The Gulf region offers massive business potential for companies involved in Electrical Generation

About KSA

Saudi Arabia, housing the world’s largest crude production capacity, has undertaken an ambitious five-year, $129-billion energy investment plan, nearly $60 billion of which will be directed toward increasing upstream petroleum capacity to an estimated 12.5 million bbl/d by 2009

Saudi Arabia is the world’s largest producer and exporter of total petroleum liquids and is currently the world’s second largest crude oil producer behind Russia. Saudi Arabia’s economy remains heavily dependent on oil and petroleum-related industries, including petrochemicals and petroleum refining. The International Monetary Fund reported that in 2006, the last available data, oil export revenues accounted for around 90 percent of total Saudi export earnings and state revenues and above 40 percent of the country's gross domestic product (GDP).

Saudi Arabia’s hydrocarbon sector operations are dominated by the state-owned oil company, Saudi Aramco. Saudi Aramco is the world’s largest oil company in terms of proven or “booked” reserves and production of hydrocarbons. In addition, Saudi Arabia’s Ministry of Petroleum and Mineral Resources and the Supreme Council for Petroleum and Minerals has oversight of the sector and Saudi Aramco directly. The Supreme Council, which is comprised of members of the royal family, industry leaders and government ministers, is responsible for petroleum and natural gas policy-making, including contract review, as well as Saudi Aramco’s strategic planning. The Ministry is responsible for national planning in the area of energy and minerals, including petrochemicals.

Energy Consumption

Saudi Arabia is the fastest growing consumer of energy in the Middle East, particularly in the area of transportation fuels. Domestic consumption growth has been spurred by the economic boom due to historically high oil prices and large fuel subsidies. In 2005, Saudi Arabia was the 15th largest consumer of total primary energy, of which 60 percent was petroleum-based. The remainder was made up of natural gas, the growth of which has been limited by supply constraints.

Electricity Overview

Similar to the situation in the natural gas sector, the combination of Saudi Arabia's rapidly expanding population and industrial base (representing 60 percent of demand), paired with artificially low power tariffs, has increased the demand on electric utilities (averaging 5 to 7 percent annual growth). At times, the increased load has lead to shortages, blackouts and power rations in various parts of the country. Saudi Arabia's Water and Electricity Ministry (WEC) estimates that the country will require at least 35 Gigawatts (GW) of additional power generating capacity by 2023-25 – more than double the 2005 estimate of installed capacity of 30.5 GW - at a cost of an estimated $120 billion. (According to the Saudi Electricity Company (SEC), capacity reached 35.9 MW in 2007). In addition, Saudi Arabia's state-owned Saline Water Conversion Corp. (SWCC) has estimated that through 2020, the country will need to spend at least $50 billion on water projects, many integrated with new power generation capacity, in order to meet the Kingdom's equally rapidly growing water demand. Most of this money is slated to come from the private sector, including foreign investors.

Feedstock for planned power capacity increases was originally expected to be natural gas and/or combined cycle. However, many new facilities may be crude-oil fired due to constraints on domestic natural gas supplies. A royal decree issued in the spring of 2006, requires that all future coastal power plants utilize crude feedstock at a set price of $0.46 per million BTU. According to a June 2008 report by Facts Global Energy, some 200,000 to 250,000 bbl/d of crude is being burned directly for power generation. All of Saudi Arabia’s electric power generation is thermal.

According to the 2007 SEC annual report, Saudi Arabia added more than 2.3 GW last year, including expansions at the Shuaibah Power Plant and nearly 900 MW of gas fired turbines in Riyadh (9), Tehama and Jizan. Some of the newest and largest facilities include the $1.7-billion, 2400-MW Ghazlan II plant north of Dammam, the first power project to be debt-financed; its sister plant, the1600-MW Ghazlan I; and the 2500-MW Qurayya I and II.

