Business | Oil & Gas

Fuel subsidies cost Saudi Arabia 50b riyals a year

Saudi Arabia's fuel subsidies cost the Middle East's biggest economy as much as 50 billion Saudi riyals (Dh48.81 billion) a year, the top official at the country's power regulator said Monday

  • Zawya Dow Jones
  • Published: 00:00 May 31, 2011
  • Gulf News

Dubai: Saudi Arabia's fuel subsidies cost the Middle East's biggest economy as much as 50 billion Saudi riyals (Dh48.81 billion) a year, the top official at the country's power regulator said Monday.

The figure represents the total value of energy consumed in the country minus the price at which it is sold, including both electricity and gasoline, said Abdullah Al Shehri, governor of the Electricity and Cogeneration Regulatory Authority, also known as Ecra.

Al Shehri, speaking at a conference in Dubai, said electricity probably accounted for around half of the 50 billion riyals.

Soaring power demand

However, he said the kingdom was not looking at raising tariffs this year after increasing prices last year for business and industrial consumers. A pilot programme last year had successfully directed fuel subsidies towards poorer families, he added.

Saudi Arabia, the world's largest oil exporter, faces soaring power demand, which analysts partly attribute to prices that fall below the cost of production. Peak-time electricity demand will almost triple within 20 years to 120,000 megawatts by 2032 from around 46,000 MW in 2010, Al Shehri said.

Exploring alternatives

He added that around half the kingdom's current power capacity uses liquid fuel including distillates, crude oil and heavy fuel oil rather than clean-burning natural gas. The availability of gas is constrained in the kingdom due to high demand also from other industries such as petrochemicals where it is used as feedstock.

Due to growing concern in the kingdom over the high level of oil consumption in power plants, the government is exploring alternatives including nuclear power. Saudi Arabia will likely reveal a long-term energy strategy to include nuclear power plants by the end of the year, Al Shehri said.

The King Abdullah City for Atomic and Renewable Energy, set up last year, has already carried out feasibility studies, concluded cooperation agreements with other countries and is looking at potential technologies to utilise, he added.

Gulf News
Business Editor's choice
Quick Access

  1. Markets

  2. Economy

  3. Property

  4. Aviation

Business Top Stories

  1. DP World opens major container facility

  2. Shuttle buses between Dubai airports

  3. Regulators to monitor over-the-counter swaps

  4. Consumers to ‘tap’ for everyday spending

  5. China auto show opens