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| Fig. 1: Historical increase of electricity consumption in Saudi Arabia and the composition of the hydrocarbons consumed in generating electricity, after Anderson. [2] (Source: N. Albokhari). |
The government of Saudi Arabia announced its plan to segment around five percent of the Kingdom's national oil company in an initial public offering (IPO). "We are listing a part of the entire company, and not just downstream," Saudi Aramco CEO, Amin Nasser said. The Saudi government targets to generate about 100 billion dollars from the IPO of its the most important asset which could be the world's largest IPO. [1]
This step indicates the Kingdom's desire to diversify not only its energy portfolio but also the sources of income. This fact comes from the instability of supply and demand of the oil market in the last decades. Saudi Arabia is seeking to reduce the dependency on crude oil in domestic power generation. This is due to the rapid increase of the consumption of this valuable resources in the local market. The kingdom's electricity comes from the consumption of domestic hydrocarbons - 45% natural gas and 55% oil. [2] Fig. 1 shows the electricity consumption in KWh from the year 2000 until 2012.
It is worth mentioning that the Saudi government supports its citizens with generous subsidies on various consumer products including petroleum products. This sacrifices a considerable amount of revenue that would be generated if this oil were sold into international markets. Thus, from both economic and social perspectives, supplementary energy resources are needed to accommodate the increasing energy consumption in the local market.
For the reasons mentioned above, the Kingdom is exhibiting a remarkable interest in the alternative energy resources such wind, Solar, geothermal and nuclear energy resources. In fact, in September of this year, Saudi Arabia is planning to award its first contracts to construct 700 megawatts of alternative power. Out of this 700, 300 megawatts will be generated by solar plants and 400 megawatts will be generated by wind turbines. [3]
Yet, this interest is not only limited to wind and solar energy. The Saudi government launched King Abdullah City for Nuclear and Renewable Energy (KA-CARE) to manage the renewable energy sector in Saudi Arabia. [4] Therefore, the kingdom is pursuing the utilization of nuclear energy in power generation. Plans to build 16 reactors over the next decades have been announced with an estimated cost of $80 billion. These plants will be fullfilling 15% of electricity demand by the year of 2032. [2]
The kingdom is not the only the country that is considering using the nuclear energy for power generation purposes. United Arab Emirates, an OPEC country like Saudi Arabia, is in the process of building the first nuclear power plants in the region. Officials from Saudi Arabia stated that their interest in this source of energy for power generation. "We will be selecting sites very soon that we will reserve for our first nuclear energy power plant," said his Excellency Khalid Al-Falih, The Kingdom's Energy, Industry and Mineral Resources Minister. [5] The target of utilizing this source is geared toward generating electricity to satisfy domestic need. The plan is to generate 6-7 gigawatts, ten times of the targeted generation of electricity from both solar and wind. This figure is expected to more than double by the year of 2040.
Consequently, the Kingdom is sparing no efforts in order to diminish the reliance on fossil fuels and diversify the revenue streams. This starts with reducing the use of petroleum and natural gas in the local market which leaves a gap in energy supply. This gap will be satisfied with an efficient utilization of diverse types of alternative energy resources that can be prosperous on the long run.
© Nooreddeen Albokhari. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] W. Mahdi, "Saudi Aramco IPO," Bloomberg, 6 Oct 16.
[2] B. Anderson, "Saudis Make Push for Nuclear Energy," Wall Street Journal, 15 Sep 15.
[3] W. Mahdi, "Saudi Arabia Plans the World's Cheapest Power With Solar and Wind" , Bloomberg, 1 Feb 17.
[4] H. Aljamaan, "The Importance of Nuclear Energy to Saudi Arabia" , Physics 241, Stanford University, Winter 2014.
[5] A. Rascouet and W. Mahdi, "Saudi Arabia to Select Nuclear Power-Plant Site 'Very Soon'," Bloomberg Markets, 20 Oct 16.