Saudi Arabia: Striking a balance as oil consumer and exporter

Saudi Arabia has recently completed its first solar-powered facility intended for sea water desalination and power generation. Observers say it’s an investment strategy aimed at reducing oil consumption among local consumers.

With the onset of summer, power consumption in Saudi Arabia is expected to go up again, leading to more consumption of oil by the barrel.  Amid possible oil supply shortages due to the July EU sanctions against Iran, various sectors are now monitoring Saudi oil use.

Analysts say that the amount of oil used by Saudi Arabia during the hot summer months is so high that it’s twice the combined volumes of oil normally supplied by South Sudan, Syria, and Yemen. However, due to country-wide conflicts, these sources could not be tapped at the moment.

Saudi Arabia is the world’s largest oil-exporting country and as such it finds itself playing the lead role in pushing up oil supply and pulling down crude oil prices.  The country’s role as a stabilizer in this sense may be highlighted once the impact of the US and EU bans on Iranian oil are felt.

Experts estimate that these bans would eventually cut global oil supplies by up to 800,000 bpd of Iranian oil. On the other hand, if Saudi Arabia remains passive about its high oil consumption especially during the hot summer months, an estimated 750,000 bpd of potential Arabian oil exports to the global market will sadly be lost to domestic consumption alone.

Ali Naimi, Saudi oil minister said that the country’s aggregate production capacity runs to 12.5 million bpd, and assured that they can easily bring this on should the need arise. The country also holds up to  2 million bpd of spare oil for emergency purposes.

However, both Naimi and Khalid al-Falih, Saudi Aramco CEO, agree that reduction of domestic oil consumption in Saudi Arabia should be worked at.

Naimi said that the country is addressing the issue by looking at alternative ways to feed local oil requirements.  Among these are investments in solar-powered facilities as well as development of natural gas and shale.

At the start of the year, Naimi attended an energy conference at Chatham House and stated that: “Warnings last year about what would happen to Saudi oil exports if current levels of domestic usage were left unchecked were taken as fact. But we are not leaving domestic energy consumption unchecked.

I would like to state for the record here in London, that the kingdom will continue to be a reliable, steady and dependable supplier of energy to the world. Saudi Arabia’s domestic growth will not impact on exports now or in the future. Of this, I am very confident.”