Saudi Arabia is importing more fuel oil than before, to use in power generation as its natural gas production reverses direction and declines, Reuters has reported, citing Rystad Energy.
OPEC’s number-one oil producer and exporter has had to slash output because of the Strait of Hormuz closure, with the shut-in amount estimated at over 3 million barrels daily. With it, some natural gas extraction as a by-product has dropped, too, prompting the rise in fuel oil imports.
These stood at an average of 360,000 barrels daily last month, according to Vortexa data cited by Reuters. This is 86% higher than what Saudi Arabia imported a year earlier. “The sharp increase in fuel oil imports is a leading indicator that oil burn will rise above year-ago levels,” Reuters also cited a Rystad Energy analyst as saying.
Summer is peak season for air-conditioning demand in Saudi Arabia and the region, and this year, consumption of fuel oil and crude for power generation could top 1 million barrels daily, Rystad Energy’s Rahul Choudhary, VP for oil and gas research, also told the publication.
Saudi Arabia has been eager to boost its natural gas production in order to reduce its dependence on fuel oil imports for power generation. Its flagship project in that area is the Jafurah gas field, which began production at the end of last year.
With a price tag of a total of $100 billion, the Jafurah development is described as the largest unconventional gas development outside the United States. Its reserves are estimated at some 229 trillion cubic feet of natural gas plus 75 billion barrels of condensate. When completed by 2030, the huge project is also expected to produce 420 million standard cubic feet per day of ethane and 630,000 barrels per day of high-value liquids by 2030. For now, however, it seems Saudi Arabia is stuck with fuel oil.
By Irina Slav for Oilprice.com