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RIYADH/LONDON (Reuters) - National oil giant Saudi Aramco is continuing to invest in oil and gas production capacity despite cost-cutting due to low oil prices, its chairman Khalid al-Falih said on Monday.
Aramco's plans starkly contrast with governments and oil firms outside the Gulf, which have been reducing capital spending sharply in response to financial pressures as crude prices drop to 12-year lows.
Saudi Arabia, the world's top oil exporter, is determined to protect or expand its market share when the balance between supply and demand eventually improves and prices recover.
"Our investments in capacity of oil and gas have not slowed down - we have been able to do a lot of cuts in spending by simply driving down costs," Aramco chairman Khalid al-Falih told a panel discussion at a business conference."
"Saudi Arabia is well documented to be the clear lowest cost producer," he told reporters later. "We have scale, capability, technologies that have allowed us to maintain our low cost."
He said global oil supply and demand would balance at a "moderate" price soon.
"Demand will grow, as it has already started in 2015, and there will be a period not far into the future (when) demand will catch up with supply," he said.
Late last year, Saudi Aramco's magazine Arabian Sun said the company would focus on controlling costs and would prioritize projects. It will re-examine existing contracts and seek cost-containment opportunities in future contracts for goods and services, the magazine said.
Industry sources say major capacity plans, such as the expansion of the giant Khurais oilfield, are progressing although they may move more slowly than originally planned for budgetary reasons.
In a letter published by the Arabian Sun magazine, chief executive Amin Nasser cited Khurais as one project which had "made progress toward planned start-up."
Additional supply from Khurais and other Saudi fields could help moderate an eventual sharp rebound in crude prices.
The West’s energy watchdog, the International Energy Agency, has repeatedly warned over the past months that the world might be heading toward a new oil crisis after investments fell steeply because of the price drop.
The IEA’s chief Fatih Birol told the World Economic Forum in Davos last week that oil investments had dropped 20 percent in 2015 and were likely to do the same in 2016 – something which has not happened since the 1980s.
Analysts from the IHS think-tank have said investments are down $1.7 trillion since mid-2014.
Some of the world's top oil economists, including the IEA's Birol and Pulitzer Prize winner and oil historian Daniel Yergin, argue the world might again become too dependent on oil from the Middle East if prices stay low for longer and OPEC’s top producers stick to their policy of fighting for market share.
"Low prices are not the only measure of energy security," said a presentation co-written by Birol and Yergin in Davos. "Over the long term, the world’s reliance on a very few countries, mostly the Middle East, would be pushed up."
"This concentration of global supply would be accompanied by elevated concerns about energy security," it said.
Asian consumers such as China, India and southeast Asia would be particularly vulnerable, it said.
Additional reporting by Marwa Rashad; Writing by Andrew Torchia; Editing by Katharine Houreld