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Will Saudi Arabia become an oil importer by 2030?

One week ago the news spread that Saudi Arabia would be forced to become an importer of oil by 2030. It was an article in Bloomberg’s Businessweek (http://www.businessweek.com/news/2012-09-04/saudi-arabia-may-become-oil-importer-by-2030-citigroup-says) that announced this sensational news and referred to a report titled ”Saudi Petrochemicals – The End of the Magic Porridge Pot?” that was released by Citigroup Global Markets Inc. on 4 September. I have now had an opportunity to look at this report that is 152 pages long. First one can assert that the report is mainly an analysis of various companies in Saudi Arabia and the discussion of future oil export possibilities is used as a framework for the company analyses.

First, I should note that there is nothing remarkable in the report regarding the production of oil itself. The report’s authors assume that oil production will be constant at 12.5 million barrels per day (Mb/d) which is the official Saudi line. In my book “Peeking at Peak Oil” I have analysed Saudi Arabia’s future oil production and arrived at the conclusion that it can be 12 Mb/d until 2030 – in other words, about the same as the Saudi’s themselves state. By analysing data from the “BP Statistical Review of World Energy” the authors have studied the historical trends of Saudi Arabia’s production and consumption of oil and natural gas. They have mainly looked at electricity generation and the plans that Saudi Arabia has for this in future.

On a per capita basis Saudi Arabians consume as much electricity as inhabitants of the nuclear-powered nation France. However, the rate of growth of consumption per capita in Saudi Arabia is much greater than in France. Today, Saudi Arabia generates around 50% of its electricity using natural gas and 50% using oil products. They are using their own natural gas and oil production to do this. Saudi Arabia consumes all the natural gas that it produces and the domestic production is insufficient for their needs. We can note that most of their natural gas is produced in association with oil production. Saudi Arabia has a number of natural gas fields that are not developed but development of these is now their highest priority together with development of oilfields that contain large quantities of natural gas.

A large part of the electricity produced in Saudi Arabia is used for air conditioning and consumption for this purpose is highest during hot summer days. The peak load is approaching 50,000 megawatts (MW) which can be compared with only 21,000 MW in 2000. They calculate that they will need 120,000 MW of electricity in 2030. Aside from electricity they need water and this requires large installations for desalination of seawater. An important factor that explains this growing need is population growth.

The Saudi authorities are conscious of the problems the nation faces if it continues to use natural gas and oil for electricity production. They have plans to use nuclear and solar energy. By 2050 they plan to institute the following: Nuclear energy 54,000 MW, concentrated solar energy 25,000 MW, photovoltaics 16,000 MW and wind power 9,000 MW. Thus, nuclear energy is expected to generate more power in 2050 than their entire current electricity generation. To understand the scale of the proposed enterprise one can note that Sweden can produce approximately 10,000 MW using 10 nuclear powerplants.

Citigroup arrives at the conclusion that Saudi Arabia will not be an oil exporter in 2030 by assuming the expansion of electricity generation will increase at approximately the same rate as is occurring currently and that there will be delays in establishment of alternative sources of electricity. It is interesting to note that, at the moment, there are over 70 different petrochemical projects that are delayed or stopped in Saudi Arabia. If one makes the extrapolations that Citigroup makes and assumes that it will be mainly installation of nuclear energy generation that will be delayed then one arrives at the same conclusion as Citigroup:

“Saudi Arabia is the world’s largest oil producer (11.1mbpd) & exporter (7.7mbpd). It also consumes 25% of its production. Energy consumption per capita exceeds that of most industrial nations. Oil & its derivatives account for ~50% of Saudi’s electricity production, used mostly (>50%) for residential use. Peak power demand is growing by ~8%/yr. Our analysis shows that if nothing changes Saudi may have no available oil for export by 2030.”

It is not only in the oil exporting nation of Saudi Arabia that domestic consumption of oil is increasing. This is occurring in all the oil exporting nations. This is why I state in “Peeking at Peak Oil” that the volume of oil available for importation by the OECD nations in 2020 will contract by half compared to what was available in 2005 when “Peak Oil Exports” occurred. The fact that Saudi Arabia will also need income from oil exports in 2030 (e.g. to purchase food) means that it will be very interesting to see how they solve their domestic energy issues.

Peeking at Peak Oil

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