When it comes to whether Saudi Arabia will invest billions of dollars to increase its ability to pump more oil, boosting the world's only large stand-by reserve, minister Ali al-Naimi has a quick answer: show me the return.
Naimi, speaking informally to reporters in Vienna on Thursday, was asked whether the kingdom needs to lift its capacity now that it is pumping crude at its fastest rate in over three decades to meet a resurgence in demand.
The country last embarked on a $100 billion push to raise its capacity a decade ago amid a price boom fuelled by China's growth. It can now pump as much as 12.5 million barrels per day (bpd), scarcely 2 million bpd above current output.
With casual banter, Naimi responded: "Is there demand for Saudi crude? Can you guarantee it? If I go and put a dollar, will you guarantee that I would get 10 percent on that dollar?"
He added: "I don't want 16 percent, just 10 - can you guarantee that?"
While his comment sheds little light on the kingdom's internal discussions about possible future investments, the question is more relevant than ever as the world's spare reserve shrinks to its smallest in seven years just as unprecedented regional political tensions are raising new risks.
Some analysts warn that the recent price crash - which has reignited demand and slammed the brakes on much global investment - may be sowing the seeds of another supply squeeze as early as next year.
It may also reflect the financial considerations being made by the world's biggest oil exporter as it navigates a new market order, one it created last year by saying the kingdom would no longer cut its own production to shore up prices - although it will continue to meet new demand from its customers.
Saudi officials have consistently brushed aside questions of new upstream investment. After finishing the kingdom's programme to add nearly 4 million bpd of capacity in 2009, Saudi officials and oil company executives have talked on and off about the possibility of targeting another boost to 15 million bpd by 2020, but those plans were shelved several years ago as demand growth cooled and new supplies emerged.
Not that the kingdom has been idle. It launched a $35 billion five-year exploration and production investment plan in 2012 meant to sustain its current capacity.
While the number of U.S. oil rigs has fallen by more than half since last year due to low prices, those drilling in the Middle East have risen to near the highest in records going back to 1975, according to Baker Hughes data.
More than 400 rigs are operating in the region, a more than 10 percent rise from 2013, with just over half of those in Saudi Arabia.
Much of Saudi Arabia's international influence has derived from a role often described as the oil equivalent of a major central bank, since it holds nearly all of the world's spare capacity - an emergency reserve that this year has dwindled to its lowest since 2008 as the kingdom steps up output to cover shortfalls in places such as Iran and Libya.
"There's not a lot of spare capacity left in the world," said Dr. Gary Ross, executive chairman of New York-based PIRA Energy Group. "The last time they pursued this kind of philosophy in 1985 they had 10 million bpd of spare capacity. "
http://www.reuters.com/article/2015/06/04/opec-meeting-saudi-capacity-idUSL1N0YQ0AH20150604