UPDATE 2-Saudi Arabia's oil expansion plans on track

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By Chris Baltimore

HOUSTON, Feb 12 (Reuters) - Saudi Arabia's plans to expand oil and refining capacity are on track, though economic turmoil and the promotion of alternative fuels like ethanol have clouded the future of global oil demand, the head of Saudi Aramco said Tuesday.

Saudi Arabia plans to expand oil production capacity to 12 million barrels per day (bpd) by the end of 2009, said Abdallah Jumah, chief executive of Saudi Aramco, the OPEC nation's state-owned oil company, speaking at the CERA Week energy conference.

Jumah added that Saudi Arabia, OPEC's largest exporter, plans to spend $90 billion over the next five years in upstream and downstream projects globally, including $1 billion on environmental initiatives like low sulfur fuels.

However, the fallout from the U.S. subprime crisis and volatility in the value of the U.S. dollar have created uncertainty in the global oil market, he said.

And "well-intentioned strategies" that call for aggressive displacement of fossil fuels with alternative sources like ethanol have caused "considerable confusion" about the future of global energy supply, Jumah said.

"Such uncertainty clearly also has negative implications for the vast investments required to expand supplies of fossil fuels," he said.

The United States recently enacted a law passed by Congress in 2007 that requires 36 billion gallons of ethanol to be mixed with gasoline supplies by 2022 - a five-fold increase from current usage.