Saudi capacity seen sufficient to cover oil sanctions on Iran
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Arab News - 22 January, 2012
http://gitm.kcorp.net/index.php?id=587489&news_type=Economy&lang=en

Saudi Arabia has the capacity to make up for Iranian oil exports to Europe
should the region's leaders go ahead with an embargo, according to the
International Energy Agency and the Centre for Global Energy Studies.

The kingdom has unused daily production of as much as 2.2mn barrels,
according to the IEA, while the CGES and Washington-based consultant PFC
Energy estimate it may be as high as 2.5mn bpd. The European Union bought
450,000 bpd Iran’s in the first half of 2011, US Energy Department data
show.

“Saudi Arabia has the capacity,” said Leo Drollas, chief economist in London
at GCES, a consultancy founded by former Saudi Arabian Oil Minister Sheikh
Ahmad Zaki Yamani. “This is the one country in Opec that can deliver.”

EU foreign ministers will meet tomorrow to decide whether to ban Iranian
crude as part of efforts to contain the country’s nuclear programme. Iran’s
oil minister said last month such a move would be “very costly.”

Saudi Arabia can “easily get up to 11.4, 11.8mn almost immediately” from
current output rates of about 9.8mn barrels, Oil Minister Ali al-Naimi said
in an interview with CNN broadcast on January 16. The kingdom, whose
production is handled by state-run Saudi Aramco, is the biggest producer the
Organisation of Petroleum Exporting Countries.

“Saudi Arabia showed once again that they are the central banker of the oil
industry,” Fatih Birol, chief economist at the IEA, a Paris-based adviser to
developed economies, said in an interview in London on Friday.

Al-Naimi has indicated that “in case of any shortage in the markets, that
they will come up with a production increase, which is very welcome,” he
said.

Iranian Oil Minister Rostam Qasemi said on December 14 in Vienna that EU
sanctions against Iran are unlikely. The EU would struggle to make up for
its intake of Iranian crude, Opec secretary-general Abdalla El-Badri said in
Doha on December 7. He assessed Iran’s shipments to Europe at about 865,000
bpd.

“The market always questions how much spare capacity Saudi Arabia actually
has,” said Jamie Webster, an analyst at PFC Energy in Washington. “We
generally believe Saudi Arabia’s numbers. When you talk to people that have
a hand in the oil business, the closer you are to a handshake relationship
with Saudi Aramco, the more likely you are to believe that they have the
12.5mn barrels.”

Saudi Arabia can increase production to 12.04mn barrels within 30 days and
sustain this level for about three months, the IEA said in a report on
Wednesday.

PFC Energy and Wood Mackenzie Consultants, based in Edinburgh, estimate the
country can pump 12.5mn barrels for several months.

Not all of the 450,000 daily barrels the EU purchases would need to be
replaced as some of it will go to nations unconstrained by any embargo,
according to CGES’ Drollas. Some may even still be processed in countries
bound by the prohibition, he said.

“Iranian oil will leak out into the world system via various routes,”
Drollas said. “Some of the oil may end up in countries that have formally
embargoed it.

Embargoes are never completely watertight.”