Gulf News reported that Saudi Arabia can boost its output capacity and isn’t at risk of becoming a net importer of oil.

Mr Mohammad Al Sabban energy analyst who advises the government said that a Citigroup study published on September 4 assumes that Saudi Arabia will maintain its production capacity for years at the current level of 12.5 million barrels a day. Such a forecast is unrealistic.

Mr Sabban said that “The kingdom’s production capacity changed in the past and it’s changing according to the needs of global demand. It was never fixed for a very long period at a certain level.”

New York based Citigroup said that Saudi Arabia may need to import oil by 2030 if the country’s domestic crude use continues to outpace gains in production. Official subsidies encouraging oil consumption are a main reason for this potential outcome. Saudi Arabia depends on oil for 86 per cent of its annual revenue and is accelerating exploration for natural gas and planning to develop solar and nuclear power to preserve more of its valuable crude for export.

Mr Al Sabban acknowledged that fuel subsidies are contributing to higher Saudi oil use and said Saudi Arabia is not opposed to reviewing local pricing. Any decision to reduce subsidies would need to take into account the possible impact on the competitiveness of Saudi exports.

Saudi Arabian power providers pay USD 5 to USD 15 per barrel for fuel from state owned Saudi Arabian Oil Company. Brent crude, the benchmark for more than half the world’s oil closed on September 14th 2012 at USD 116.66 per barrel on the London based ICE Futures Europe Exchange.

Saudi Arabia plans to gradually replace crude with gas as fuel for power stations and this will help free more oil for export. The country has refused to import gas, unlike neighboring producers such as Kuwait and the UAE that also lack fuel to generate power.

Source - Gulf News

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