The Future of Energy in Saudi Arabia

Introduction

Saudi Arabia is a leading manufacturer of energy such as natural gas and petroleum for both local consumption and export. It has the largest crude oil reserves in the world; domestically, this fuel is utilized in the generation of electricity. The country economy depends on oil production, which accounts for about 90% of exports and government revenue of 75% (Selmi & Bouoiyour, 2019). Petroleum oil fields in the nation include Saudi Aramco, which is the largest globally, the Ghawar oil field, Manifa, Khusaniyah, Khurais, Haradh, Shaybah I II & II, and Narayan (Miandad et al., 2018). This paper highlights the fact that natural resources such as fossil fuel, which is not sustainable is the most prevalent source of energy in Saudi Arabia.

Clean Energy

There is a rising energy demand in Saudi Arabia requiring an expansion of clean power generation systems. Currently, conventional source involving the burning of fossil fuels is the main source of energy. This method of energy generation has negative impacts on the environment and human health (Salam & Khan, 2018). It produces harmful gases such as carbon monoxide, nitrogen oxides, and sulfur dioxide, which are emitted to the environment as greenhouse emissions as shown in figure 1 below. Since the country is located along the Sunbelt solar energy production through photovoltaic cells needs to be adopted.

Development of CO2 emissions from 1979 to 2016 in million tons
Figure 1. Development of CO2 emissions from 1979 to 2016 in million tons

Experienced Energy Shortage

Saudi Arabia faced a shortage of natural gas to fulfil the demands of the country. The deficiency issue forced the companies to seek a natural gas alternative by shifting to the use of naphtha/oil-based feedstock to produce energy. The Petrochemical giant Saudi Basic Industries Corporation stated that Saudi Aramco supplied less energy as required (Salam & Khan, 2018). The government also had to make changes to curb the deficit, and they did this by using oil and diesel to fire new industrial projects and power plants, which generated electricity.

Inefficient Energy Consumption

The energy consumption rate in Saudi Arabia is growing towards an unsustainable level. This phenomenon had been attributed to a lack of efficient energy practice among citizens. High rates of economic development and population growth, and low prices of energy are reasons exacerbating inefficient energy use of energy. Additionally, the absence of public awareness concerning saving electricity has encouraged negative practices. For instance, people have a habit of not switching televisions and lights off when not in use.

Electricity consumption in Saudi Arabia 
Figure 2. Electricity consumption in Saudi Arabia 

Current Issues Linked With Energy in Saudi Arabia

Covid-19 Pandemic

The demand for the energy market especially fuel is reducing globally. This occurrence is attributed to lockdown measures implemented to hinder the spread of the covid-19 pandemic. For this reason, the amount of fuel imported by countries such as China for aviation has decreased (Ali, 2021). Currently, the prices of crude oil have plunged to the lowest relative to the past 18 years, consequently lowering the country’s revenue (Ali, 2021). Since Saudi Arabia’s economy depends on oil energy, it had to offer discounts on the products to maintain its customers.

Increase in demand per Capita

The demand for electricity is growing rapidly more than the gross domestic product (GDP) in Saudi Arabia. This is attributed to the increasing population and economic growth, which is raising the demand for power per Capita. It is projected that the GDP is likely to rise by 4.4% in the next five years (Miandad et al., 2018). The estimated increase is greater than that of developed countries but low relative to emerging markets.

Excessive Domestic Use of Energy

Currently, Saudi Arabia’s energy intensity is doubling the consumption of European members of the Organization for Economic Development. Their climatic conditions consumption pattern drives fuel demand up. For instance, in winter, the need for power is lower than in summer since air-conditioning has to be done (Selmi & Bouoiyour, 2019). For these reasons, the export capacity may reduce tremendously if domestic energy intake is not curtailed.

Improving Consumers Awareness and Diversification

The major issues affecting energy use in Saudi Arabia have been linked to consumers’ behavior in daily life among uneducated and low-income earners. Thus, to improve efficiency, the focus was placed on increasing citizens’ positive attitudes through education and conducting public awareness programs. In addition, plans to diversify energy sources by adopting nuclear power were made to curb the increasing need attributed to population growth and construction boom in urban areas.

