Sunday, February 19, 2006

Saudi Arabia's Ability to Export Oil

Saudi Arabia is the top world oil exporter with a net export of 8.73 mbpd in 2004. Saudi Arabia faces a number of challenges in rising production from its aging oil fields. Also, Saudi Arabia faces population pressures from a large, young population; fertility rates of almost 6 children per woman; high population growth; and a large expatriate population. One question is how this demographic pressure will drive the domestic oil consumption which has been rising rapidly :


Fig 1. Saudi Arabia oil consumption (millions of barrels per day, src: BP)

The annual population growth rate is about 2.3% for 2005 and is expected to stay constant for the next 10 years ([1]). The Total Fertility Rate (average no. of children born to a woman during her lifetime) is very high at almost 6 children per woman. The population was 24 million in 2002 and is expected to reach 41 million in 2025 (Population Reference Bureau). If we divide the oil consumption by the population numbers, the consumption per capita is remarkably stable around 25 barrels/capita/year (see Figure 3). This high number (in comparison to 21 for the US) can be explained by the fact that Fuel prices are subsidised at the expense of the country's energy sector. The average price for a liter of gasoline was only 24 cents in 2003 [3].

Fig 2. Saudi Arabia population trend (src: UN)

Fig 3. Number of barrels consumed per capita per year.

If we assume that the number of barrels/capita/year will remain constant around 25 we can predict Saudi Arabia's future oil consumption based on the population forecast shown on Figure 2. The result is shown on Figure 4 (red line). The oil production forecast for Saudi Arabia was established in the last post. We can observe that the oil exports will peak a few years before the total production. The fraction of oil exports will fall below 85% from 2010 (Figure 5).

Fig 4. Projected oil consumption based on the population growth and a constant consumption per capita of 24.8 barrels per year (red curve)..

Fig 5. Projected share of the oil exports for the different population scenario.

Edit: 02/20/2006 10:44 am: corrections of a few mistakes about the color coding employed for the different variants (sorry about that!).

References:

[1] PRB Country Profiles: Saudi Arabia
[2] Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2004 Revision and World Urbanization Prospects: The 2003 Revision

[3] www.internationalfuelprices.com

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