Saudis draft goals for the time when the oil runs low
Dhahran, Saudi Arabia — Saudi officials don't talk about the day the oil wells dry up; rather they refer to the day when reseachers announce an economic alternative to oil. With estimated oil reserves of 168 billion barrels or approximately 26 percent of the world's reserves, Saudi Arabia could manage to stretch out the life of its indefinitely. If crude production is maintained at its present 10.3 million barrels per day, reserves theoretically would last almost 50 years, assuming there are no discoveries of new oil fields.
But the Saudis are discovering more crude and, according to Sheikh Ahmed Zaki Yamani, minister of petroleum and minerals, yearly discoveries have continued to at least equal total annual production, which in 1980 topped 3.5 billion barrels.
With these large oil reserves and an estimated capacity to produce as much as 12 million barrels a day, the kingdom has been in a good position to exert a moderating force on its fellow members of the Organization of Petroleum Exporting Countries (OPEC) and to act to cushion temporary shocks in the oil market.
Thus, Saudi production has risen from 8.3 million barrels a day in 1978 to its present 10.3 million since the initial cuts in Iranian production during the revolution and the subsequent cuts in both Iranian and Iraqi production due to the Gulf war.
Earlier this week Mr. Yamani indicated his nation would continue at its current high production rate until other members of OPEC fall into line with a Saudi pricing formula providing uniform prices for comparable qualities of crude oil.OPEC members are slated to meet May 25 in Geneva. How long Saudi Arabia will continue partially insulating the world economies from the full force of market interruptions remains a question. It could easily reduce production to its designated "normal" level of 8.5 million barrels and keep it there. Saudi officials admit they don't need the extra oil revenues.
"We learn from the past that using our means to increase the level of production and stop the price of oil from reaching the necessary levels helped increase consumption and prepared the ground for a sharp sudden increase in the price of oil caused by the Iranian revolution. We want to avoid that," Oil Minister Yamani said recently.
"It's in the interest of Saudi Arabia, of OPEC and of the world to have some sort of stability and not to lose the availability of a crude supply from Saudi Arabia in order to alleviate some temporary problems and then suddenly face a more critical problem sometime in the future," he said.
Sheikh Yamani's position is that by allowing the price of oil to steadily increase in relation to growth and inflation in the indsutrialized countries the oil producers are helping the world in the long run by inducing the conservation of oil products, speeding the development of other energy forms, and promoting oil exploration elsewhere.
"The whole world must learn how to live with a limited source of supply of oil, and the world must do whatever possible to diversify and find alternative sources of energy," he said.
Since January 1979 the price of a barrel of Saudi "Arabian light" crude has risen from $13 to about $32. That is the cheapest oil for sale within OPEC, with some OPEC producers charging more than $40 a barrel. (Meanwhile, North Sea crude has sold at prices even higher than OPEC's.)
"The price of oil must go up until one day it reaches the price of alternative sources of energy. Before that we'll always be behind that level," the oil minister said, adding, "Already the price of oil is far higher than the Btu (British thermal units, a measure of heat content) equivalents in coal or nuclear energy but less than the price for synthetic crude."
The Saudis seek to strike a balance between high oil prices, which reduce consumption and increase investments in alternative energy, and a need to maintain a world dependence on oil supplies long enough to see Saudi development to its emergence as an industrial nation.
Mr. Yamani believes that if oil prices rose too high too fast, research and investments would be intensified and breakthroughs significant enough to dry up Saudi markets would begin to appear within 10 years.
"We are at a point in our development where we are in a race with time," Mr. Yamani said. "Our interest forces us to maintain the life of our oil production long enough to build our economy until we reach that period of time when there is another major source of energy that can replace oil. At that time we will shift to that source as our main source of energy. "We expect that in the next century, at some point in its '20s or '30s at the latest, there will be a major source of energy other than oil, perhaps solar energy or atomic fusion or any other source of energy that is discovered as a result of research that is going on now."
Sheikh Yamani added, "At that point in time the Kingdom of Saudi Arabia should have enough petroleum to serve its petrochemical industries."
Construction has begun on the first of seven petrochemical plants planned as primary industries on both the kingdom's Red Sea and Gulf coasts.
There is a sense of urgency among officials in the kingdom to develop the necessary industrial infrastructure, plant facilities, and, perhaps most important, a trained and educated Saudi work force to guarantee during the coming decades the successful conversion of invested oil revenues into industrial revenues.
The $10.5 billion petrochemical facilities will continue to feed off remaining Saudi crude reserves even after oil is replaced as the primary world energy source. The plants are expected to become the cornerstone of a Saudi economy based on industrial products rather than oil exports.
Meanwhile, other sectors of the kingdom will be undergoing shifts to newly developed forms of energy.
Saudi officials have stressed that they, too, should participate in the search for alternative energy sources so that when oil is replaced the Saudies will be in a position to supply themselves and benefit from the new source.
A Division of Energy Resources was established at the kingdom's University of Petroleum and Minerals, Dhaharan, to investigate long-term energy alternatives and to ensure that the kingdom is kept fully informed of potential developments in non-oil resources to allow "optimum utilization and marketing of petroleum and gas reserves."
The division's projects currently include several studies in solar energy.
Across the campus at the university's Physics Department preliminary discussions are under way for development of the first nuclear reactor in the kingdom. The reactor, to be built with foreign technology, is intended for use in water desalination and power generation.
In addition, the Saudi and US governments are participating in a $100 million joint research effort to develop two solar-powered distillation plants, one for saltwater and one for brackish water.
The joint project is being conducted by the Saudi Arabian National Center for Science and Technology in Riyadh and the Solar Energy Research Institute in Colorado.