Bloomberg/Dubai
Saudi Arabia, the world’s biggest crude exporter, risks becoming an oil importer in the next 20 years, according to Citigroup.
Oil and its derivatives are used for about half of Saudi Arabia’s electricity production, which at peak rates is growing at about 8% a year, according to Citigroup
Oil and its derivatives are used for about half of the kingdom’s electricity production, which at peak rates is growing at about 8% a year, the bank said yesterday in a an e-mailed report. A quarter of the country’s fuel production is used domestically, more per capita than other industrialised nations, as the cost is subsidised, according to the note.
“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.
The country already consumes all its natural-gas production and plans to develop nuclear power, which pose execution risk amid a lack of available experts, safety issues and cost overruns, Rehman said.
Saudi Arabia, which depends on oil for 86% of its annual revenue, is accelerating exploration for gas and is planning to develop solar and nuclear power to preserve more of its valuable crude for export. The kingdom has refused to import gas, unlike neighbouring producers such as Kuwait and the UAE that also lack fuel for power generation.
Saudi Arabia’s per capita consumption in 2011 is higher than most industrialised nations, including the US, according to the report. The nation’s 10-year historical consumption compound annual growth rate may increase 6%, double its projected population growth, Rehman wrote.
Saudi Arabia’s population was 28mn as of the end of 2011, International Monetary Fund data compiled by Bloomberg shows.
“Indeed we would expect consumption to continue to outstrip population growth as Saudi Arabia’s currently young population ages and consumer spending increases supported by rising GDP per capita,” Rehman wrote.
The IMF forecasts a 10% rise in gross domestic product per capita this year to $22,635 and may climb to $23,936 by the end of 2017, the data shows. Saudi Arabia’s $600bn economy, the largest in the Arab world, may expand 5% this year, according to the median estimate of 12 economists surveyed by Bloomberg.
The country produced 11.2mn bpd of oil and natural-gas-liquids last year, 13% of the world’s supply and more than any other nation, according to BP’s statistical review. It was the eighth-largest gas producer, providing 9.6bn cu ft a day to the domestic market, according to the report.
Saudi Arabian power providers pay $5 to $15 a barrel for its fuel from state-owned Saudi Arabian Oil Co, according to the report. Brent crude, the benchmark for more than half the world’s oil, was trading at $116 a barrel yesterday on the London-based ICE Futures Europe Exchange.
“As a result of its subsidies we calculate ‘lost’ oil and gas revenues to Saudi Arabia in 2011 to be over $80bn,” Rehman wrote. “At the domestic level, we believe the only real way to rationalise energy consumption would be to reduce subsidy levels.”