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Saudi Arabia Not at Risk of Being Oil Importer, Analyst Says

the world’s No. 1 crude exporter, can boost its output capacity and isn’t at risk of becoming a net importer of oil, an energy analyst said, rebutting a report by Citigroup Inc.

Mohammad Al-Sabban said a Citigroup study published on Sept. 4 assumes that Saudi Arabia will maintain its production capacity for years at the current level of 12.5 million barrels a day. Such a forecast is “unrealistic,” said al-Sabban, who also works as his nation’s chief negotiator on climate-control issues.

“The kingdom’s production capacity changed in the past, and it’s changing according to the needs of global demand,” he said yesterday by telephone from Riyadh. “It was never fixed for a very long period at a certain level.”

New York-based Citigroup said Saudi Arabia may need to import oil by 2030 if the country’s domestic crude use continues to outpace gains in production. Official subsidies encouraging oil consumption are a main reason for this potential outcome, the bank said. Saudi Arabia depends on oil for 86 percent of its annual revenue and is accelerating exploration for natural gas and planning to develop solar and nuclear power to preserve more of its valuable crude for export.

Al-Sabban acknowledged that fuel subsidies are contributing to higher Saudi oil use and said Saudi Arabia is not opposed to reviewing local pricing. Any decision to reduce subsidies would need to take into account the possible impact on the competitiveness of Saudi exports, he said.

Gas-Fired Plants

Saudi Arabian power providers pay $5 to $15 a barrel for fuel from state-owned Saudi Arabian Oil Co., according to Citigroup. Brent crude, the benchmark for more than half the world’s oil, closed on Sept. 14 at $116.66 a barrel on the London-based ICE Futures Europe Exchange.

Saudi Arabia plans to gradually replace crude with gas as fuel for power stations, and this will help free more oil for export, al-Sabban said. The country has refused to import gas, unlike neighboring producers such as Kuwait and the United Arab Emirates that also lack fuel to generate power.

The desert Kingdom is using natural gas to fuel 50 percent of its power plants currently, while crude oil, heavy fuel oil, and distillates make up the other 50 percent, Electricity & Co- Generation Regulatory Authority Governor Abdullah Al-Shehri said today in an interview in Riyadh. “We will keep replacing crude with gas as fuel depending on the availability,” he said.

Insulating Houses

The country is currently forcing all new houses to use insulation and it’s no longer importing electrical equipment that uses power inefficiently, al-Shehri said in the interview. These two steps will slash peak-demand for electricity by half in coming years, he said.

While there are 6 million buildings in the country that aren’t properly insulated, the government is targeting new housing and he expects to see 400,000 units built every year.

Saudi Arabia may burn 850 million barrels of oil a year, or 30 percent of its crude output, to generate electricity by 2030 if doesn’t become efficient in energy consumption, al-Shehri said in a presentation in Riyadh May 8.

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