(Reuters) - Below is a transcript of a Reuters interview with Saudi Arabia’s Minister of Energy, Industry and Mineral Resources Khalid al-Falih. For related stories, click and
Q. With the recent shutdown of Britain’s Forties crude oil pipeline and the decline of production in Venezuela, do you see a change in market fundamentals that would lead to an earlier-than-expected market rebalancing?
A. When we entered into the agreement to extend in Vienna, we were looking at the mid-to-long term as our objective. I said then and I say it again today, that almost the single metric that we look at is global inventories and of course the most transparent and trustworthy is the OECD inventories and it takes time to track these.
We don’t intend to change course based on small changes here and there. The North Sea in the overall scheme of things is a small part of the global supply. We haven’t seen any major declines in inventories that we didn’t expect.
As we said last month we still have approximately 150 million barrels of overhang, and it is going to take the second half 2018 to draw that down because we expect the first few months of 2018 to be either flat or a build as it is typically the case with the seasonality with the oil market especially on the demand side.
So I think it is premature to discuss any potential changes in our course, and the earliest opportunity to assess where the market is in a major way would be in June.
Of course we have the joint ministerial monitoring committee, the JMMC, which will meet in January to discuss.
Q. On cooperation with Russia and his view on a future exit strategy.
A. I know from discussions with my counterpart and colleague Minister Novak that Russia sees the benefit of continuing to cooperate. And he does hold general consultations with Russian companies to make sure that they’re on board.
I think all producers – whether companies and countries – have benefited significantly from the course of action that we have taken and therefore they would benefit from continuing the course but not beyond reaching balance.
I think once we reach balance we will need a gradual, deliberate, measured and thoughtful way of exiting and making sure that supply is always there for the rise in demand.
For the last two years the focus has been on supply, and of course we have had a phenomenal success in terms of the degree of compliance by both OPEC and non-OPEC countries.
But the untold story is demand. Demand has been extremely healthy in the last couple of years. 2017 will prove to be a very robust year in terms of demand and we expect that momentum to continue.
We’re seeing demand healthy in China, in India, in the U.S. and even in the traditionally declining regions like the EU and elsewhere. And of course with global GDP picking up in 2018 ..., there is no reason not to expect the demand trends that we have seen to continue.
So even with supply coming from the U.S., I don’t see that slowing the momentum of rebalancing ... but I don’t expect that balancing to be achieved in the next few months, certainly not in the first half and I think we will have plenty of time to monitor and discuss by the time we get together in June.
Q. Nuclear cooperation agreement talks with the U.S.
A. We’ve signed agreements with China, Russia, with France, so their technologies will be competing for the Saudi national nuclear project.
The U.S. has restrictions as part of their 1-2-3 (agreement) with the U.S. law.
We have indicated with our American partners that we intend to localize the entire value chain with nuclear energy in the Kingdom of Saudi Arabia.
Saudi Arabia is blessed with energy from various sources, whether it’s fossil in oil and gas, or renewables, wind and solar that are extremely competitive. But we also have large resources of uranium that we’re exploring and we’re extremely encouraged.
So in the mid- to long-term, our nuclear program will need to capitalize on our national endowment and turn it into an industry for the kingdom.
We absolutely want to harness nuclear energy for peaceful purposes. There should be no doubt about Saudi Arabian intentions. Whatever we do is going to be under strict compliance with international agreements.
But we will not deprive ourselves of accessing our natural resources and localizing an industry that we intend to be with us for the long term.
We hope that, through the negotiations that will be taking place over the next few weeks with our American partners, that we will find common ground that will allow the American government to meet the intent of American law of controlling that American technology is deployed in the safest, most secure manner and certainly for peaceful purposes, which will be assured through our program.
But at the same time to meet the objectives I just mentioned, which are: We’re going to harvest our resources, we’re going to localize and we’re going to develop the technology just as we’ve done with oil and gas.
Our history with Americans goes back over 80 years. They came here, they helped us harness our oil and gas and we became leaders. We’re doing it now with global partners in renewables and we want to do it with the best value proposition that’s provided to us by technology providers.
We hope that American companies will be competing for these contracts when they’re tendered later on... and participating in the front-end engineering studies that will be starting in the next few weeks.
Reporting by Rania El Gamal and Katie Paul; Editing by Adrian Croft