Saudi Arabia is commonly regarded as the world’s swing producer of oil, with proven crude reserves of 264.5 billion barrels and production of around 9.7 million barrels of oil per day (bpd).
However, a report in the Financial Times says the Kingdom’s burgeoning domestic demand for oil, especially for electricity generation, may seriously restrict it’s ability to continue to stabilise prices by increasing exports.
Saudi is already the world’s sixth largest oil consumer, with domestic oil demand rocketing by 75% in the ten years to 2011. Domestic oil consumption is slated to rise by 5.6% this year from it’s current rate of 2.81 million bpd.Â
Power generation in Saudi is particularly oil-intensicve as plants typically burn heavy crude, rather than refined oil.
Saudi is starting to expand it’s gas exploitation, with Karan, the Kingdom’s first non-associated gas field, beginning production now. Â However, oil looks set to remain the core energy source for electricity generation for several years.Â
The FT reports that International Energy Agency, which recently reviewed Saudi direct burn of oil for power, says that it averaged less than 200,000 bpd in the early 2000s, but more than doubled to about 450,000 bpd in 2009. The IEA now estimates that Riyadh will burn on average 581,000 bpd this year, with a peak of 740,000 bpd in the period betweenthe peak air-conditioning months between April and September.
In addition to the problem of a narrowing gap between crude production and domestic burn, there are doubts over Saudi’s role as a swing producer. Recent offers of crude to booming Asian markets were rebuffed on the basis of non-compettiive prices, and some analysts believe the Kingdom may have a smaller margin for increased production that it or OPEC lets on.Â
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