Saudi Arabia Quietly Decreasing Dependence on Crude Exports: Lee

 

• Crude share of exports falls 10 percentage points in 4 years
• More rigs drilling for gas than oil for first time in 7 years

https://www.bloomberg.com/news/articles/2018-02-21/crude-declines-below-62-as-u-s-oil-stockpiles-seen-expanding

While an Aramco IPO continues to grab the headlines, Saudi Arabia is quietly getting on with the business of weaning itself off a dependence on crude oil exports, with flows of refined products soaring and direct burning of crude near multi-year lows, writes Bloomberg oil strategist Julian Lee.

Diversifiying

Crude's share in total Saudi oil exports has fallen to around 82% from as much as 96% a decade ago

Sources: Bloomberg, JODI

• Data for December from the Joint Organisations Data Initiative in Riyadh show that Saudi Arabia is continuing to make progress in reducing its dependence on crude oil for export and power generation, with its refinery inputs hitting a new high and direct crude use near the lowest since 2009.
• Crude’s share of total Saudi oil exports was 82 percent on average in the last three months of 2017, down from 92 percent in the final quarter of 2013.
  • Comparing the two periods, crude oil exports fell by 650,000 barrels a day, while daily overseas sales of refined products increased by 876,000 barrels.
• Refinery crude intake rose to 2.83 million barrels a day, the highest in JODI data going back to January 2002. A new 400,000 barrel a day refinery under construction at Jazan on the southern Red Sea coast will boost the kingdom’s crude intake and refined product exports when it comes into operation in 2021.
• Direct use of crude oil was 260,000 barrels a day in December, just 8,000 barrels above the January 2017 level, which was the lowest since April 2009, according to JODI data. 
  • The kingdom boosted gas use in power generation with the start of the Wasit gas plant in March 2016. The country is now in talks with Russia and others to import natural gas in order to cut oil use further.
  • Meanwhile, the search for domestic gas resources goes on. Baker Hughes international data show more rigs drilling for gas than for oil in Saudi Arabia in January for first time in seven years.
• NOTE: Julian Lee is an oil strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice