GI: Saudi's energy policy problematic in long-term

Crude set to become more important for Saudi power generation.

Saudi Arabia’s decision to increase the use of crude for power generation will cause the kingdom problems in the long-term, says Global Insight analyst Sam Ciszuk.

Salah al-Awaji, the kingdom’s deputy electricity minister, told Reuters on the sidelines of an Asian power conference that he estimates the kingdom’s total feedstock use will rise from 1.5 million boe/d last year to 2.5 million boe/d in 2020 on the back of spiraling domestic power demand. The Saudi Electricity Company (SEC) expects that domestic demand will require an expansion of the power generating capacity from 46,000MW now to 67,000MW by 2020.

Story continues below

Advertisement

FEATURED COMMENT Please click here to comment on this article

“The redirection of less efficient and more polluting crude to its power plants might work as an interim solution but will eat into its spare production capacity cushion when global demand starts rebounding seriously,” comments Ciszuk.

A scarcity of natural gas is the underlying reason for the over-reliance on crude, say Ciszuk. “A failure to find significant new gas reserves and a need to utilise more gas as feedstock for the petrochemical industry, which is being expanded as part of the kingdom’s job-creating industrialisation programme, leaves it little option”

“Power demand—fuelled by highly subsidised utility prices—continues to spiral, while more and more power plants have to be converted back to oil use after the country's power generation feedstock mix was almost virtually purged of crude a decade ago,” he adds.