Saudi Oil Minister Ali al-Nuaimi said on Sunday the world has enough crude to last for "many decades" and that his country will invest massively to be able to produce 15 million barrels a day.
"The world has enough petroleum reserves, both conventional and non-conventional, to meet oil demand for many, many decades to come," Nuaimi told a summit in Jeddah of top consumers and producers.
"Concerns over long-term supply shortages seem to be playing a role in strong futures prices, though I believe these concerns are badly misplaced," Nuaimi added.
In contrast, US Energy Secretary Samuel Bodman told the meeting that "production had not kept pace with growing demand for oil, resulting in increasing -- in increasingly volatile -- prices."
Nuaimi said Saudi Arabia's production capacity will rise to 12.5 million barrels per day (bpd) by the end of 2009 and another 2.5 million bpd could be added if demand warranted.
Projects underway will see "the kingdom's maximum sustained production capacity rise to 12.5 million bpd by the end of next year," he said. It currently has output capacity of 11.3 million bpd.
"In addition, we have identified a series of future crude mega increments totalling another 2.5 million bpd of capacity that could be built if and when crude oil demand warrants their development," the minister said.
The projects include a 900,000 bpd boost in Zuluf, 700,000 bpd in Safaniya, 300,000 bpd each in Berri and Khurais and 250,000 bpd in Shaybah, Nuaimi said.
The kingdom plans to add two million bpd of refining capacity over the next five years.
"These are massive investments, which over the next five years will total 129 billion dollars between the upstream and downstream segments of the industry," Nuaimi said.
Nuami emphasised that record prices were not reflecting the true state of market supplies. The price of a barrel of crude has doubled from about 70 dollars to nearly 140 dollars over the past year.
"Between the second quarter of 2007 and the second quarter of 2008, global demand rose by an estimated 800,000 (barrels) to 1.2 million barrels per day.
"At the same time, global oil supplies rose between 1.4 and 1.6 million barrels per day, substantially more than the increase in demand."
He added that forward cover -- a key market measure for how long oil inventories would last if production stopped -- had increased from 52 days to 54 days over the past 12 months.
"Clearly something other than supply and demand fundamentals is at work here, and a simplistic focus on supply expansion is therefore unlikely to tame the current price behaviour," Nuaimi said.
However, in a gesture to appease consuming nations at Jeddah and dampen high prices, Saudi Arabia, the oil powerhouse, said it would ramp up oil output to 9.7 million barrels per day.
That is the highest daily production for Saudi Arabia since 1981, when it pumped a record high of 10 million barrels per day.