Saudi Gas, Renewables Will Help Boost Oil Exports

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Saudi Arabia's plans to boost output of gas and renewable energy will help the kingdom reduce its own consumption of liquid hydrocarbons by up to 1 million barrels per day by 2030, thereby increasing the kingdom's oil export capacity, industry sources told Energy Intelligence on Thursday.

With global upstream production capacity stretched and oil prices north of $100 a barrel, there is considerable interest in quantifying how much spare production and export capacity Saudi Arabia and other Mideast Gulf producers hold.

Developing new oil production capacity is a lengthy and costly process for the few producers that have the necessary resources, but the kingdom is keen to maintain its credentials as a reliable supplier by increasing its export capacity. Changes in its domestic power generation mix will play a big part in this.

Saudi Arabia currently generates 49% of its electricity from gas and 51% from petroleum liquids, including crude oil, according to sources familiar with the matter.

By 2030, it plans to generate 45-50% of its electricity from renewable resources and 50-55% from gas, the sources added. This is part of the country's long-term goal of achieving carbon neutrality by 2060.

In May of this year, Saudi Arabia used 967,000 b/d of petroleum liquids for power generation, compared with 803,000 b/d in May 2021, according to numbers from the Joint Organizations Data Initiative.

During the hot summer months, the kingdom's "direct burn" of unrefined crude oil tends to rise as air-conditioning demand increases. In addition to crude oil, it also burns fuel oil and diesel for power generation.

Jafurah Gas Project

Earlier this year, Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom's growing use of gas and renewables will free up 1 million b/d of oil for export.

To ensure that there is sufficient gas to meet the projected rise in domestic demand, state-controlled Saudi Aramco is developing the Jafurah field, which is expected to produce 2 billion cubic feet per day of gas by 2030.

Gas production from the first phase of Jafurah is expected by 2025, according to contractors.

Saudi Arabia is already working on plans to increase its sustainable oil production capacity to 13 million b/d from 12 million b/d by 2027.

At a recent Arab Summit, which was also attended by US President Joe Biden, Saudi Crown Prince Mohammed Bin Salman said that his country will not increase its oil production capacity beyond the previously announced target of 13 million b/d.

However, Energy Intelligence understands that this comment was intended to drive home the message that Saudi Arabia cannot bear sole responsibility for increasing global supply, and that other countries must contribute to the effort by boosting their upstream investment.

Industry sources in the kingdom say that Aramco conducts regular strategy reviews, which include assessing how much production capacity is needed.

However, any decisions related to further expansions of capacity must come from the kingdom's political leaders.

Oil Supply, Gas Supply, Gas-Fired Electricity, Renewable Electricity , Upstream Projects
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