Aramco can cope with lower for longer: Al-Falih

OREANDA-NEWS. January 22, 2016. Saudi Arabia is able to deal with lower oil prices for a long time to come, chairman of state-owned Saudi Aramco, Khalid al-Falih, said today at the World Economic Forum in Davos.

"Saudi Aramco as a company, and Saudi Arabia as a nation, we have the most resilient capacity within producers to take whatever the market serves us. If prices continue to be low, we will be able to withstand it for a long, long time," said al-Falih.

He said although Saudi Arabia does not hope for lower oil prices to persist, it is prepared for this. "We have the lowest cost production in the planet by a big margin, from our next competitors, and our investment programme is well financed internally, so we are able to maintain and continue to grow capacity in oil and gas without having to borrow," said al-Falih. "Saudi Aramco essentially has zero debt on its balance sheet."

Al-Falih, who is also Saudi Arabia's health minister, said the current price is lower than rational expectations.

"The price itself is irrational, if you ask me, because prices are supposed to be set by the marginal barrel. The marginal barrel is certainly way higher than \\$30/bl," said al-Falih.

"The market has overshot on the low side, and it is inevitable it will start turning up", he said. By the end of this year, the price "is going to be higher than where we are today."

Al-Falih said most producers remain able to pay production costs at current prices, but said "if the market continues to drive prices down, we will see some producers exiting, simply on not being able to finance their short-term operating costs."

"We do not hope for that," said al-Falih. "I think the market will need all producers in the long term."