Oil-importing nations have long treated Saudi Arabia as an infinitely deep well of crude oil supplies. In 2005, Matt Simmon’s book Twilight in the Desert did much to call attention to the possibility of diminishing production from the desert kingdom’s ageing wells.
More recently, cables released by Wikileaks highlight the possible overstatement of Saudi oil reserves. Excellent commentary and links to detailed information covering these issues can be found in a recent post on The Oil Drum.
What much of this discussion ignores, however, is that oil exports from Saudi Arabia depend on more than just production — they are a function of both production and internal consumption.
This post will focus on the existing trends of energy consumption within Saudi Arabia and how they will impact future exports, whatever future production levels may be.
The effect this growing population is having on energy consumption is seen in the next two figures which come from the Energy Export databrowser. In Figure 2) we see long term development of Saudi oil production (grey), internal consumption (black line) and net exports (green).
While production levels over the last decade have seen some large year-to-year variations, production in recent years has been near the all time highs.
By contrast, net exports in 2009 were at their lowest level since the first Gulf War. This is easily explained by looking at the steadily rising level of internal use which in 2009 consumed 27% of total oil production.
The Energy Information Association (EIA) Country Analysis Brief on Saudi Arabia has the following to say about internal oil consumption trends:
Saudi Arabia is the largest oil consuming nation in the Middle East. In 2009, Saudi Arabia consumed approximately 2.4 million bbl/d of oil, up 50 per cent since 2000, due to strong economic and industrial growth and subsidized prices. Contributing to this growth is rising direct burn of crude oil for power generation, which reaches 1 million bbl/d during summer months, and the use of natural gas liquids (NGLs) for petrochemical production. Khalid al-Falih, CEO of Saudi Aramco, warned that domestic liquids demand was on a pace to reach over 8 million bbl/d (oil equivalent) by 2030 if there were no improvements in energy efficiency and current trends continued.