SAUDI ARABIA: ENERGY LANDSCAPE

1Strictly Confidential

SAUDI ARABIA ENERGY SYSTEM INTR

OD

UC

TION

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Generation capacity• Saudi Electricity Company (SEC) 60 GW today 90 GW by 2020• Other generators ~10 GW currently (mostly desalination, Aramco & industry self-generation)• Total national capacity 120 GW by 2032• Implied annual growth rate 3.2%• Subsidy reform in December 2015 but fuel, power, water prices remain well below

international levels• Privatisation of SEC planned

Gas supply• Planned to grow from 12 Bcfd currently to 17.8 Bcfd by 2020• Much gas needed for industry• If all devoted to power, would fuel ~26 GW share of gas would rise substantial but

absolute oil use would still rise• Gas imports politically difficult

Other power generation• Some studies to use coal; no firm plans• Minimal use of renewables today, but 400 MW wind & 300 MW solar to be awarded by

September 2017• Target 3450 MW by 2020 and 9500 MW by 2023

• Initial goal of 2800 MW nuclear, said to be in design phase• 2 x 1000 MW pumped hydro storage facilities in design on Red Sea coast

o 50% of more of total power demand met by oil (fuel oil, diesel, crude)

o Nearly all the remainder from natural gas

o Peak summer demand (air-conditioning) 60%+ above winter demand

o Situation improved slightly in 2016 with start-up of new gas fields

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SAUDI POWER GENERATION REMAINS HIGHLY DEPENDENT ON OIL

0

500

1000

1500

2000

2500

3000

Feb

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Au

g-1

4

Sep

-14

Oct

-14

No

v-1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Oil

pro

du

ctio

n d

eman

d (

kbb

l/d

ay)

Saudi Arabia oil demand

Gasoline Kerosene Diesel Fuel oil Crude LPG Other

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SAUDI GRID INTERCONNECTION STILL UNDERWAY

SAUDI ARABIA HAS NEW GAS OPTIONS – CONVENTIONAL AND UNCONVENTIONAL

Source: PacWest; Qamar research 5

Source: Qamar research6

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2

4

6

8

10

12

14

Gas

pri

ce e

qu

ival

en

t ($

/MM

Btu

)

HIGH-COST FUELS

HIGH NEXT-GENERATION PRICES

INTERNATIONAL

BENCHMARKS

HIGHER NEXT-GENERATION PRICES

LOW LEGACY

PRICES

SAUDI AND REGIONAL NATURAL GAS PRICES GRADUALLY RISING

• Total solar radiation (PV) • Direct solar radiation (CSP)

• Wind speeds7

SAUDI ARABIA IS RICH IN RENEWABLE POTENTIAL (MOSTLY SOLAR)

• GCC focuses on Solar PV because it is cheaper

• Advantage of CSP is its thermal storage• Possibility of PV power with storage

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DRAMATIC FALLS IN SOLAR PV POWER BIDS

Source: Qamar research

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1

2

3

4

5

6

7

18/09/201427/12/201406/04/201515/07/201523/10/201531/01/201610/05/201618/08/201626/11/2016

Bid

pri

ce (

USc

/kW

h)

Dubai

DubaiAbu Dhabi

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SOLAR PV ATTRACTIVE VS TRADITIONAL GENERATION

Source: Qamar research

0 2 4 6 8 10 12 14

Gas CCGT, $12/MMBtu

Diesel turbine, $50/bbl

Nuclear

Onshore wind

Gas CCGT, $6/MMBtu

Solar rooftop

Coal CCS

Gas CCS, $6/MMBtu

Conventional coal

Gas CCGT, $1/MMBtu

Solar PV

Electricity price (c/kWh)

Transmission & distribution Low case

• Solar and wind now competitive against gas, and particularly against oil

• Alternative energy sources –solar, nuclear and coal (without CCS) – are being pursued actively by several Gulf countries

10

LCOE NOT ENOUGH – NEED TO EVALUATE SOLAR AS ONE COMPONENT OF SUPPLY

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Gen

erat

ion

(M

W)

Qamar Energy

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400

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10000

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Gen

erat

ion

(M

W)

February / March

August

• No need for high-cost gas/imports

• Low-cost gas baseload, solar midday, high-cost gas/imports for evening

SolarLow-cost gas

High-cost gas / imports

Low-cost gas or other baseload

Example of a typical Gulf electricity market

CONCLUSIONS INTR

OD

UC

TION

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• Even with subsidy reform & efficiency initiatives, reducing demand growth and

replacing oil in power remains a major challenge

• Domestic gas production will contribute but unlikely to be sufficient

• Large-scale gas imports technically possible but politically & commercially

challenging

• Solar & wind are commercially & technically viable components of future

generation mix

• Challenges

• Scale & speed

• Technological capability and organisation

• Grid extension/reinforcement

• Demand patterns/storage

• CSP, batteries, pumped hydro, others?

Robin Mills,

CEO, Qamar Energy,

Suite 32, 33rd Floor, HDS Business Centre,

Cluster M, Jumeirah Lake Towers,

PO Box 413032,

Dubai, UAE

info@qamarenergy.com

+971 4 364 1232

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