Arab oil producers will need about $700 billion in financing for
petroleum sector projects over the next 10 years to assure the sustainability
of the Middle East and North Africa region’s key industrial sector, Saudi
Arabia’s oil minister said Thursday.

Forecasting a continued rising trend in global oil demand to the tune of
about 1 million b/d, despite the current market oversupply and sluggish world
economic growth, Ali al-Naimi said annual depletion from producing fields was
running at about 4 million b/d. He calculated that the petroleum industry
would need to add 5 million b/d of new production every year to satisfy future
demand.

“This needs financial solutions at the Arab and international level.
Investment should include all the phases of production and manufacturing,” he
said during a keynote speech at the Apicorp Energy Forum in Bahrain.

In the context of the sustained slump in oil prices since mid-2014, which
officials addressing the forum described as a financial and economic crisis
for Arab countries, petroleum sector sustainability in the Middle East and
North Africa region emerged as a key concern during a ministerial panel
session.

Despite OPEC’s recent policy of keeping crude production high to defend
global market share, Naimi stressed the historic role played by Saudi Arabia
in seeking to maintain oil market stability as well as what he said was the
kingdom’s readiness to cooperate with all other oil-producing states, whether
inside or outside the MENA region.

“The challenge we are facing in the Arab world highlights our need for
more joint Arab action in the fields of oil and energy,” he said.

Bahrain’s energy minister Abdul-Hussain Mirza said all the island
kingdom’s major oil projects were on track and going ahead as previously
planned, including a project to build a new oil pipeline between Saudi Arabia
and Bahrain, and offshore oil and gas exploration.

“Long-term trends indicate that the long-term fundamentals of the oil
complex remain robust,” he told delegates. “In the long term, oil is not a
commodity in decline.”

Any petroleum sector investment cuts would therefore have a long-term
negative effect on the sector, Mirza argued.

“In the kingdom of Bahrain we put our emphasis on future outlook in the
upstream sector way beyond the current situation,” he said.

While international and national oil companies had been struggling since
June 2014 to find ways to remain profitable, MENA states were still expected
to spend about $750 billion in the next decade on oil and gas development,
Mirza projected.

Naimi said even Arab states that were net importers of oil and gas were
being negatively affected by low oil prices.

“The economies of all Arab countries, including non-oil-producers, are
closely linked. This means their economies are linked to oil and gas, with
that linkage expected to continue for many decades,” he said.

Bahrain, with limited indigenous oil and gas resources, is a good example
of that. Its economy is intricately linked to that of Saudi Arabia and its
larger neighbor’s petroleum sector, as it refines large volumes of Saudi crude
as well as receiving half the revenue from oil sales from one of Saudi
Arabia’s biggest offshore fields under a 1950s-era treaty.

Mirza said Bahrain’s government was using a change in political sentiment
related to lower oil prices to push forward a package of fiscal reforms,
including a five-year plan started last year to lower electricity and fuel
subsidies.

Bahrain’s government was also borrowing on international capital markets
to finance strategic energy projects, he said. Such projects include
construction of pipelines and domestic gas infrastructure.

–Tamsin Carlisle, tamsin.carlisle@platts.com

–Edited by Alisdair Bowles, alisdair.bowles@platts.com

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