“Hitachi Energy”: Developing transportation networks and electrical connectivity enhances investment opportunities in Saudi Arabia

US Secretary of Energy Chris Wright said that oil flows through the Strait of Hormuz have returned to between 80 and 90 percent of pre-conflict levels, equivalent to about 13 to 14 million barrels per day on average, noting that the increase in oil flows through alternative pipelines has contributed to supporting supplies to global markets.

Wright explained, during his participation via video conference at the World Petroleum Conference, that excess production capacity and large stocks helped keep crude oil supplies at acceptable levels, despite the continuing challenges, pointing out that the crude oil problem has become largely under control, but it has not completely ended.

He added that the biggest challenge is the flows of refined petroleum products emerging from the Arabian Gulf region, which are still only between 25 and 35 percent of pre-conflict levels, which exacerbates the scarcity of supplies in the diesel, jet fuel and gasoline markets.

A shortage of refined products exacerbates market pressures

Wright pointed out that the decline in exports of refined petroleum products from the Gulf coincides with a decline in supplies from other sources, explaining that Russia, which was a major exporter of diesel, has become a net importer of it, albeit in limited quantities.

He added that China has significantly reduced its exports of petroleum products, and announced that it will not export refined petroleum products during October, which increases pressure on global markets.

He expressed his hope that increased production from Chinese refineries, which have surplus refining capacity and operate with encouraging profit margins, would contribute to alleviating the shortage of refined products, in addition to American refineries continuing to operate at record levels in terms of quantities of oil processed and production.

He pointed out that the course of the Russian-Ukrainian war and Chinese policy towards exports of petroleum products will affect supply developments during the coming period.

Sea shipping hampers supply recovery

The US Secretary of Energy explained that sea shipping represents an additional factor complicating the recovery of flows of refined petroleum products from the Gulf, in light of the high transportation costs and long shipping routes.

He pointed out that the Houthi unrest in the Bab al-Mandab Strait prompted oil tankers to take longer routes, while changes in sources of supplies and Iranian attacks on ships contributed to increasing pressure on the capacity available for maritime shipping.

He added that the decline in the flows of Iranian, Venezuelan, and Russian oil through the channels that were using what is known as the “dark fleet” led to the availability of a large number of tankers that were transporting these supplies.

Wright said that there is a need to reintegrate some of these tankers into the regular shipping system, and lift sanctions on them where possible, with the aim of increasing the capacity available to transport petroleum products from the Gulf and supporting the continued operation of the oil and gas system.

High prices for diesel and jet fuel

Wright warned that the rise in shipping costs is more reflected in markets far from sources of supply, noting that global diesel prices have recorded very high levels, while jet fuel prices have risen, in addition to a more moderate increase in gasoline prices.

He stressed that the abundance of spare production capacity and stocks helped contain pressures on the crude oil market, but the continued shortage of refined products and restrictions imposed on sea shipping remain challenges.

Wright concluded by noting that dealing with the repercussions of the conflict demonstrated the energy system's ability to adapt, but he stressed that the crisis is not over, and that the markets still face challenges that require continued work to ensure the flow and stability of supplies.

Nigeria's Minister of State for Petroleum Resources, Heineken Luke Perry, affirmed his country's solidarity with Saudi Arabia following the recent attacks on it, stressing the importance of international cooperation to confront energy security challenges and ensure the availability of supplies at affordable prices.

Perry said - during his participation in the World Petroleum Conference in Riyadh - that the Nigerian President directed his country's delegation to come to the Kingdom to show solidarity with it, and to confirm that Nigeria stands by it, despite the concerns raised by the attacks regarding participation in the conference. He pointed out that the challenges facing the energy sector are not limited to a specific country; Rather, its effects extend to various global markets. He explained that the current energy crisis requires countries to strengthen cooperation and exchange experiences, pointing out that the challenges of providing energy in Saudi Arabia share many aspects with those facing Europe and Nigeria, which requires joint work to find solutions that guarantee the continuity of supplies and the possibility of bearing their costs globally.

Nigeria turns to exporting refined products

Regarding the development of the energy sector in his country, Perry pointed out that, a few years ago, Nigeria relied on importing most of its needs of refined petroleum products, despite being a crude oil producing country. It exported crude and imported almost all of its refined products. He added that this situation has witnessed a noticeable change, explaining that imports declined to about 10 percent, coinciding with the growth of local capabilities in the field of refining.

He pointed to the role played by the “Dangote” refinery in this transformation. It has become able to meet the needs of the local market and provide oil products to foreign markets, including European markets. He pointed out that Nigeria now has a surplus of some petroleum products. Especially aviation fuel, which enhances its ability to contribute to international market supplies. He stressed that developing local refining capabilities represents an important step to enhance energy security and reduce dependence on imports, as well as providing new opportunities to export petroleum products and benefit from local resources.

The Saudi Minister of Energy and Minister of Industry and Mineral Resources, Prince Abdulaziz bin Salman, said that the Kingdom is working to expand the “East-West” pipeline, which may increase its capacity to transport 10 million barrels of oil per day within two to three years, as part of efforts to enhance the flexibility of the energy system and raise its readiness to deal with changes and ensure continuity of supplies.

He explained during a dialogue session within the World Petroleum Conference in Riyadh that the Kingdom has developed multiple scenarios to deal with potential crises, and has worked to prepare for them in a way that enhances its ability to understand its potential, develop it, and expand in the future. Pointing out that advance planning made it possible to deal with recent developments and avoid a larger energy crisis.

Prince Abdulaziz bin Salman said that the scale of the challenges witnessed in the past eight months exceeded what many expected, even under the assumption of the most severe scenarios, adding: “However, we have not witnessed an energy crisis of this magnitude, as much as we could avoid it.”

He explained that threats to energy security remain, and that dealing with them requires focusing on core business, and providing multiple options that allow flexibility and maneuvering when crises occur, rather than just dealing with their repercussions after they occur.

He stressed that preparing for the future is not linked to economic indicators or financial returns only; Rather, it requires establishing a mentality based on anticipating challenges and believing in the necessity of preparing for them, stressing that the Kingdom’s mission is to ensure its readiness to deal with the various possibilities that the energy system may face.

He added that the various parties faced difficulties in containing the repercussions of the recent developments, but he stressed that the efforts made contributed to overcoming a large part of the challenges, without going into details that he said went beyond what he should talk about.

Referring to the Kingdom’s operational and export capabilities, the Minister of Energy said: “I do not want to brag about the size of our exports, but I am sure that many of our friends here will be surprised by what we are doing today.”

Prince Abdulaziz bin Salman touched on the absence of Alexander Novak, Russian Deputy Prime Minister and responsible for the energy file, from the dialogue session, explaining that he was keen to participate, but circumstances in Moscow prevented his plane from taking off, after a member of his family suffered a health condition.