The power of partnership
Speech by
His Excellency Ali Al-Naimi,
Minister of Petroleum & Mineral Resources,
Kingdom of Saudi Arabia
It is a pleasure to be back in China and speaking to the prestigious Beijing EnergyClub.
In 1989, when I was CEO of Saudi Aramco, we sent a team of two people to assess the potential of Asia. They came back and said there was no potential for us in China because all you see are bicycles. When I first came here in 1992, this was true. And there was just one, single lane road to and from the airport. But I could see the potential. I returned a few years later and I was amazed. The airport was new and the road was multiple lanes in each direction.
I was most impressed in 2008, when I came here shortly after the breath-taking Beijing Olympics. That time, I was struck by the electricity pylons, the solar panels and the abundance of trees. This told me that China was a vital energy market, that all forms of energy were important and that the environment also played an essential role amidst all this progress.
China was transforming. And so was our energy relationship. In 1994, Saudi Arabia exported a minuscule 20,000 barrels of oil per day to China. Today, we export around 1m barrels each day.
Our partnership has been further symbolized by visits from our political and business leaders. Chinese leaders have visited the Kingdom many times. China was the late King Abdullah’s first overseas visit and, last year, King Salman visited with a large delegation.
Saudi Arabia, like China, is on an historic mission to develop. We are taking steps to grow our economy, create jobs and improve the lives of our people. And energy is fundamental. We have many things in common, much that connects us. And it is a pleasure to stand here before you today, to talk about the power of our partnership.
Ladies and gentlemen,
Today I would like to address three important energy-related issues.
First, I will discuss the role of Saudi Arabia as the key global supplier and the future demand picture in China and Asia. Secondly, I will cover the recent decline in the oil price and its implications. Thirdly, I will highlight areas of potential partnership for Saudi Arabia and China in the future.
It is clear to all of us gathered here today that without reliable energy supplies, no nation can truly be on the path to prosperity. Energy drives the global economy, it helps lift people out of poverty and boosts living standards. It helps create a better world for our children and their children. The evidence for this is all around us.
Ladies and gentlemen,
Saudi Arabia is the world’s premier supplier of oil. We have huge reserves and an unrivaled record of reliability, continuity and quality. We have invested vast sums to maintain a spare capacity which has ensured global oil demand needs are met whatever the challenge. No other nation comes close to our dependable and professional approach. We are a stable nation and we have along-term view.
We have proved, over many years, to be a reliable partner for China as its energy demands have increased. We remain committed to this partnership, and to this friendship.
For a greatnation like China, its energy demands are huge, and supplies come from a diverse range of sources. This is a sensible, pragmatic approach, and one we also share. While many people think Saudi Arabia and think oil, we are also seeking to diversify our energy mix. We are increasingly utilizing gas, and hope to truly harness the power of the sun in the years and decades ahead.
This diversification is in our fundamental long-term economic interest. We are investing time, money and manpower to take the steps necessary to become a global player in solar energy. Solar energy makes economic sense to us, but it also serves a vital purpose in terms of ongoing environmental concerns. I truly believe that, by working together and investing in research, science and technology, that global climate issues can be handled fairly and effectively.
For now, and for the foreseeable future, oil will remain the world’smost important energy source. China and Asia are proof of what is possible if that energy can be harnessed to create the conditions for progress.
From our perspective, Asian demand for oil remains strong and we are ready to supply whatever is required. As the Asian population grows, and as the middle class expands, so the demand for energy will increase. It will be met by an increasing range of supplies, and I am certain that gas and renewables will form an ever larger role. That said, oil will retain its preeminent position. We should not lose sight of that fact and the importance of our ongoing relationship. We are all part of the Asian land mass, and our great, ancient cultures have traded and supported one another for centuries. Long may it continue.
Ladies and gentlemen,
From speaking about the long term, I will now turn to the second part of my talk: the events that have taken place over the past nine months.
