THE flame of oil is not eternal – none can dare deny. Suspicions concerning longevity and indeed eternity of crude supplies continue to linger. Citigroup said in a recent report - the onus is back again on the supply side of the global energy equation. Having sailed through scare of ‘Peak Oil' – in not too distant a past – we seem to be getting back to square one. Despite having witnessed the emergence of new energy frontiers – from tight oil and shale gas to off shore developments, sidelining the peak oil pundits, the energy world seems getting back into ‘concern' mode. And this could have major implications on market psyche – one can't help underlining here. The Citigroup Inc. report says that Saudi Arabia, the world's biggest crude exporter, risks becoming an oil importer in the next 20 years. “If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030,” Heidy Rehman, an analyst at the bank, wrote. Oil and its derivatives are used today for about half of the kingdom's electricity production, which at peak rates is growing at about 8 percent a year. A quarter of the country's fuel production, roughly around 3 million barrels a day, is captive to domestic consumption, some assert. The Kingdom already consumes all its natural gas. The nation's 10-year historical consumption compound annual growth rate may increase to 6 percent, double its projected population growth, Rehman wrote in the report. The Saudi water consumption is also touching 250 liters per day – the world's third highest, growing at 9 percent a year – and most of this is provided from energy-guzzling desalination plants. All this is unsustainable, one can't argue. Some recent studies indicate that Saudi domestic crude consumption could top seven million barrels a year by 2030. “Indeed we would expect consumption to continue to outstrip population growth as Saudi Arabia's currently young population ages and consumer spending increases supported by rising GDP per capita,” Rehman said. The country produced 11.2 million barrels a day of oil and natural-gas-liquids last year, 13 percent of the world's supply and more than any other nation, according to BP Plc (BP/)'s statistical review. It was the eighth-largest gas producer, providing 9.6 billion cubic feet a day to the domestic market, according to the report. Many in the industrialized world point to the low domestic fuel prices as the prime reason for the galloping consumptions. The Citigroup seems concurring too. “As a result of its subsidies we calculate ‘lost' oil and gas revenues (opportunity cost) to Saudi Arabia in 2011 to be over $80 billion,” Rehman wrote. “At the domestic level, we believe the only real way to rationalize energy consumption would be to reduce subsidy levels.” But all the above is no news. People within the Kingdom – from Minister Naimi to Khaled Al-Falih, the Aramco CEO, all are not only aware of the galloping domestic consumption – but also of its implications – if it is allowed to continue unimpeded and uninterrupted. And they are not ready to let it continue the way. Walking around in the corridors of Aramco, one could definitely feel the desire, the urge and indeed the determination - at the topmost level - to curb domestic consumption. And there is big move all around – to attain the objective. Major steps are in pipeline – virtually on all frontiers. New variables are beginning to play a role and would definitely impact the ultimate picture – one needs to underline. The country is already planning an 80GW nuclear blitz. It also is pinning big hopes on solar projects based on successes of solar farms in California. New desalination filters are also getting in to reduce energy use drastically. Saudi Arabia is also planning to install 41 gigawatts of solar capacity over the next two decades. Bids for two gigawatts worth capacity will be issued in the first quarter of 2013. Saudi Arabia also wants to build both PV plants and solar thermal plants. The world's biggest solar energy facility, built with Austrian technology, has already opened in Saudi Arabia and is providing Riyad's Princess Noura Bint Abdulrahman University with warm water. The facility, built by Austrian firms GREENoneTEC and AEE Intec, consists of 36,000 square metres (387,500 square feet) of solar panels and cost 3.6 million euros ($4.7 million). Saudi Arabia may hold the fifth-largest deposits of shale gas, behind China, the US, Argentina and Mexico, with as much as 645 trillion cubic feet of recoverable fuel, according to a Baker Hughes estimate. Aramco seems serious to exploit the source, appearing set to increase the number of drilling rigs in coming months as it plans an exploration push for shale gas and hydrocarbons in the Red Sea. Saudi Aramco, as the world's largest crude exporter has about 133 active rigs at the moment. Saudi Aramco also plans to intensify drilling and bring Manifa, the world's fifth-largest oil field, into production next year, according to the company's latest annual review. It also expects to announce commercially viable shale gas deposits soon, Al-Falih told a local newspaper on Aug. 22. What does all this indicate? Simply one thing – the challenge of rising domestic consumption has been registered at the highest level and steps are in pipeline to meet the challenge. This is no absolute world – where Riyadh could simply permit its consumption to grow and grow. It knows the implications – fairly well. One just needs to talk to people in Aramco to realize how seriously the issue is being taken here. In the ultimate analysis, a number of factors are to impact the overall crude consumption pattern of Saudi Arabia. The world is not that simple and single faceted, the mathematics is not just that simple, as Citigroup is portraying. A combination of factors would ultimately be in play and Saudi domestic consumption tomorrow would not be as disastrous as is being projected today – one could indeed say with confidence and indeed some background info. Does one need to say more?
