Can Saudi Arabia break free from using oil for power generation? | The National
If Saudi Arabia’s electricity sector were a country, it would match the entire oil consumption of Italy, Spain or Turkey. Despite also consuming prodigious quantities of natural gas, the kingdom uses nearly 1.4 million barrels per day in summer to generate power and water. But Riyadh may be about to turn the corner.
Like its GCC neighbours, Saudi Arabia needs large volumes of fuel for desalination and air-conditioning. It is on a bigger scale, though, and with the exception of Kuwait, its other Gulf colleagues use gas almost exclusively instead of oil. Fuel is supplied to the power sector at very low prices: until recently, less than $7 per barrel of crude oil.
After subsidy reductions in 2016 and 2018, electricity demand flattened out. But the attempts to diversify the economy, boost industry and tourism, and construct new cities, have seen power consumption resume its strong upward growth from 2021 onwards. An increasingly hot climate and new sectors such as data centres will push up future electricity needs: peak demand was up 9.5 per cent in the first half of this year.
This heavy use of oil is problematic in various ways. Not because Saudi Arabia cannot afford it – it can. Oil production costs are low, and reserves huge, probably more than will realistically be produced well into the second half of this century. This is not, as some naive analyses suggest, oil that would otherwise immediately be exported to the world market at $80 per barrel.
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