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By Samuel R. Avro on Feb 15, 2010 with 5 responses

Saudi Energy Adviser Alarmed about Peak Demand for Oil, Pushes for Diversified Economy


A top Saudi oil ministry adviser declared his concern that a peak in oil demand had already occurred, or would take place in the next decade, and said that his country, which relies heavily on income from its crude oil exports, is alarmed enough about it to diversify its economy by striving to become a leading alternative energy exporter.

“Talk of oil demand peaking is an alarm to speed up the economic diversification process,” Mohammed al-Sabban said on Monday at the World Economic Forum in the Saudi city of Jeddah. “The challenges facing Saudi Arabia are huge: we need to develop Saudis in order to be innovative, creative, to catch up with the rest of the world.”

More than a quarter of the youth in the country are unemployed, and the kingdom is trying to upgrade their scientific and educational institutions to further their knowledge which will help them expand their economy into other areas.

Al-Sabban also announced that his country will be launching its first carbon capture project by injecting carbon dioxide into the Ghawar oil field, the world’s largest oil field, beginning in 2012.

“The world cannot wait for us before we are forced to adapt to the reality of lower and lower oil revenues,” al-Sabban added.

The theory of “peak oil” is the point where oil extraction has reached its maximum levels and is entering a state of permanent decline. Experts differ on whether most oil producing nations have already reached their peaks in oil extraction, or, as al-Sabaan contends, if crude oil consumption will begin to slow as leading economic nations begin to rely more heavily on alternative and renewable energy sources.

“The world cannot wait," for the Saudis before they are "forced to adapt to the reality of lower and lower oil revenues,” Mohammed al-Sabban warned.

Saudi Arabia is currently extracting 8 million barrels of crude oil per day, with a reserve capacity of 4 million barrels per day more.

Gulf states, which rely on crude oil exports to cover as much as 90 percent of their budgets, need to begin looking into nuclear energy as an alternative, Adnan Shihab-Eldin, a former secretary general of the Organization of the Petroleum Exporting Countries (OPEC) told the audience in Jeddah. He noted that nuclear power would be economically viable even with crude oil prices just above the $40 per barrel range.

The Saudis, as the biggest oil producer in the 12-member organization, are widely considered to be the leader of OPEC and their comments are usually looked at as a sign of what the cartel as a whole is thinking.

Saudi King Abdullah recently launched a solar-power water desalination plant in its efforts to begin looking toward alternative energy. The country provides more than 18% of the world’s production of desalinated water.

  1. By Lester on February 17, 2010 at 5:11 am

    It would be particularily good if they could find a way to produce: The current 10,000,000 barrels per day x 5.6 million BTU/barrel = 56000000000000 BTU per day from renewables. Good luck with that – I’m planting a garden.

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  2. By Maxwell on February 17, 2010 at 6:56 am

    Good point Lester!! Some1 on Digg asked why the heck don’t they utilize all that desert sun and make large solar arrays instead of laundering all that money into US munitions. They also need to work on human rights before they can get “innovative” on the renewables side.
    Is there nothing they can use all of that sand for??

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  3. By Max Gold on February 17, 2010 at 10:29 am

    Unless Saudi becomes a more progressive society, they face a major collapse post peak oil. Without massive cash reserves and paid global influence, they will have to compete on talent.  The society and infrastructure  is just not in place and will not be in place in 10- 15 years.

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  4. By posconvex on July 4, 2010 at 6:22 pm

    Any discussion about peak oil and oil prices over the next decade must include an attempt to quantify emerging economy demand as an important driver at the margin. Here is a simple thought experiment using Chinese demand to give some idea of the magnitude of the supply issues we face:
    - China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year
    - Transition takes 30 years
    - No peak in global production

    In next 10 years we must find 44 million BOPD. If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years:
    - Oil demand elasticity of -0.3
    - Current production 84 million BOPD, current price US$ 80
    - Peak production 100 million BOPD
    - Post peak decline rate of 3-4%

    If you want to try the model for yourself using your own assumptions it can be found at Petrocapita Income Trust:
    http://www.petrocapita.com/index.php?option=com_content&view=article&id=128&Itemid=86

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  5. By Eli Wagar on July 22, 2010 at 2:10 pm

    Ah I see, so you have to wait until your vast fortunes are in trouble before you start trying to make your society better. Don’t get me wrong, I think any change towards alternative energy is great, I have even detailed it in this article alternative sources of energy. However I see this country as rich beyond rich, at least for it’s top .5 percent off of their oil sales. Now they want to start educating the young because their golden egg is about to be fried. Should have been concentrating on your society instead of your wallet in the first place.

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