If Citigroup is right, Saudi Arabia will cease to be an oil exporter by 2030, far sooner than previously thought.
A 150-page report by Heidy Rehman on the Saudi petrochemical industry should be sober reading for those who think that shale oil and gas have solved our global energy crunch.
I don't wish to knock shale. It is a Godsend and should be encouraged with utmost vigour and dispatch in Britain. But it is for now plugging holes in global supply rather than covering the future shortfall as the industrial revolutions of Asia mature.
The basic point – common to other Gulf oil producers – is that Saudi local consumption is rocketing. Residential use makes up 50pc of demand, and over two thirds of that is air-conditioning.
The Saudis also consume 250 litres per head per day of water – the world's third highest (which blows the mind), growing at 9pc a year – and most of this is provided from energy-guzzling desalination plants.
All this is made far worse across the Gulf by fuel subsidies to placate restive populations.
The Saudis already consume a quarter of their 11.1m barrels a day of crude output. They are using more per capita than the US even though their industrial base as a share of GDP is much smaller.
The country already consumes all its gas. (Neighbouring Kuwait is now importing LNG gas from Russia:
From Heidy Rehman at Citi:
• Saudi Arabia Could be an Oil Importer by ~2030 — Saudi Arabia is the world’s largest oil producer (11.1mbpd) & exporter (7.7mbpd). It also consumes 25% of its production. Energy consumption per capita exceeds that of most industrial nations. Oil & its derivatives account for ~50% of Saudi’s electricity production, used mostly (>50%) for residential use. Peak power demand is growing by ~8%/yr. Our analysis shows that if nothing changes Saudi may have no available oil for export by 2030.
• It Already Consumes All Its Gas Production — Saudi Arabia produces 9.6bn ft3/day of natural gas. This is entirely consumed domestically. It is looking to raise gas production to 15.5bn ft3/day by 2015E, implying a 2011-15E CAGR of 12.7%. However, peak power demand is growing at almost 8% pa. We believe Saudi Arabia will need to find new sources to meet residential & industrial demand.
This may concentrate a few minds in The Kingdom. The country is already planning an 80GW nuclear blitz though they are woefully short of nuclear power experts.
It has big hopes from solar projects based on successes of solar farms in California. Both nuclear and solar would allow it export more of its oil output.
A great deal could change. New desalination filters should reduce energy use drastically, for instance. Saudi fuel subsidy policies may change.
While I don't wish to judge the claims of this report – I merely pass it on to readers since I don't know enough about the Saudi system – but it is yet another piece of evidence pointing to Peak Cheap Oil.
Jeremy Leggett, the head of the UK Taskforce on Peak Oil and Energy Security, says Britain is sleepwalking into a potential disaster by failing to prepare fully for a global supply crunch.
The refusal to listen to warning signals is comparable to the complacency in the build-up to the financial crisis, he argues, but with graver implications for the British economy.