Saudi Arabia ‘must tame energy use’

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Saudi Arabia's central bank governor has warned that the kingdom must tame growth in its domestic oil and gas consumption, which are too big for both its population growth and the size of its economy.

“Data shows that the kingdom's domestic consumption of oil and gas is posting continuing growth and at high ratios,” said Muhammad Al Jasser. “It rose by an average 5.9 per cent over the past five years.”

“This is a high growth percentage compared to demographic growth and Gross Domestic Product – which gives cause for research into the causes of the increase in oil and gas consumption and work to rationalise it,” he added.

Saudi Arabia's annual population growth is around 1.8 per cent. Economic output grew by 0.9 per cent last year and the International Monetary Fund expects it to rise by 3.7 per cent this year.

Jasser made the remarks during a meeting where he presented Saudi Arabia’s King Abdullah with the central bank's 2009 annual report. The rapidly-rising domestic demand for energy was one of three main challenges facing the kingdom outlined in the report. The other two were the need to create more jobs, particularly for Saudi Arabia’s recent graduates, and the need to boost housing for Saudis.

Growing demand for electricity is one of the biggest drains on Saudi Arabia's energy supplies, say officials. State-controlled Saudi Electricity has said it used about 274,000 bpd for electricity production in 2009.

Abdullah Al Shehry, governor of the Electricity and Co-generation Regulatory Authority, has said that about 877,000 bpd goes to the production of electricity. That’s more oil than the whole of Oman produces in a day. Demand for electricity has been rising by an annual eight per cent in recent years.

Market analysts say electricity is being sold at giveaway prices to households, although prices for industrial users were increased in July. Most of Saudi Arabia's gas output is associated with oil, so when it complies with oil production curbs agreed by OPEC, this also reduces gas production. The kingdom plans to raise its production of unprocessed natural gas to 15.5 billion cfd by 2015 from 10.2 billion cfd currently.

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