As per the IEA, the world's biggest crude exporter looks set to burn a record average of 600,000 barrels per day of its own crude in 2011, limiting exports despite an increase in output.
On a hot day, up to 1.2 million barrels are be needed by Saudi power plants to meet electricity demand. Interestingly the difference between peak and trough Saudi direct crude demand increased from about 180,000 barrels per day in 2002 to 2008 to about 660,000 barrels per day in the years since 2009 — apparently a consequence of a changing life style!
Based on the Joint Oil Data Initiative figures, the IEA estimates, Saudi Arabia burned less than 200,000 bpd on average for most of the 2000s but gobbled up more than 450,000 bpd in 2009.
The total Saudi domestic energy demand is expected to rise from about 3.4 million barrels per day of oil equivalent in 2009 to approximately 8.3 million barrels per day of oil equivalent by 2028 — a growth of almost 250 percent, making the Kingdom the second-biggest source of global oil demand growth after China.
This growing Saudi consumption is a cause for concern, conceded, highlighted and acknowledged by none other than Khalid Al-Falih, the czar of Saudi oil. This is a real challenge to planners here in Riyadh. Inefficiency cannot continue. Al-Falih too acknowledges that unless Saudi Arabia tackles inefficiencies in the way it uses energy, the Kingdom's availability of crude to export risks falling by as much as three million barrels by 2028 to seven million barrels a day.
If no efficiency improvements are achieved, and the business remains as usual, the oil available for exports is likely to decline to less than seven million barrels per day by 2028, a fall of three million barrels per day while the global demand for oil will continue to rise.
Peak-time electricity demand will almost triple within 20 years to 120,000 megawatts by 2032 from around 46,000 MW in 2010, Abdullah Al-Shehri, the governor of the Electricity and Cogeneration Regulatory Authority, Ecra, recently told a gathering in Dubai. And around half the Kingdom's current power capacity uses liquid fuel including distillates, crude oil and heavy fuel oil.
Saudi Arabia will have to step up crude consumption for power generation in 2011, Saleh Alawaji, the deputy electricity minister, said earlier in March.
"Our main sources are crude oil and natural gas, and the new expansion of power plants this year will use more crude oil," Alawaji told reporters on the sidelines of an industry conference in Singapore.
Power generation capacity in the Kingdom is to grow by about 6 to 10 percent this year, while installed power generation capacity, which now stands at 50 GW, would grow to 77 GW by 2020. Peak power demand for the summer in 2010 was 45,000 megawatts (MW), Alawaji said as against 41,000 MW a year earlier.
In May, Saudi Arabia produced 8.89 million b/d of oil and consumed 2.24 million b/d, according to the JODI data. The International Energy Agency sees Saudi direct crude burn peaking at 900,000 b/d this year and at almost one million b/d in 2012, compared to peaks of around 300,000 b/d from 2006-09.
This is not business as usual, people in the corridors of power in Riyadh understand and underline. Alternatives including nuclear and solar power are being explored and tapped. Saudi Arabia is also expected to unveil its long-term energy strategy to include nuclear power plants by the end of the year, Abdullah Al-Shehri had indicated a few months back.
The King Abdullah City for Atomic and Renewable Energy has already carried out feasibility studies, concluded cooperation agreements with other countries and is looking at potential technologies to utilize, he added.
But it is all long term. With brute desert summer in the midst, even in the immediate term Saudi Arabia needed to take steps to curb the rising crude consumption. And some seem on cards. Saudi Aramco has already begun production at its Karan nonassociated gas megaproject, replacing some of the oil used by power plants.
Gas has reportedly begun to flow from the giant offshore Karan field to the onshore Khursaniyah gas plant, and will gradually build to 400 million-450 million cubic feet per day this summer. Karan is expected to provide gas for four months this summer, Aramco had said in its annual review.
The 1 billion cubic foot per day Khursaniyah plant, which was completed in 2010, has reportedly enough spare capacity to take the early Karan production. The facility has been designed to handle 300 MMcf/d of associated gas from the 500,000 barrel per day Abu Hadriya, Fadhili, Khursaniyah (AFK) development, as well as associated gas from the Safaniyah, Majan and Zuluf fields.
Karan will ramp up to 1.5 Bcf/d by June 2012, when an expansion at Khursaniyah will be completed and 14 wells drilled, completed and tied in, Aramco says. It will hit 1.8 Bcf/d in April 2013, once the last two wells have been completed.
Aramco's decision to bring Karan on earlier will help lessen the load. The 400 MMcf-450 MMcf/d of raw sour gas will likely yield around 300 MMcf/d of sales gas, which would offset around 55,000 b/d of crude or oil products, a third industry source says.
However, while Saudi Arabia tackles with its burgeoning energy demand, the issue of efficiency also needs to be addressed, sooner -rather than later.
Indeed there is inefficiency in the overall system. Khalid Al-Falih too acknowledges and underlines that. Energy required to produce one unit of GDP, energy intensity, needs to go down. Between 1980 and 2000, China's energy intensity in terms of BTUs of energy used per dollar of GDP generated fell by 67 percent. Over the same period, the US energy intensity index dropped by more than 33 percent. In comparison, energy intensity for the Kingdom increased by some 138 percent over the 1980 level. If the economy does not grow faster and if the Kingdom does not improve energy efficiency, by 2028 the intensity increase would reach 227 percent higher than the 1980 level.
This is a cause of major concern. Economists feel that subsidies too fuel inefficiency. IEA has been pointing out to this fact for some time. While subsidizing fuel does help in keeping cost of production low and spur economic activity, it may be responsible for some of the inefficiencies, one has to concede. Saudi economy managers need to have a hard look at it.
