The plan is to reduce the use of oil in energy production
Saudi Arabia has come up with a plan to reduce the direct use of oil in energy production. Instead of oil, it is to start using more energy from gas and renewable sources.
Currently, Saudi Arabia generates about 51% of its electricity from oil and 49% from natural gas. So by 2030, it wants to reduce its use of oil and move towards a more environmentally friendly path. At the same time, the oil giant will be able to export the oil it saves.
The long-term plan is to be as energy-friendly as possible and ideally achieve net zero. Of course, these plans are long-term and Saudi Arabia would like to achieve them by 2060.
Consumption is driven up by air conditioning
As we experience higher temperatures every year and the summers get hotter, the demand for air conditioners increases. So in Saudi Arabia, when temperatures are high, they have to generate more energy to run air conditioners in homes.
The Joint Organisations Data Initiative (JODI) shows information from May where we see confirmation of this trend. In May, direct oil consumption increased to 582 000 barrels per day. This is 185,000 barrels per day more than in April and 131,000 barrels per day more than in May last year.
So even this steady increase in the need for oil for domestic use is limiting the ability to export oil abroad. Despite this, we need not worry that Saudi Arabia does not have enough oil for foreign markets. It wants to reach a production capacity of 13 million barrels per day by 2027.
Analysts said direct flaring of oil and products at power plants in Saudi Arabia accelerated this summer, which could lead to less available oil supply for international markets.
Saudi Crown Prince Mohammed bin Salman himself has spoken out on the subject of exports, saying.
“The kingdom will meet its challenge in this regard as it has announced an increase in its production capacity to 13 million barrels per day, after which it will have no more capacity to increase production.”
So if there is no more capacity to increase production any further, the aforementioned changes in energy production may be a great bonus for the kingdom’s exports.