 4. Saudi Arabia has the capacity to produce 12.4 MMbpd of crude, according to the IEA.
Saudi Aramco expects to start producing natural gas from the new Wasit plant from mid-2014. The plant will process around 2.5 Bcf a day from the Arabiya and Hasbah offshore fields. The two fields can pump as much as 3.05 Bcf a day during emergencies and peak demand, Aramco said in its annual report in May.