Last June, oil was trading at $115 per barrel. These high prices were caused by recovering demand post-2008 and, more importantly, by concerns – real or imaginary – about potential supply disruptions. High prices encouraged the oil industry to invest. As a result, we have seen increased production from oil fields that are more costly to develop or operate, such as in the arctic, deep offshore, heavy oils, and shale oil.
But just as the supply was dramatically increasing, so demand growth was slowing, and declining in Europe. This additional oil impacted the wider marketand there was an inevitable fall in the oil price. During the second half of 2014 and into 2015, the oil price fell by more than 60%. We have seen falls like this before. Oil is a commodity, and all commodities are cyclical.
I know that lower oil prices are good for growing economies in Asia, and I have no doubt that these cheaper energy supplies will be put to good,productive use across the region.
For many producers, the price drop presented difficult challenges. But while Saudi Arabia remains reliant on the revenues it receives from oil, the situation in the Kingdom was not dramatically different. The reason for this is that, during the period of high prices, Saudi Arabia saved and invested the revenues wisely. We fixed the roof while the sun shined. The wise policies of the late King Abdullah are strengthening under King Salman.
For Saudi Arabia, it is about a fair price. One that is fair for producers, consumers and industry. It is also about stability. Oil is a long-term business, requiring long-term plans and investment. Sudden rises or falls in the cost of oil is not welcome and it is up to all nations, both producers and consumers, to work together to ensure transparency and reduce volatility. This is easier said than done, but it’s in all our interests to ensure stable prices.
China was certainly a great help in this respect in 2008 when the cost of a barrel of oil spiked at $147. At that time, political and business leaders, including from China, met in Jeddah to calm markets. As one of the world’s great powers, China’s contribution to global energy politics and diplomacy is always welcome.
Ladies and gentlemen,
I’d like to turn to the third and final part of my talk here today. And that is areas of potential partnership for Saudi Arabia and China in the future.
As I said, I have been visiting China for some 30 years and Saudi Aramco has now moved its Asian headquarters to Beijing. We recognize the importance of China and Asia more broadly, and also that our relationship is mutually beneficial.
President Xi spoke at the 6th Ministerial Conference of the China-Arab States Cooperation Forum in Beijing last year. He spoke of the New Silk Road, and proposed that both sides of Asia join hands and work together in energy, in terms of infrastructure and investment, and cooperation on new technology, particularly new energy breakthroughs.
In terms of our reliability and being a proven, long-term strategic ally, I believe this is already happening. We have never wavered in our commitment to meet China’s demands and we will continue to be a trusted ally in the future. While these are mere words, I believe our actions over the past two decades are proof of our commitment.
As things stand, China has overtaken the US as Saudi Arabia’s largest trading partner. Chinese companies have won $25bn of business in the Kingdom in recent years. We operate a joint venture refinery in Yanbu. We run a successful joint venture refinery in Fujan. There are 160 Chinese companies operating across Saudi Arabia in the fields of construction, infrastructure, telecommunications, petrochemicals and others. There are more than 1,200 Saudi students in China and more than 600 Chinese students in the Kingdom.
Can we do more together? Yes, of course. That’s why I’m here. Further steps can and should be taken in terms of deepening our oil and gas cooperation. We want to work with you and help meet your needs. But both nations need to work harder to improve the conditions for trade and investment. Business is based on trust, but also mutual benefit. The climate must be right. I’m sure we can do better. We can also do more in terms of cooperation in science, research and development, although Saudi Arabia is already taking positive steps. Tomorrow, I am inaugurating Saudi Aramco’s new Research & Development Centre in Beijing. I hope this is fruitful – and a sign of our long-term commitment, partnership and aspirations.
Ladies and gentlemen,
I will conclude my remarks by repeating my key message here today: Saudi Arabia is a consistent, stable and reliable supplier of quality oil. We are the most reliable supplier on earth. Quality and quantity is assured. We are a partner for prosperity in China and across the region. And by working together we can advance economic progress, create jobs and provide opportunities for our people.
Thank you.