Saudi summer oil burning hits record high in 2012 -JODI

Daniel Fineren

DUBAI, Nov 19 (Reuters) - Saudi Arabia burned record volumes

of crude oil over the summer, official government figures show,

contrary to its aim of using more gas for power generatation to

reduce wastage of crude that it could export.

During the peak period from early June through September,

Saudi Arabia burned an average of 763,250 barrels per day (bpd)

of crude, compared to an average of 701,250 bpd last year and

747,750 bpd in the previous record summer of 2010, official

government data issued on Sunday under the Joint Oil Data

Initiative (JODI) shows.

Saudi Oil Minister Ali al-Naimi said in March that more

natural gas should be available from fields that only produce

gas, or so-called non-associated fields, to meet peak summer

power demand, potentially saving millions of barrels of valuable

crude for export.

Key to this plan was the ramp-up of Karan, Saudi Aramco's

first non-associated offshore gas field, which was completed

ahead of schedule, helping boost Saudi gas production by 18

percent over summer, Aramco said in October.

Karan, which can pump gas free from OPEC-constrained crude

oil fields, should save tens of millions of barrels of crude for

export over coming years.

But its rapid ramp up was not enough to prevent a rebound in

crude oil burning in the world's leading oil exporting country,

as rampant power demand and tight supplies of alternative fuels

for electricity and sea-water desalination sucked in millions

more Saudi crude barrels for burning this year.

"Karan has definitely contributed to reduce crude oil

burning, had it not been on stream, oil burning could have

exceeded 850,000 bpd in the peak summer period," said Sadad

al-Husseini, a former top executive at Saudi Aramco said.

"But demand (for power) was significantly higher, due to an

exceptionally hot summer."

In summer 2011, record Saudi imports of diesel and fuel oil,

which is used to generate power in parts of the country,

combined with a sharp rise in Saudi crude production which

boosted associated gas supplies, contributed to the first hiatus

in the rise of crude burning since 2003.

Lack of refinery capacity means Saudi has to import fuel.

Saudi crude production averaged 9.845 million bpd from June

to September 2012, or 192,500 bpd more than it pumped in the

same period of last year, which would have brought with it more

associated gas from the kingdom's vast oil fields.

But there was still not enough gas to meet demand as

temperatures in the kingdom soared over 45 degrees Celsius.

Despite stepping up diesel and fuel oil imports

, a market made tighter by sanctions on Iran kept

prices high and supplies scarce, forcing the country sitting on

the world's largest oil reserves to burn around 7.56 million

more barrels of oil over the four months than it did last year.

At an average price of $105 a barrel, that equates to

around $800 million more Saudi crude burnt this summer.

Saudi Arabia is by far the largest user of crude oil for

power generation, with most countries outside the Middle East

cutting back oil-fired power generation long ago in favour of

gas, nuclear and renewable energy sources.

Aramco now manages known gas reserves of 279 trillion cubic

feet, the fourth largest in the world, and hopes to increase its

gross gas production from 10.2 billion cubic feet per day (bcfd)

in 2010 to more than 15 bcfd by 2015.

It has raised output significantly over the past few years

but has not been able to keep up with rapidly rising demand

driven by population growth and a buoyant industrial sector.


Although dwarfed by Saudi Arabia, the United Arab Emirates

(UAE), which generates the vast majority of its electricity with

natural gas, set light to an average of 20,000 bpd oil in the

period, compared to just 4,500 bpd last summer and a previous

high of 14,750 bpd in 2010.

The UAE burned an average of 79,000 bpd of oil in April,

nearly four times its previous monthly record high of 21,000 bpd

set in December 2011, according to JODI data.

Kuwait, which like the UAE has tried to reduce its oil use

for power generation by increasing imports of liquefied natural

gas over the last few years, burned 13,000 bpd more crude every

day this summer than it did last year.

But less of its oil was used than in the June-September

periods of peak air conditioning demand in 2009 and 2010, JODI

figures show.

(Additional reporting by Reem Shamseddine; editing by Keiron