RIYADH: Despite having witnessed the emergence of new energy frontiers in recent months – from tight oil and shale gas to new off shore finds all around - sidelining the peak oil pundits in the process - the energy world seems getting back into ‘concern’ mode.
A just released Citigroup Inc. report says that Saudi Arabia, the world’s biggest crude exporter, risks becoming an oil importer in the next 20 years.
“If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030,” Heidy Rehman, an analyst at the bank, wrote.
Oil and its derivatives are used today for about half of the kingdom’s electricity production, which at peak rates is growing at about 8 per cent a year. A quarter of the country’s fuel production, roughly around 3 million barrels a day, is captive to domestic consumption, some assert. The Kingdom already consumes all its natural-gas.
The Saudi water consumption is also touching 250 liters per day – the world's third highest, growing at 9 per cent a year – and most of this is provided from energy-guzzling desalination plants. All this is unsustainable and would impact the global energy balance.
Some recent studies indicate that Saudi domestic crude consumption could top seven million barrels a year by 2030.
Many in the industrialised world point to the low domestic fuel prices as the prime reason for the galloping consumptions. The Citigroup seems concurring too. “As a result of its subsidies we calculate ‘lost’ oil and gas revenues (opportunity cost) to Saudi Arabia in 2011 to be over $80 billion,” Rehman wrote. “At the domestic level, we believe the only real way to rationalise energy consumption would be to reduce subsidy levels.”
But all the above is no news. The country is already planning an 80GW nuclear blitz. It also is pinning big hopes on solar projects based on successes of solar farms in California. New desalination filters are also getting in to reduce energy use drastically.
Saudi Arabia is also planning to install 41 gigawatts of solar capacity over the next two decades. Bids for two gigawatts worth capacity will be issued in the first quarter of 2013. Saudi Arabia also wants to build both PV plants and solar thermal plants. The world’s biggest solar energy facility, built with Austrian technology, has already been established in Saudi Arabia.
Saudi Arabia may hold the fifth-largest deposits of shale gas, behind China, the U.S., Argentina and Mexico, with as much as 645 trillion cubic feet of recoverable fuel. Aramco seems serious to exploit the source, appearing set to increase the number of drilling rigs in coming months as it plans an exploration push for shale gas and hydrocarbons in the Red Sea. Saudi Aramco also plans to intensify drilling and bring Manifa, the world’s fifth-largest oil field, into production next year, according to the company’s latest annual review. It also expects to announce commercially viable shale gas deposits soon, Al-Falih told a local newspaper on August 22.
What does all this indicate?
Simply one thing – the challenge of rising domestic consumption has been registered at the highest level and steps are in pipeline to meet the challenge. Walking around in the corridors of Aramco, one could definitely feel the desire, the urge and indeed the determination - even at the topmost level - to curb domestic consumption. And there is big move all around – to attain the objective. Major steps are in pipeline – virtually on all frontiers. Riyadh fully knows the implications.
In the ultimate analysis, a number of factors are to impact the overall crude consumption pattern of Saudi Arabia. The world is not that simple and single faceted as Rehman of Citigroup is portraying. The mathematics is not that simple.