Dubai (Platts)--26Nov2012/650 am EST/1150 GMT

Saudi Arabian oil minister Ali Naimi Sunday called for the rationalization of the kingdom's domestic energy use as a senior energy official warned that oil consumption was growing at 'a frightening level."

"The kingdom uses around 2.5 million barrels of oil equivalent to produce $1,000 of domestic income, compared with an average 1.3 million to produce the same unit of GDP," the official Saudi Press Agency quoted Naimi as telling an electricity and water conference in Riyadh.

"At this rate, energy consumption will double by 2030 which requires a highly efficient rationalization program with the participation of the public and private sectors and all citizens in order to reduce consumption," he added.

Naimi said the kingdom, the world's biggest oil exporting nation, faced "a clear challenge in achieving optimal energy use," adding that reversing the trend was not "impossible." Curbing domestic energy could be translated into economic success while freeing up volumes of crude oil, which is the most important resource for the kingdom, he added.

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Hashem Yamani, president of the King Abdullah City of Atomic and Renewable Energy, told the same conference that the growth in consumption of oil and oil equivalent was unsustainable.

Among the main challenges facing the OPEC kingpin "was the growth at frightening levels of the use of oil and oil equivalent," Yamani said, adding that "change is inevitable" and should be introduced gradually.

He called for the establishment of a working plan for the sustainable use of crude oil.

Naimi said a balanced energy mix that would make use of both conventional and unconventional fuels was needed in order to cope with the anticipated growth in demand.

"It is important for the kingdom to achieve a balanced mix of energy sources, whether conventional or renewable, in a way that will reduce the use of fossil fuels and guarantee the availability of more natural resources for future generations," SPA quoted Naimi as saying.

The Saudi minister has said repeatedly that unless domestic consumption of energy is curbed, the kingdom's oil exports would fall.

Riyadh has announced plans to generate 50% of its electricity from nuclear, solar and other renewable energy sources by 2032.

Saudi Arabia is producing just under 10 million b/d. It has total capacity of 12.5 million b/d and is focusing on expanding its natural gas output. Gas demand has also risen as a result of a rapidly expanding petrochemicals sector.

The International Energy Agency said in July 2011 that Saudi Arabia's direct burning of crude oil for power generation has been rising rapidly in recent years and was set to reach a record average level of 582,000 b/d in 2011.

Crude burning in Saudi Arabia peaks during the summer months, when demand for electricity is at its highest as air conditioning use rises.

Until 2008, Saudi Arabia's direct crude burn was less than 200,000 b/d, but it has risen rapidly since. It doubled in 2009 when the global recession dented demand for Saudi Arabia's crude exports and then rose by a further 21% in 2010 and 10% in 2011.

Although more often thought of as a major crude producer and exporter, Saudi Arabia, where energy prices are heavily subsidized, is a significant and fast-growing user of oil, and is already among the world's top 10 consuming nations.

Saudi Aramco CEO Khalid al-Faleh said in December last year that an average 500,000 b/d of crude oil was being burned for power generation on average. He said total energy consumption in barrels of oil equivalent was in the range of 4 million boe/d, about 50% of which was gas based. Consumption is set to double to 8.2 million boe/d by 2030 if it is not curbed, he said at the time.

--Kate Dourian, kate_dourian@platts.com
--Edited by Martin O'Rourke, martin_orourke@platts.com

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