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Saudis continues Oil Exploration Despite Shale Revolution

Source: Wall Street Journal (WSJ) 1/28/2013, Location: Middle East

Saudi Arabia will continue exploring for oil and natural gas, despite the transformation of the global energy industry caused by rising output of shale oil in North America, according to a senior Saudi oil official.

The kingdom needs to maintain its investments in new oil fields in order to retain its ability to boost oil production in the event of an emergency, Saudi deputy oil minister Prince Abdul-Aziz bin Salman said at a news conference.

"We will continue to explore, we will continue to invest," Prince Abdul-Aziz said, in response to a question about the impact of rising output of U.S. shale oil. "Saudi Arabia has something that no other country in the world has, and that is excess capacity."

Saudi Arabia is producing about 9 million barrels a day of crude oil, having boosted output to near-record levels over the past 18 months to make up first for lower output in Libya and then for the impact of sanctions on Iran. But Saudi oil officials say the kingdom could produce as much as 12.5 million barrels a day, if required, and the state-owned oil giant Saudi Arabian Oil Co. has announced plans to invest $35 billion in oil production and development over the next five years.

"Being a responsible producer we have to maintain that excess capacity," Prince Abdul-Aziz said.

Many forecasters expect demand for oil produced by Saudi Arabia and other members of the Organization of the Petroleum Exporting countries to drop this year as a result of rapid increases in North American shale-oil production. In the U.S. alone, shale-oil production is expected to rise to around 5 million barrels a day by 2030, making the U.S. largely self-sufficient in energy by that date, according to a recent study by BP PLC.

The International Energy Agency said last year that the U.S. could overtake Saudi Arabia and Russia to become the world's top oil producer by 2017.

Prince Abdul-Aziz played down recent suggestions that rising domestic energy consumption could turn Saudi Arabia into a net energy importer within the next 20 years.

He questioned the basis of those forecasts, saying: "Ignorance leads to idiocy."

A research note by Citibank in September said that the soaring growth of Saudi energy use, if it continues at the current rate, could turn the kingdom into a net oil importer by 2030.

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