MOSCOW (Reuters) - Saudi Arabia will invest $20 billion in the next few years to maintain and possibly expand its spare oil production capacity, Saudi Energy Minister Khalid al-Falih said on Thursday.

Saudi Arabia is the only oil producer with significant spare capacity on hand to supply the market if needed. The kingdom has a maximum sustainable capacity of 12 million barrels per day (bpd).

Falih said the country had not decided yet whether it wanted to take its capacity up to 13 million bpd or keep it at current levels.

The energy minister has repeatedly called on other oil producers to invest in capacity-building to avoid a supply shock and spike in oil prices.

“This spare capacity is not just a natural reservoir that we have. This is very expensive investments for the kingdom, and some of our partners within OPEC and OPEC+ have elected to invest to maintain (oil capacity) to have the readiness on a short notice,” he said at an energy industry event in Moscow.

“The next 1 million bpd of Saudi capacity is going to cost us over $20 billion. It costs us $2 billion a year of operation expenses to staff and maintain these facilities.”

The oil market has been watching closely what Saudi Arabia, OPEC’s de-facto leader, will say and do to calm market supply worries that have contributed to a rise in oil prices above $86 a barrel this week. [O/R]

State oil company Saudi Aramco [IPO-ARMO.SE] has said it plans to spend close to $300 billion over 10 years in upstream oil and gas projects.

Investing in oil capacity expansion is crucial to help Saudi Arabia sustain its spare capacity and reduce pressure on ageing fields.

Aramco will bring new crude output capacity of some 550,000 bpd online in the fourth quarter from two fields - Khurais and Manifa - giving it the ability to boost production when needed.

The additional output would not raise Aramco’s capacity, but would give the company more flexibility to boost supplies and reach higher production levels more quickly than before.

The world’s top oil exporter is pumping 10.7 million bpd in October and plans to produce slightly more in November, Falih said, reflecting an expected increase in demand before the imposition of U.S. sanctions on Iran, OPEC’s third-biggest producer.

That leaves Saudi Arabia with a tight output buffer of 1.3 million bpd if there is a sudden supply shortage.

“1.3 (million bpd of spare capacity) will be waiting for the demand to materialize,” Falih said.

“Some in Asia have requested more barrels than in the contracts. As a result ... the exports will exceed the loading schedule at 7.7 million bpd, which is a very high number.”

Falih also said he hoped to resume oil production from the Neutral Zone, which Saudi Arabia shares with Kuwait, after resolving pending issues between the two Gulf OPEC allies.

Saudi Arabia’s Crown Prince Mohammad bin Salman flew to Kuwait on Sunday to discuss the resumption of oil output from the Neutral Zone, a source familiar with the matter told Reuters.

The resumption of the Neutral Zone’s oilfields could add up to 500,000 bpd of oil output capacity to Saudi Arabia and Kuwait.