Saudi Arabia Strives to Balance Export Capacity

5 may 2017 | IA REGNUM

In 2018, Saudi Arabia wants to resume the operation of its Muajjiz terminal in the Red Sea in order to increase its total oil refining and shipping capacity. "However, the kingdom would not experience a shortage of port infrastructure in the foreseeable future even if no new capacity was brought online, so this decision probably reflects the Saudis' desire to shield themselves from the instability in Iran and Iraq," Analytical Center expert Alexander Kurdin commented on the situation for a REGNUM correspondent.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

The analyst is of the opinion that the planned relaunch of the Muajjiz terminal in Saudi Arabia will increase the country's export potential. However, this increase in potential will not happen overnight, but rather in the medium term. As for today, constraints on oil and petroleum product transshipment capacity are hardly a key factor in the country's expert potential.

Saudi Arabia announced it had export capacity of 11.5 million barrels a day. However, the Analytical Center estimates that depending on the decisions of the OPEC and those of the country's government, in 2017 the country will need an export infrastructure capacity of 9-10 million barrels a day. In other words, Saudi Arabia would not experience a shortage of capacity even if the terminal in question was not relaunched, Mr. Kurdin noted.

At the moment, the expert potential depends more on how much oil the country may produce, which is subject to agreements with other oil suppliers. On the other hand, long-term projections suggest that Saudi Arabia is going to gradually increase oil production in the long term. This means that several years from now the need for the capacity offered by the Muajjiz terminal will increase.

"But the key factor in the development of the terminal on the Red Sea coast specifically is safety. Saudi Arabia needs to balance its export capacity between the Persian Gulf and the Red Sea to hedge against the instability in Iran and Iraq," the expert believes.

Mr. Kurdin stresses that this event will not have a significant effect on the global oil market. Today a more important factor that can push down the prices is the upcoming OPE decision on output. And yet the relaunch of the Muajjiz terminal in Saudi Arabia will not go unnoticed.

"At the talks in Vienna this news will not be an important factor affecting the decision making process, but it can certainly add anxiety, because Iran and Iraq may view it as creating additional risks for them on account that Saudi Arabia is moving part of its export capacity from the Persian Gulf to the Red Sea and because of the expectations of Saudi Arabia's medium-term expansion in the oil market," Mr. Kurdin added.