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KSA may have only 18 years left as net exporter

by Adam Lane on Sep 10, 2012


Citi report: The world's second largest producer and number one exporter may lose its crown by 2030.
Citi report: The world's second largest producer and number one exporter may lose its crown by 2030.

A report by Citigroup has suggested that Saudi Arabia could risk becoming a net oil importer by 2030 as a result of rapidly growing energy consumption. The report, obtained by Bloomberg and the Daily Telegraph, argues that the Kingdom may have no oil available for export within 20 years if current energy usage trends continue.

The research says that oil and derivatives are used for around half of the kingdom’s electricity production – currently increasing at around 8 percent per year - in addition to its desalinated water production. At present, around a quarter of the country’s total fuel production is used domestically and the report author Heidy Rehman states that “if Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net importer by 2030.”

Saudi already consumes all of its natural gas production – around 9.6 billion ft3/day – domestically, whilst the author suggests that plans to diversify the fuel mix by investing in nuclear energy (with targets of around 80GW of output) could be hampered by a lack of suitably qualified experts in the field.

The Kingdom has so far refused to import gas, and has instead accelerated programmes for gas exploration, in addition to recent announcements of ambitious investment targets for solar power that are aimed at conserving oil for export. Saudi is currently planning to produce 41GW of electricity by 2032 through solar power investments.

The Kingdom’s per capita energy consumption in 2011 was higher than most industrialised nations, and its 10-year historical consumption compound annual growth rate may increase by 6 percent – double projections for population growth.

“Indeed we would expect consumption to continue to outstrip population growth as Saudi Arabia’s currently young population ages and consumer spending increases supported by rising GDP per capita,” the report states.
With the Kingdom relying on oil for 86 percent of its annual revenues, the Kingdom is said to be “very aware of that fact that it needs to address this [situation]”. Rehman argues that a key part of the solution will be to address the level of subsidy on domestic oil – with Saudi Arabian power providers paying between US $5 and $15 per barrel from Saudi Arabian Oil Co.
“As a result of its subsidies we calculate ‘lost’ oil and gas revenues to Saudi Arabia in 2011 to be over $80 billion. At the domestic level, we believe the only real way to rationalise energy consumption would be to reduce subsidy levels.”

 


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