Major Independent Power Projects

Throughout the kingdom, independent power projects (IPPs), which are not integrated with desalinization facilities, are also being tendered by the SEC, primarily to local contractors. According to the SEC, about 8000 MW of new capacity is currently under construction, 5200 MW of which are IPPs. The SEC is calling for ten percent of power generation to come from IPPs in the next decade. Three SEC-led IPPs are currently being planned include Rabigh (1200 MW, online 2012 or 2013), Riyadh-P11 (2000 MW, 2013 or 2014) and Al-Qurayyah (2000 MW, 2014 or 2015). The facilities will be built on a Build-Own-Operate (BOO) basis, and the SEC will be a partner.

Major Cogeneration Facilities

Separately, Saudi Aramco is building a series of co-generation plants at oil and gas installations throughout the country in order to reduce drain of the energy sector on the national grid. For example, as part of the Khursaniya and Shaybah mega-projects, two cogeneration units with a combined capacity of 300 MW were installed. Also, a 380-MW plant is being constructed at Rabigh that will power the adjacent Sumitomo/Aramco petrochemical complex.

Transmission and Regional Interconnection

Besides generation, Saudi Arabia also requires additional investment in power transmission. At present, around 10 percent of the Kingdom’s population lacks access to the national power grid. Aramco estimates that creating a unified national grid may require laying more than 20,000 miles of additional power transmission and distribution lines on top of the existing 150,000 miles of lines.

Non-Conventional Energy

In July 2006, the U.S.-based International Power Group, Ltd. (IPWG) was granted a three-year renewable license to conduct a feasibility study for a waste-to-energy (WTE) facility in the southwestern city of Jizan. Following the study, a US$300-million plant was commissioned, and is expected to come online in December 2008, although formal plans have not been publicized. According to IPWG, the WTE modules combust up to 180 tons of solid and hazardous waste, while generating 6 MW of electricity and up to 250,000 gallons of distilled water per day.

Oil

Reserves

According to the Oil and Gas Journal, Saudi Arabia contains approximately 267 billion barrels of proven oil reserves (including 2.5 billion barrels in the Saudi-Kuwaiti shared "Neutral" Zone), amounting to around one-fifth of proven, conventional world oil reserves. Around two-thirds of Saudi reserves are considered "light," "extra light" or “super light” grades of oil, with the rest either "medium" or "heavy." Although Saudi Arabia has around 100 major oil and gas fields (and more than 1,500 wells), over half of its oil reserves are contained in only eight fields, including the giant 1260-square mile Ghawar (the world's largest oil field, with estimated remaining reserves of 70 billion barrels) and Safaniya, including Khafji and Hout (the world's largest offshore oilfield, with estimated reserves of 20 billion barrels).

Production Capacity

Saudi Arabia maintains the world’s largest crude oil production capacity, estimated to be around 10.5 - 11 million bbl/d, at mid-year 2008. In 2005, Saudi Arabia’s Ministry of Petroleum and Mineral Resources announced the details of a plan to increase this capacity to 12.5 million bbl/d by 2009, the detail of which are outlined below.

Production & Consumption

For 2007, the U.S. Energy Information Administration (EIA) estimates that Saudi Arabia produced on average 10.2 million bbl/d of total oil, comprising crude oil, lease condensate, natural gas liquids, and other liquids (including half of the Saudi-Kuwaiti Neutral Zone's 600,000 bbl/d). In addition to 8.7 million bbl/d of crude oil, Saudi Arabia produced around 1.5 million bbl/d of natural gas liquids (NGLs) and other liquids, which are not subject to OPEC quotas. Saudi Arabia, a leading world producer of NGLs, has experienced a rise in demand for NGLs from developing countries, including India (the leading export destination), where is it used for cooking and transportation. In the first and second quarters of 2008, Saudi Arabia’s production rose to an estimated 9.2 million bbl/d of crude oil, representing approximately 13 percent of total world crude production.

In response to historically high oil prices and rising demand, in June 2008, the Ministry of Petroleum and Mineral Resources announced that Saudi Arabia would increase production to around 9.7 million bbl/d in July 2008. As a result, Saudi Arabia will be producing at the highest level of crude since the early 1980s. The new capacity is expected to come primarily from the Khursaniyah development.