Saudi Arabia’s power play will unleash crude oil supplies: Fuel for Thought

Saudi Arabia’s energy strategy could put to bed questions over its spare oil capacity in the coming years. The kingdom’s plan is two-pronged: Expand and develop oil fields to offset production decline, and diversify away from crude for power generation. It is this latter move that is key to unlocking further oil exports. The OPEC doyen plans to burn less crude as it pushes ahead with a swathe of important gas and high-sulfur fuel oil power plants to drive its economy and keep homes cool. S&P Global Platts Analytics sees high-sulfur fuel oil displacing 200,000 b/d of crude burn by 2020, as Saudi Arabia ramps up use of the cheap and undesirable by-product of the refining process rather than its precious black gold. The International Maritime Organization’s regulation that will cut the sulfur limit from 3.5% to 0.5% from the start of 2020 and see shipowners scramble to find cleaner alternative energy sources is likely to play into the kingdom’s hands. The UN agency’s ruling will see a probable global glut of fuel oil that could find a home powering much of the Persian Gulf. In 2016, Saudi Arabia became a net consumer of fuel oil, especially during the summer… continue reading

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