Policies

The government of Saudi Arabia has made policies to manage domestic demand and find new energy sources. It has removed subsidies of power bills for citizens and provided direct financial aid to the needy population. This move aims at encouraging consumers to utilize electricity efficiently, to cut the cost of fuel for production, and increase the amounts for export. It has also expanded the energy sector and encouraged investment by foreign businesses in the gas segment and downstream industries to maximize energy production (Selmi & Bouoiyour, 2019). Thus, companies interested in solar, nuclear, and natural gas production are encouraged to invest in the country. Currently, there is a proposal for the production of renewable energy by use of H2, which will be harvested from industrial, agricultural, and domestic waste deposited in dumpsites and landfills (Ali, 2021). Solar and waste products are the best sustainable alternative source to be exploited.

Saudia Arabia 2030 Energy Vision

Vision 2030 for Saudia Arabia has a strategic framework that aims at reducing overdependence on oil. The government’s plans to constitute the vital role of gas and oil sector in the entrepreneurial, fiscal, and technological channels. In addition, fuel composition, energy demand patterns, and local energy price levels have been incorporated into the agenda (Al-Moneef, 2018). These reform programs was established to regulate energy production and consumption and achieve the vision’s goal.

Slow demand for energy by 2030 is to be achieved through generating energy efficiency programs, and economic slowdown, and switching prices for domestic fuel. These measures are expected to align oil, refined products, and natural gas prices in Saudi Arabia with global market values. The cost of fuel was adjusted in 2016 and 2018, a 67% and 133% increase in the price of natural gas prices for domestic and industrial utilizes was imposed, respectively (Al-Moneef, 2018). Diesel and gasoline prices to be utilized in transportation rose by 80% and 240% correspondingly, while liquid fuels were hiked by 60% (Al-Moneef, 2018). These adjustments were made to improve fuel efficiency and lower the demand.

The energy reforms also aimed at boosting fuel generation and strengthening energy industry linkages. For instance, it increased production in the government-owned Saudi Aramco company as well as that of other petrochemical and power industries. Furthermore, an agency for promoting sustainable energy projects has been established to discourage overdependence on oil and fossil fuel. The government has created new capacities for energy production for it to achieve vision 2030 energy goals respectively (Al-Moneef, 2018). This has been done by opening opportunities for the generation of more valuable products such as diesel and gasoline.

Conclusion

In conclusion, energy is the most critical factor influencing the economic growth of Saudi Arabia. Since the power demand for local consumption is high, there is a need for the adoption of more sustainable means of fuel production to evade the depletion of natural resources. Diversification of energy is a dimension included in vision 2030 agenda, its plans to increase natural gas production and other renewable energy sources such as solar and nuclear energy is commendable because it will lower consumption and pollution. For instance, the proposal for the generation of renewable energy using H2 in dumpsites will reduce greenhouse gas emissions to the environment.

References

Ali, A. (2021). Liquidity variations and variability cohesiveness with revenue and profitability: A case of Saudi energy sector companies. Accounting, 7(4), 763-770. Web.

Al-Moneef, M. (2018). The energy sector reforms of Saudi Arabia’s Vision 2030. Economic Research Forum. Web.

Miandad, R., Rehan, M., Ouda, O. K. M., Khan, M. Z., Shahzad, K., Ismail, I. M. I., & Nizami, A. S. (2017). Waste-to-hydrogen energy in Saudi Arabia: Challenges and perspectives. Biohydrogen Production: Sustainability of Current Technology and Future Perspective, (pp. 237-252). Web.

Ritchie, H. & Roser, M. (2020). Energy. OurWorldInData.org. Web.

Salam, M. A., & Khan, S. A. (2018). Transition towards sustainable energy production–A review of the progress for solar energy in Saudi Arabia. Energy Exploration & Exploitation, 36(1), 3-27. Web.

Selmi, R., & Bouoiyour, J. (2019). Arab geopolitics in turmoil: Implications of Qatar-Gulf crisis for business. International Economics, 161, 100-119. Web.

Worlddata.info. (2021) Energy consumption in Saudi Arabia [Data set]. Web.

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