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Daniel Poneman, the US deputy energy secretary, said oil producers should continue to invest in production capacity. Lee Hoagland / The National
Daniel Poneman, the US deputy energy secretary, said oil producers should continue to invest in production capacity. Lee Hoagland / The National

US says change in energy fortunes will not weaken Saudi relationship

Washington says that in spite of its growing energy independence, it remains committed to cooperating with the Arabian Gulf.

The United States says that in spite of its growing energy independence, it remains committed to cooperating with the Arabian Gulf.

A rise in American hydrocarbons production has shifted the traditional producer and consumer dynamic that has long underscored involvement in the region’s military and energy sectors.

Now American oil production is projected to top 8 million barrels per day (bpd) by next year, and the US cut imports by 2 million barrels between 2010 and 2012.

“All of us are still adapting to this new reality where our oil production is up tremendously,” said Daniel Poneman, the US deputy energy secretary. “This does not alter the strong relationships with our friends out here, which are based on many aspects including, but not confined to, energy. And our commitment to the security of this region and to freedom of navigation through the Strait of Hormuz is clear and will remain so.”

At stake is a relationship between the US and Saudi Arabia that dates to Franklin D Roosevelt’s presidency and which has thrived on Washington’s appreciation of Riyadh’s ability to unleash spare capacity to keep oil prices in check.

This week, however, the Saudi intelligence chief said the kingdom would make a “major shift” in US relations because of disagreements over strategies in Syria and Iran.

“We will continue to work very closely with the Saudis for years to come,” said Mr Poneman. “Every relationship obviously has moments of challenge, and that’s what friends and colleagues and partners do, is you work through those challenging times.”

Oil prices were too high for economic growth and producers, including the US, should invest in production capacity, said Mr Poneman.

“We’ve been very consistent in talking to our colleagues and all producer nations that we are concerned about high oil prices that are not consistent with continued global growth, and therefore we think it’s appropriate that people should continue to invest in development so demand is well satisfied,” he added. “The demand is there. The prices are high.”

The US was also in “continuing consultation” with both Saudi Arabia and Jordan on potential nuclear treaties that would allow for the export of American supplies and services, including reactors, to those countries’ nascent nuclear programmes, said Mr Poneman.

Hopes for such treaties, known as 123 agreements, have been high ever since the UAE signed one that was dubbed the “gold standard” for its commitment to forgo enrichment or nuclear reprocessing.

Other countries have been less enthusiastic about giving up such rights. Jordan has already embarked on uranium mining and, in the past, Saudi Arabia has floated the possibility of performing enrichment at home.

The UAE’s 123 agreement stipulates that if Washington signs a treaty with another regional power with lesser nonproliferation commitments, it can renegotiate its original agreement.

“If there are countries that have decided, as the UAE decided, to adopt a policy that on their own volition refrains from those activities, that’s a fine thing, and we welcome that,” said Mr Poneman.

“But we’re going to take every case as it comes along, review the specifics in each situation, and take an approach that we believe maximises overall global interests.

“Every case is different, and we will analyse each set of circumstances as they present, and of course as we analyse each set of circumstances we have to look at it in the context of the global regime and the arrangements that have been made with other countries.”

The deputy secretary visited Abu Dhabi’s nuclear construction site, Baraka, where a US$20 billion power plant is taking shape.

“I have seen this programme emerge from conception to execution in a few short years, and it’s really impressive their commitment to safety, environment, and health,” he said. “It’s a model.”


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