Oil demand has risen across the Gulf Cooperation Council by an average of 9% a year since 1973, growing faster than GDP (gross domestic product), on average, according to The Abdullah Bin Hamad Al Attiyah Foundation for Energy & Sustainable Development.
The aggregate oil consumption in the six GCC States was less than 500,000 bpd in 1973 and more than 4mn bpd in 2014.
Although power demand has been problematic in all GCC countries outside Qatar, Saudi Arabia and Kuwait face highest pressure because of their reliance on liquid fuels – crude oil, heavy fuel oil and diesel fuel – for most of their power generation feedstock.
Hence, while oil consumption in the remaining GCC states is weighted more heavily toward the transport sector – where oil is considered most valuable – burning of liquid fuels for power generation is still dominant in Saudi Arabia and Kuwait.
Saudi Arabia consumed more than a quarter of its overall production in 2013. Direct burn of crude oil for power generation reached an average of 0.7mn bpd from 2009 to 2013 during the months of June to September, with peak month power sector consumption rising as high as 900,000 bpd.
While Kuwait is gradually shifting toward natural gas via imported LNG (liquefied natural gas), Saudi crude burning looks set to top 1mn bpd by 2020.
Low domestic prices for crude oil – roughly $5 a barrel in Saudi Arabia – are a major factor encouraging crude oil demand, the Al Attiyah Foundation said in its inaugural industry report.
Intensifying domestic crude burning coupled with a 1.4mn bpd increase in crude shipments to Aramco refineries inside and outside the kingdom signal that Saudi Arabia is moving beyond its long-held role as the world’s market-balancing supplier of crude oil.
Recent data show slipping Saudi crude exports, alongside flat or rising production. Assuming that Saudi crude production remains constant at around 10mn bpd, the amount of crude available for export could fall below 5mn bpd by 2020. The GCC also holds major reserves of natural gas, but, in contrast with oil, most production is consumed domestically. Only Qatar is a major exporter.
The UAE and Kuwait have been net gas importers since 2008. The region has no gas market pricing mechanism, such as an index based on trade at a hub. In similar fashion to the electricity sector, low prices (of around $1 to $2 per MMBtu) are driving demand.
But underpricing is also stifling production from known reserves – some of which are comprised of high-cost non-associated gas – which has encouraged imports.
Despite these difficulties, the US Energy Information Administration (EIA) projects that gas consumption in the Middle East’s generating sector will grow by nearly 150% by 2035.
In Oman, rising domestic demand and depleting conventional gas reserves have forced reductions in LNG exports. Unconventional reserves are under development, but lifting costs are expected to run beyond the state-fixed selling price for bulk gas.
In Saudi Arabia, a $9bn gas investment campaign aims to slow the growth of crude oil and diesel in the power sector by substituting with gas. Saudi Aramco hopes to increase gas output by 50% above 2011 production of 280MMcm/day, but, like Oman, most of its non-associated reserves consist of difficult formations.


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