KSA braces for summer air conditioning demand

Updated 01 May 2013
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KSA braces for summer air conditioning demand

JEDDAH: Saudi Arabia faces another summer of heavy crude burning for power generation, with little more gas available and demand for cooling rising each year in the Kingdom.
Roughly half of Saudi gas supply still comes from its vast oil fields, so summer air conditioning demand supports high oil output levels because the Kingdom needs more of both fuels for its power stations.
There have been no big gas fields brought online since the Karan project ramped up production in 2012, and it is unclear whether this independent gas field will be able to run at full flow this summer.
Petroleum and Mineral Resources Minister Ali Al-Naimi said on April 1 that Karan should be running at capacity “very soon,” but it is not clear whether it has been running below capacity because spring power demand was low or because it was still unable to run flat out.
If Karan is able to run at full capacity all summer it should help reduce the total volume of crude burn compared to 2012, because it was not running at capacity until toward the end of last peak demand season.
Sources familiar with Saudi oil policy said recently that they expected external demand for Saudi crude to remain steady from March through June 2013.
But crude demand by Saudi power plants is set to surge from now until July, with a rise of 356,000 barrels per day seen from March-June 2011 and a jump of 400,000 bpd in the same period of 2012, government data published through the Joint Organizations Data Initiative (JODI) shows.
So if crude export demand does remain steady, the inevitable Saudi oil demand jump means output will have to rise significantly.
If Asian demand for Saudi crude falters, the surge in domestic demand should still support production, especially as any reduction in output would deal a double blow of depriving industry of gas feedstock while condemning even more oil to burn in power plants because there is less associated gas.
Riyadh has long insisted that it adjusts oil supply to meet demand and not to steer prices.
With Brent crude trading at around $ 104 a barrel on April 30, but the world economy still seen as fragile, Saudi oil policy makers will be wary of raising production significantly to meet their own demand.
They had hoped Karan would dampen the annual crude burning bonanza last year, but exceptionally hot weather forced record volumes of Saudi oil into power plant furnaces last summer.
Were it not for Karan, combined with near record high crude output pumping out more associated gas, oil burning would have exceeded the record 763,250 barrels a day (bpd) used in power plants from June through September last year.
Using stocks to meet the air-conditioning driven demand surge would avoid having to raise production above current levels of around 9.2 million bpd — a move which risks driving oil prices well below Saudi Arabia’s stated preferred level of around $ 100 a barrel.
Saudi oil strategists will have to weigh the benefits of using crude stocks instead of raising well head production — considering that using stocks means less potential gas supplies from oilfields, which will further increase the amount of crude it needs to burn to keep the growing population cool.
But as most oil traders do not find out about production levels until the next month, and because export volumes have greater influence over prices the Kingdom could raise output if it needs the oil without immediately impacting prices or increasing exports.
But there is still some uncertainty over how much gas Karan will be able to supply, with one part of Saudi Aramco’s website saying it hit full capacity of 1.8 billion cubic feet per day (bcf/d) in summer 2012, and another saying the processing plant will reach full capacity by 2013.
Saudi oil officials and Saudi Aramco spokespeople were unable to comment immediately on Karan’s operational status.
A sharp rise in oil production from May to June 2011 enabled Saudi Arabia to satisfy its own surge in oil demand and boost exports to compensate for a fall in supplies during the Libyan civil war.
A 1 million bpd hike in oil output from May to 9.8 million bpd in June 2011 also helped reduce its crude burn by making more associated gas available.

There is little evidence of it relying on stocks before and stock withdrawals do not offer the extra gas that pumping oilfields harder does.
Saudi oil exports have fallen relative to production in three of the four summers since 2009, when domestic demand has eaten into exports each year, JODI data shows.
Meanwhile, stock withdrawals have remained relatively low, indicating that Saudi stocks have not been heavily used to support exports over summer.
Saudi electricity use has risen by about 6 percent annually over the last decade, with summer peak demand more than doubling from 2002 to over 48 gigawatts in 2011, according to the national electricity regulator.


ArcelorMittal Temirtau to suspend hot-rolled steel coil exports to Iran: adviser

Updated 8 min 53 sec ago
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ArcelorMittal Temirtau to suspend hot-rolled steel coil exports to Iran: adviser

  • The decision follows President Trump’s announcement that the US would withdraw from the Iran nuclear deal
  • Trump has previously suggested that organizations that continue to trade with Iran could potentially face sanctions

MOSCOW: ArcelorMittal Temirtau, a Kazakh unit of the world's largest steelmaker, will suspend the export of hot-rolled steel coils to Iran due to the re-imposition of US sanctions, Alex Agoureev, an adviser to the company, told Reuters.
"Supplies to Iran will be temporarily suspended due to the sanctions. Once sanctions are lifted, the supplies will be resumed," said Agoureev, an adviser to ArcelorMittal CIS CEO Paramjit Kahlon.
He did not say when the suspension would happen or provide further details.
In May, President Donald Trump withdrew the United States from the Iran nuclear deal and ordered the reimposition of US sanctions against Tehran that were suspended under the 2015 accord. A range of U.S. sanctions is due to kick in after a "wind-down" period ends on Aug. 6.