What is “our” oil doing in their economy? — Saudi oil consumption trends

What is “our” oil doing in their economy? — Saudi oil consumption trends

April 8, 2011. Jonathan Callahan

Oil importing nations have long treated Saudi Arabia as an infinitely deep well of crude oil supplies. In 2005, Matt Simmon’s book Twilight in the Desert called attention to the possibility of diminishing production, recent cables released by Wikileaks reveal possible overstatement of Saudi oil reserves, as does this post on The Oil Drum.  Oil exports from Saudi Arabia depend on more than production – you also need to consider the energy consumption within Saudi Arabia .

[some excerpts from this article below]

Saudi net-exports of crude oil have entered terminal decline

Saudi Arabia’s rapid growth from a population of 5 million in 1965 to 25 million in 2010 and the population is still projected to reach 27 million in 2015 and 32 million in 2025.

This article makes the case that the Saudi economy will consume ever increasing quantities of the oil they are currently exporting. The hope that they will turn to solar or nuclear power is unlikely.  In the real world of existing infrastructure, existing know-how, existing finance and existing technology oil and natural gas will continue to fuel Saudi growth.  The Fukushima disaster in Japan makes the odds of nuclear power even less than before, and even if the Saudis decided to build a nuclear power plant, it takes 10 years to build one.

[My comment: Solar power is unlikely as well after Prieto and Hall’s book “Spain’s Photovoltaic Revolution. The Energy Return on Investment”.

Internal consumption in Saudi Arabia was 27% of total oil production in 2009, up 50% since 2000, due to strong economic and industrial growth and subsidized prices. Contributing to this growth is rising direct burn of crude oil for water desalinization and for power generation, which reaches 1 million bbl/d during summer months, and the use of natural gas liquids (NGLs) for petrochemical production. Khalid al-Falih, CEO of Saudi Aramco, warned that domestic liquids demand was on a pace to reach over 8 million bbl/d (oil equivalent) by 2030 if there were no improvements in energy efficiency and current trends continued.

With no infrastructure for import/export of natural gas, the Kingdom consumes 100% of its own production. In 2008, natural gas accounted for 44% of total energy consumption with oil making up the rest.

Water Desalination

Providing fresh water to Saudi’s millions is a very high priority in their desert environment. To date, 27 desalination plants operate throughout the country, which provide 70% of the nation’s potable water along with 28 thousand megawatts of electricity from Integrated Water and Power Plants (IWPP). Unfortunately, this currently requires burning approximately 1.5 million barrels per day of crude oil.

Large cars

The strength of the Saudi economy, reflected in a higher per capita income, led to the increasing popularity of luxury cars and premium automobiles. In addition, Saudis have always opted for large SUVs that can accommodate large families. The market for GMC Suburbans and similar sized SUVs has remained relatively unaffected by the fluctuations in the economy.

Other countries exporting less too

Both Indonesia and Egypt have seen relatively moderate declines in their ability to produce oil. Yet they have been eliminated from the ranks of oil exporting nations because of rising internal consumption. Indonesia’s net exports of oil have fallen steadily since their secondary peak production year in 1992. Egyptian net exports of oil have fallen steadily since their peak production year in 1993 [my comment: and many experts believe that this is what fueled unrest the past few years because the revenue to buy food for Egyptians was no longer available once they stopped exporting oil]. So far, Saudi annual net exports of oil have fallen steadily since their peak production year in 2005.

Reviewing the population growth in figure 1) and all the evidence presented above it seems safe to predict that Saudi net exports of crude oil have entered terminal decline.

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