A brief comment by Saudi Energy Minister Khalid al-Falih in Baku on 17 March (MEES, 22 March) underlines a key limiting factor in the kingdom’s oil supply flexibility. In reiterating Riyadh’s opposition to a replay of the “80s phenomenon” where the kingdom cut production to barely 2mn b/d in a bid to manage markets, he flagged up the resultant gas shortages.
This is due to the kingdom’s dependence on associated gas – gas produced alongside crude oil – although Riyadh has been successfully reducing this. Associated gas now represents approximately one third of Saudi sales gas output. Given that Saudi Arabian gas production is inadequate to provide its power plants with sufficient feedstock, the kingdom has to burn vast quantities of liquids to meet electricity demand. (CONTINUED - 969 WORDS)