Burning Less Oil At Home Will Help Saudi Exports And Aramco IPO
DUBAI, March 7 (Reuters) - Saudi Arabia is likely to reduce the amount of oil it burns to generate power this summer as the kingdom hikes domestic energy prices and uses more natural gas in power stations, industry sources said.
Burning less crude at home means the world's top oil exporter may not need to push output to the record high of 10.67 million barrels per day (bpd) reached in July last year, even if the Organization of the Petroleum Exporting Countries and other producers end supply curbs in June.
It may also make the sale of a 5 percent stake in Saudi Aramco
"Now we are using more and more natural gas, and with the reforms in electricity prices, crude burning will go down," said a Saudi-based industry source. "This summer you will see less crude burning."
Saudi Arabia's domestic energy reforms aim to rein in waste which threatens to erode the amount of oil available for export.
The kingdom's energy subsidies have long kept power and fuel at a fraction of cost price, draining the state budget and giving consumers little incentive to buy smaller cars or switch off power-hungry air conditioners -- even when they leave home.
But a slide in international oil prices to around $55 a barrel now from above $100 in 2014 has left a gaping hole in state coffers, encouraging efforts to wean the nation off cheap energy and use more of its huge gas reserves.
"That's a national objective. Aramco's been doing this for years, reducing crude burning by increasing use of gas and encouraging the state power generation sector to become more efficient," said another source familiar with the matter.
In December 2015, the government, which spent nearly 300 billion riyals on energy and water subsidies that year, hiked electricity for the industry and gasoline prices at the pump by about 50 percent. More gradual increases are planned until 2020.
Under the 2015 rises, 95 octane gasoline rose to 0.90 riyal ($0.24) per litre from 0.60 riyal, a big rise for Saudi drivers but still offering them some of the cheapest fuel in the world. A further 30 percent rise could come as early as July, sources said.
Cheap fuel prices have helped make Saudi Arabia the world's fifth biggest energy consumer, while its economy is ranked about 20th in size.
The OPEC heavyweight burned an average of 700,000 bpd of oil for electricity to keep the population cool in the hottest months from May to August, official figures showed.
Expanding gas usage is helping cut the hefty level of oil consumption. Aramco aims to nearly double gas production to 23 billion standard cubic feet a day in the next decade, supplying more of the fuel to power stations.
In the wake of the price reforms and gas development plans, domestic demand for crude declined about 3.5 percent year-on-year in December 2016 to 2.21 million barrels per day compared to a year earlier, the lowest total for the month of December since 2013, according to an OPEC report.
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds