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Saudi Arabia Looks To Stop Using Crude For Domestic Power Generation

Saudi Arabia is working to replace the use of petroleum liquids for power generation with solar energy and gas-fired capacity, Argaam reported on Monday, citing Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, as saying.

As part of the program ‘Hydrocarbon Demand Sustainability’, the world’s largest oil exporter will aim to replace petroleum—which it still burns for electricity—with solar power energy, Prince Abdulaziz bin Salman said at a meeting to describe the strategy of the Saudi energy ministry.

“The program will rank among the most important initiatives, given its value added to the national economy and its ability to stop the country’s financial waste,” Argaam noted.  

Replacing petroleum with solar energy for electricity generation would free up more oil for OPEC’s top producer and de facto leader, Saudi Arabia, to export. This could potentially give the Kingdom even more sway on the global oil market and help it obtain more revenues from crude oil sales, despite constant assurances that the economic diversification away from oil is underway.  

At the event on Monday, Prince Abdulaziz bin Salman also noted that Saudi Arabia made “strong efforts” to balance the oil market last year, according to Argaam.

Last year, Saudi Arabia went on a brief and ill-timed oil price war with Russia after the two friends/foes disagreed in March 2020 how to manage oil supply to the market at a time of collapsing demand in the pandemic. After Saudi Arabia and Russia returned to negotiations and sealed a new OPEC+ pact a month later, both leaders of the alliance had to cut their production much more than what they had discussed in March.  

This quarter, global oil demand and the market are still wobbling due to the still spreading COVID, and Saudi Arabia abandoned, this time around, its insistence that everyone at OPEC+ take their share of the burden in rebalancing the market. The Kingdom announced a surprise unilateral cut of 1 million bpd of its crude oil production in February and March.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on January 25 2021 said:
    This is already an integral part of Saudi Crown Prince Mohammed bin Salman’s “Saudi Vision 2030” for the diversification of the Saudi economy.

    In 2019 Saudi Arabia consumed 3.788 million barrels a day (mbd) or 37% of its crude oil production according to the 2020 BP Statistical Review of World Energy. Saudi Arabia was the world’s fourth largest consumer of oil after the United States, China and Japan although its GDP ranked 19 in the world.

    Oil accounts for 65% of power generation, with natural gas accounting for 27%.It is estimated that Saudi Arabia used up to 1.6 mbd or 16% of its daily oil production in 2019 to power its 27 desalination plants and this is projected to rise to an estimated 40% by 2025 if no alternative energy sources are found.

    That is why it is very essential for Saudi Arabia to replace oil with natural gas, solar power and nuclear energy for electricity generation and also water desalination.

    Replacing oil with solar energy and nuclear energy would free up more oil for Saudi Arabia, enhance the longevity of its oil reserves and add significantly to its revenues. The alternative is that Saudi Arabia will have little oil to export by 2030.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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