Saudi Arabia, Kuwait Seek Gas to Supplant Use of Oil for Power

Saudi Arabia, the world’s largest oil exporter, and neighbor Kuwait seek to add natural gas supply to avoid burning crude and refined products to generate power, officials from the two nations’ state oil companies said.

“We are picking up gas exploration,” Ahmad Al-Sa’adi, vice president of gas operations at Saudi Aramco, said today at a conference in Doha, Qatar. “Any liquid fuel we are burning comes at the expense of our exports.”

Middle East oil producers like Saudi Arabia, Kuwait and the United Arab Emirates are largely dependent on gas found together with crude oil. Output of the fuel is crimped because the Organization of Petroleum Exporting Countries limits the amount of gas that can be extracted.

Kuwait, which uses an average of 200,000 to 300,000 barrels of oil and refined products each day to generate power, seeks to increase gas supply through liquefied natural gas imports and associated gas finds, Kuwait Petroleum Corp. Chief Executive Officer Farouq al-Zanki said. The company aims to produce more gas as oil production rises and to find stand-alone deposits.

“Our plan is to use less oil than gas,” he said. “If worst comes to worst, we would continue to use the more expensive fuel.”

Al-Sa’adi and Al-Zanki were speaking in Qatar, the world’s largest LNG exporter, where they were attending a gas supply conference. Qatar’s ample supplies are in contrast to other states in the region, whose governments seek added gas to feed growing economies and industry.

Demand Outpacing Growth

Saudi Arabia’s domestic oil and gas use is growing faster than its economy, rising at an average of 5.9 percent annually in the past five years, the kingdom’s central bank governor Muhammad al-Jasser said in September. The Saudi economy, excluding oil, may expand 4.5 percent in 2010 according to the International Monetary Fund, compared with 3.3 percent in 2009.

“What is really making the difference is that domestic demand is growing,” Al-Sa’adi said. Implementing renewable energy projects like solar power generation and starting efficiency programs to cut energy use are steps to have an immediate impact on oil use, he said.

Saudi Arabia consumes about 1.2 million barrels a day of oil and refined products for power generation and about the same amount of crude for processing, ACWA Power International Chief Executive Officer Paddy Padmanathan said last week. Unless the government goes ahead with a plan to diversify power-generation sources, crude available for export could slip to 45 percent of the total produced by 2030, he said at a conference in Abu Dhabi. The kingdom produces about 8 million barrels of oil a day and has a capacity to pump more than 12 million daily.

Kuwait, which pumps about 3 million barrels a day, is producing about 1 billion cubic feet of gas a day less than it needs for domestic use, Kuwait Oil Co. Chairman Sami al-Rushaid said at a conference there yesterday. The country needs about 2.2 billion cubic feet of gas a day and this requirement will rise to 5 billion cubic feet a day by 2030, he said. It produces 1 billion cubic feet a day of associated gas and 130 million to 140 million cubic feet a day of non-associated gas.

To contact the reporter on this story: Anthony DiPaola in Doha at adipaola@bloomberg.net; t rtuttle@bloomberg.net.

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net.

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