Page 453 - Arabia the Gulf and the West

450 Arabia, the Gulf and the West

supplier’ in OPEC’s interest, lowering her output whenever a glut occurs on
the market so as to enable those members of OPEC with the greatest need for

revenue (Algeria, Persia, etc.) to keep up their oil exports as well as to prevent a
fall in oil prices? Or, again, will Saudi Arabia simply consult her own interests.
primarily if not exclusively, and adjust her production of oil to her own
financial and political desiderata?

Saudi Arabian production, after the lifting of the previous winter’s embargo,
reached 8.5 million b/d in the summer of 1974, at which time ARAMCO
predicted that production would rise to a maximum sustainable capacity of

11.2 million b/d by 1976, 16 million b/d by 1979 and 20 million b/d by 1980.
When 1976 came, however, actual production averaged only 8.3 million b/d
throughout the year, even though it reached a height of 8.8 million b/d in
December, when the oil companies were stockpiling against the price increase

expected to take effect from 1 January 1977. ARAMCO’s maximum sustain­
able productive capacity was reported in the spring of 1977, and again in
February 1978, to be between 11 and 12 million b/d. The later report admitted,

however, that actual production in the first quarter of 1977 had been well below
this level, averaging 9.2 million b/d. It rose to 10 million b/d in April 1977,
before the fire which broke out in the Abqaiq field in the second week of May
severely reduced output. Before the year was out ARAMCO had had to revise
its estimate of future sustainable productive capacity (from the earlier figures

of 16 million b/d by 1979 and 20 million b/d by 1980) down to 15.5 million b/d
by 1983. Even this estimate had to be trimmed again in the first half of 1978 to
12 million b/d by 1983 - or even as late as 1987. Some doubt must attach,

therefore, to the accuracy of the reports of ARAMCO’s having achieved a
sustainable productive capacity of between 11 and 12 million b/d in 1977-
According to testimony from ARAMCO sources given before the Senate
sub-committee on multinational corporations in 1974, 9-2 million b/d was the
level at which major technical difficulties would be encountered in raising the

rate of production in the Saudi Arabian fields. To overcome these difficulties
would require not only considerable engineering skill and perhaps technical
innovations but also the investment of very large amounts of capital. Whether

the figure of 9.2 million b/d was accurate or not, the Saudi government
apparently seized upon it, and upon similar calculations from undisclose
sources, to impose in the latter half of 1978 a ceiling of 12 million b/d 0
sustainable capacity upon ARAMCO’s future production levels. At the same
time the Saudis reaffirmed the unchanging nature of the requirement t at

ARAMCO should finance any and all expansion of its production aci me
from earnings - even though Saudi Arabia was on the verge of fully ^aminaii

ing the company. The upshot of these restrictions was that ARAM^ * .
revised its estimate of future producdon levels from a maximum su tenable

capacity of 12 million b/d down to 10.8 million b/d by 1983. and to .
b/d by 1987. Actual production during 1978 was limited by order of