Maria van der Hoeven, Executive Director, International Energy Agency (IEA), on the Kingdom’s central role in global energy markets

Saudi Arabia has long been a lynchpin of global oil and gas production, but its energy profile is changing. The Kingdom is becoming a rapidly growing energy consumer and a key player in the development of sustainable energy technologies. Saudi Arabia is sometimes called the “central bank” of the global oil industry. With over 260bn barrels of conventional reserves (nearly a fifth of the world’s total), the country can expect to continue producing oil for at least 70 years. At present, the Saudi state oil company Aramco is producing nearly 10m barrels per day (bpd), but also maintains capacity to produce 2.5m bpd more. This is particularly important in the contemporary context, when global economic growth is reviving, oil demand continues to rise and markets are looking tight. Ali Al Naimi, the Saudi minister of petroleum and mineral resources, said recently that the country would meet any additional demand from the market. The Kingdom has proven a reliable partner and supplier, and as executive director of the IEA, I am particularly glad to have such reassurances now.

Saudi Arabia must continue to invest in order to maintain sufficient production. A large new offshore oilfield, Manifa, is due to come on-stream in early 2013. In addition, the Kingdom’s first large offshore gas field, Karan, is coming on-stream around late 2012. Much of Saudi gas is associated gas. In the 1980s the Master Gas System captured this gas and used it to lay the foundations for rapid industrialisation in the country. Associated gas served as feedstock for petrochemicals plants, energy for heavy industry and to power the world’s largest water desalination system.

Over the past decade Saudi Arabia has seen strong growth in GDP and population, and therefore a rapid increase in electricity demand – as much as 8% per year. In recent years, peak demand has been met by burning crude in addition to gas. Some commentators have speculated that if these trends continue, the Kingdom would consume much of its own oil output by the mid2020s. This being said, Saudi Arabia is certainly not standing still. It has successfully explored for extra gas in the south-east and is exploring in the north-west of the Kingdom and offshore in the Red Sea. Furthermore, Saudi authorities are taking steps to moderate energy demand through the establishment of the Saudi Energy Efficiency Centre, which coordinates policy by bringing together all the national stakeholders in the energy sector, both government and industry.

Another obvious option is to develop renewable energy systems. Saudi Arabia holds a natural advantage in solar power, and experience elsewhere in the region suggests that the Kingdom could benefit from both photovoltaic systems and from developing larger concentrated solar power projects. Government funding for scientific research is increasing each year. Building on the research conducted so far at the King Abdulaziz City for Science and Technology in Riyadh and the King Abdullah University of Science and Technology near Jeddah is concentrating a number of the country’s international collaborative projects in the area of solar power. King Abdullah bin Abdulaziz Al Saud has recently announced the establishment of the King Abdullah City for Atomic and Renewable Energy to coordinate this work. Diversification of energy resources and the promotion of new energy technologies are also areas where our member governments have committed resources over the years. The IEA runs a range of energy-technology collaboration programmes which are open to all countries, and we would very much welcome participation by Saudi institutions in the future.

Saudi Arabia will continue to play a central role in energy markets for the foreseeable future. It will account for an increasing share of global production in the oil market, and its maintenance of spare capacity will consolidate its position as a key partner in guaranteeing sufficient supply in times of disruption. But the Saudi push to expand its gas production, and its impetus toward sustainable energy, will also be key to satisfying its long-term needs. The IEA is pleased with the collaboration we enjoy with Saudi Arabia, and impressed by the nation’s dynamic plans for energy developments.