RIYADH -- Saudi Arabia, the world's largest oil exporter, plans
convert its domestic power usage from oil to natural gas by 2002,
with private investors set to play a central role because of the
great capital demands, said Saudi American Bank's chief economist
The kingdom's blueprint for conversion to gas was presented last
week at a Saudi Arabian conference on the use of gas for power and
industrial development, being held in Yanbu, an industrial city on
the Red Sea coast.
"The rising domestic consumption of oil cuts into Saudi's
export volume," said Taecker, a speaker at the conference, and whose
bank is the nation's largest by market value. "There is no global
market for gas and shipping it is way too expensive, so the more gas
they consume domestically the more oil they will have to export."
Foreign companies attending the conference include Eni SpA,
Italy's state-controlled energy company and its engineering unit,
Snamprogetti; Bechtel Group, a closely held U.S. engineering and
construction company based in San Francisco; Mobil's liquefied
natural gas unit, Mobil LNG; Royal Dutch/Shell Group; and Powergen
Plc., a U.K. power generator and supplier. Saudi American Bank said
the costs of fully developing the gas resources, building the
pipelines and distribution grids needed to take gas to customers,
to convert, expand, and develop new electric power generation
facilities will be enormous.
Saudi Arabia, though, is starting to recognize the limitations of
bank financing and the advantages of equity capital, analysts said.
"Eni intends to participate in the development of different gas
projects in Saudi Arabia through the establishment of different
ventures," said Aldo Carbone, Eni's representative in Saudi Arabia.
According to the International Energy Agency, world oil demand is
to grow by 30 percent over the next 15 years. Saudi Arabia consumes
domestically about 15 percent of the 8 million barrels of oil it
produces each day, and in terms of returns for units of energy
consumed, natural gas will generate more electricity or desalinate
more water than most other fuels, including oil.
Saudi Arabia incurred a budget deficit for the 14th consecutive
year in 1996, which has restricted its ability to underwrite
infrastructure projects. Deep spending cuts, though, since 1992 has
seen the budget deficit fall to about 3 per cent of national output
from about 20 percent in the early 1990s.
"The Saudi government will have to step aside and let the private
sector into the energy and petrochemical industries, because it is
not in a position to meet the great demands for capital in these
industries," said Michael Frisby, counselor for commercial affairs
the U.S. embassy in Riyadh.
According to official U.S. government figures, the native
population of Saudi will more than triple by the year 2020. …