Citigroup report on Kingdom’s energy consumption has many lapses

IN September, Citigroup issued a report on the Kingdom’s petrochemical sector. It discussed the Kingdom’s consumption of energy. Due to the high levels of local consumption, the authors assumed Saudi Arabia would be a net importer of oil by 2030. We shall discuss in this article the rate of consumption in the Kingdom, a cornerstone in the current local and international debate about the accelerated levels of consumption here.
The report, however, contains a number of lapses.
It shows that the per capita consumption of energy in Saudi Arabia is very high compared to consumption in two developed countries: South Korea and the US.
It points out that per capita consumption in the Kingdom is 7.7 tons of oil equivalents in 2011, higher than the per capita consumption in the US, which is 7.2 tons of oil equivalents for the same year.
The report notes that the high rates of the Kingdom’s energy consumption occurred despite the fact that its population is less than that of the US and Korea. This is the first lapse in the report: There is no specific relation between the size of a population and per capita consumption of oil. Energy consumption rates in China and India are much less than that of developed countries. It seems that the authors of the report have forgotten that the ratio of any per capita variable neutralizes the population’s size factor.
Checking the data of per capita consumption of energy for 2011 cited in the report, the authors add a small increase in the Kingdom’s consumption (the actual rates are 7.3 tons per capita, according to 2011 local data, and 7.5 tons per capita according to Shell and BP data). The same report shows a small decrease in per capita consumption in the US (7.3 tons per capita in 2011, according to Shell and BP data).
The goal behind this manipulation in data, it seems, is to create the impression of higher per capita consumption rates of energy in the Kingdom.
The authors avoided comparing Saudi consumption of energy with other countries with specific climatic conditions, or with countries that are similar to the Kingdom and located in the same geographical area.
If these rates were compared with those of Canada, which has special climate conditions like Saudi Arabia, we would find that consumption rates in the Kingdom are much less than in Canada. Moreover, consumption rates in the Kingdom are less than those in Kuwait, Qatar and the UAE, which are countries neighboring the Kingdom and are more suitable for comparing, as they are similar in their geographical conditions and demographic characteristics.
The authors have omitted the fact that a large proportion of total energy consumption turns into industrial products, mostly for exportation.
The truth is that consumption of energy products by industrial chemicals and petrochemicals raise the levels of per capita consumption, despite the fact that the consumption by these industries raises the added value of energy products.
This is a desirable factor, and one of the main policies of the Kingdom to increase economic growth rates.
Due to the lack of accurate data on the volumes of gas, liquefied gas and oil products consumed by chemical or petrochemical industries, it is very difficult to neutralize this portion of energy consumption.
According to my estimates, at least 20 percent of total energy consumption goes to these industries.
This ratio may reach to about a quarter of the Kingdom’s total consumption of energy.
It is likely that this percentage will increase if the current support to value prices of these industries continues.
It is true that other countries have chemical and petrochemical industries, but they are less concentrated than the existing and future industries in the Kingdom.
For this reason, one should neutralize the consumption of these industries, so one can address energy consumption issues properly.
If consumption of these industries were neutralized, per capita consumption would fall to 5.8 or 5.5 tons. No one denies that this rate is high, but it is lower than the previous rates.
It is clear that this report contains an implicit prejudice against Saudi Arabia.
It also contains many lapses concerning the debate on the Kingdom’s consumption of energy, and we hope that they are not intentional.
This report draws a dark picture somehow of the future of chemical and petrochemical industries in the Kingdom instead of encouraging investment in it.

— Courtesy of Al-Eqtisadiah newspaper