Why natural gas supply is critical to Saudi economic transformation

Al-Monitor Readers

Gerald Kepes

President, Competitive Energy Strategies, LLC

May 22, 2024

Much has been made of Saudi Arabia’s decision to step back from a 13 million bpd crude production capacity objective this year. The underlying reality and factors behind the decision were straightforward: uncertainty of global oil demand weakened the need to invest in another million bpd of spare capacity, and anticipated liquids from the natural gas program and planned replacement of a million bpd of liquids burned for power from new natural gas and renewables investment already promised 2 million bpd of new liquids capacity. Perhaps the question, "Why did Saudi Arabia cancel its 13 million bpd capacity target?" was the wrong question. The better question might be: Why didn't Saudi Arabia cancel it earlier, and focus even more on natural gas and renewables for power generation?  

Saudi Arabian natural gas is a big deal, critical to the economic transformation outlined in Vision 2030. Natural gas’ purpose is to provide reliable supplies meeting 50% of the power generation capacity (and baseload for renewables power) needed to support development of the non-oil economy.  

Crude oil exports are critical to financing the transformation (cash and valuation) and government revenues. But it is the natural gas sector (and its linkage with the renewable power program) which will build the new non-oil economy in Saudi Arabia. Not enough natural gas production capacity? Vision 2030 stumbles.