Saudi Arabia’s volte-face on its oil capacity expansion plans was attributed to the energy transition, disclosed the country’s energy minister on Monday, affirming that the kingdom possesses abundant spare capacity to support the oil market.
The Saudi administration on Jan. 30 instructed state oil firm Aramco to suspend its oil expansion scheme, aiming for a maximum sustained production capacity of 12 million barrels per day (bpd), which is 1 million bpd lower than the target announced in 2020 and slated for attainment by 2027.
“I think we postponed this investment simply because… we’re transitioning,” remarked Prince Abdulaziz bin Salman at the IPTC petroleum technology conference in Dharan.
He further mentioned that Aramco has other investment avenues in oil, gas, petrochemicals, and renewables.
Saudi Arabia has declared its ambition to achieve net zero emissions by 2060, with Aramco striving for net zero emissions from its operations by 2050.
Prince Abdulaziz highlighted that the kingdom possesses a “huge cushion” of spare oil capacity to mitigate major disruptions to global supplies arising from conflicts or natural calamities.
Aramco Chief Executive Amin Nasser, addressing reporters at the conference, affirmed that the state oil giant is prepared to increase capacity if necessary.
“We have adequate spare capacity of about 3 million barrels,” stated Nasser, adding, “And as a company – because this is a decision for the government – we remain ready whenever they want to increase MSC (maximum sustained capacity); we are always ready to expand.”
Under agreements made by the Organization of the Petroleum Exporting Countries and its allies led by Russia, collectively known as OPEC+, Saudi Arabia’s oil production currently stands about 3 million bpd below its 12 million bpd maximum sustainable capacity, making it the world’s largest holder of spare capacity.
“We are ready to tweak upward, downward, whatever the market necessity dictates,” affirmed Prince Abdulaziz.
He criticised a coordinated decision by the International Energy Agency in 2022 to release oil from emergency reserves to stabilise global prices following Russia’s invasion of Ukraine.
Nasser expressed expectations of oil demand reaching 104 million bpd this year and 105 million bpd in 2025, dismissing notions of an imminent peak.
OPEC data indicates that oil demand surged to a record high of over 102 million bpd last year.
Regarding a potential further offering of Aramco shares this year, Nasser stated it would be a “shareholder decision”.
The Saudi state remains the largest shareholder in Aramco, heavily reliant on its dividend payouts, with direct ownership of 90.19%, while the kingdom’s Public Investment Fund (PIF) holds 4% and PIF subsidiary Sanabil possesses 4%, according to LSEG data.