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There are several ways to look at Saudi Arabia’s use of crude oil to burn for electrical generation. First, it is fiscally responsible, but it may not be the best long-term solution for their local environment. As the leader of OPEC, it does help to have the flexibility to reduce the kingdom’s energy costs by burning crude oil that they want to hold off the open market for political reasons.
While burning oil is costly, it is not as costly when the state owns the oil, mineral rights, and supply chain. It is also cheaper than buying other forms of fuel. The average cost for oil from the Saudi Arabia fields is $3 to $10 depending on which field the oil is drawn.
Saudi Arabia has one of the lowest oil production costs globally due to its vast, easily accessible reserves, advanced infrastructure, and minimal taxation. Estimates for 2025 based on available data are:
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Average Production Cost: Approximately $3 to $10 per barrel, depending on the source and methodology.
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IndexBox (2025): Estimates $3 to $5 per barrel, citing the abundance of reserves in fields like Ghawar, modern drilling techniques, and efficient extraction methods.
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Rystad Energy (2016, cited in 2025): Reports an average of less than $9 per barrel, with capital spending at $3.50 per barrel and low production costs due to shallow, large fields.
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Saudi Aramco (2024): Claims a lifting cost of $3.10 per barrel.
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CNBC (2024): Notes a production cost of around $10 per barrel, emphasizing Saudi Arabia’s competitive advantage.
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X Posts (2025): Vary widely, with estimates from $3.50 (low-end, focusing on extraction) to $40–45 per barrel (including broader operational costs like prospecting and research).
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Key Factors:
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Geological Advantage: Oil in fields like Ghawar is near the surface, reducing drilling and extraction costs.
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Infrastructure: Decades of investment in pipelines, refineries, and export terminals lower transportation costs.
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Low Taxes: Unlike other producers, Saudi Arabia imposes minimal gross taxes on production, keeping costs down.
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Variations: Costs can differ by field (e.g., $7 per barrel for Ghawar vs. higher for offshore fields) and include capital expenditure, production, administrative, and transport costs.
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Fiscal Breakeven Price: Distinct from production costs, this is the oil price needed to balance the national budget, estimated at $90–$100 per barrel for 2025 due to high government spending on Vision 2030 projects. This reflects economic needs, not the cost of extracting oil
Anas Alhajii on X has been pointing this out for a long time, and it did not even fully sink in until I read his post.
Saudi Arabia’s Energy Mix
Saudi Arabia’s energy mix is heavily reliant on fossil fuels, particularly for electricity generation, with ongoing efforts to diversify through renewables and natural gas under Vision 2030. The electricity generation mix in 2023, based on available data, is approximately:
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Natural Gas: 52% of electricity generation, primarily from associated and non-associated gas fields. Saudi Arabia has been increasing gas production, targeting a doubling to over 200 billion cubic meters per year by 2030.
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Oil: 40% of electricity generation, including crude oil, fuel oil, and diesel. Saudi Arabia is the world’s largest consumer of crude oil for power generation, though efforts are underway to reduce this reliance.
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Steam (Other Fossil Fuels): 8%, typically from older thermal plants using heavy fuel oil or other petroleum products.
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Renewables: ~1.4% of electricity, primarily solar (1%) with negligible wind contributions. The share of renewables is low but growing, with projects like the Al Shuaibah solar plant (2.6 GW) and plans for 40 GW of solar photovoltaic (PV), 16 GW of wind, and 2.7 GW of concentrated solar power (CSP) by 2030.
The total energy consumption (beyond electricity) includes oil (over 60% of primary energy), natural gas, and a small but increasing share of renewables. Saudi Arabia’s National Renewable Energy Program aims for 50% renewables in the power mix by 2030, with gas making up the other half, effectively phasing out oil-based power generation.
Oil Burned for Electricity
Saudi Arabia burns significant volumes of crude oil and petroleum products for electricity, particularly during summer months (May–August) when air conditioning demand spikes. Key data points:
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Annual Crude Oil Burn:
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In 2024, Saudi Arabia was expected to burn approximately 470,000 barrels per day (bpd) of crude oil for power generation, per posts on X, though this figure is not independently verified.
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In 2018, the country burned an average of 400,000 bpd of crude oil, the lowest since 2009, down from a peak of 900,000 bpd in summer 2015.
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By 2030, the Jafurah shale gas field, starting production in 2025, is projected to displace up to 350,000 bpd of crude burn by substituting natural gas, reducing oil use to near zero for power generation.
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Seasonal Variations:
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Summer months see higher crude burn due to increased electricity demand. For example, in July 2014, Saudi Arabia burned 900,000 bpd, the highest recorded for that month. In contrast, summer 2018 averaged 500,000 bpd, a 41% reduction from 2015’s summer peak.
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In 2020, estimates suggested a potential record burn of up to 500,000 bpd in summer due to reduced natural gas availability from OPEC+ oil production cuts and increased domestic demand during the pandemic.
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Economic and Environmental Impact:
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Burning oil for electricity is costly, with an estimated $6.8 billion in forgone export revenue in 2021 from ~100 million barrels burned domestically.
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The practice contributes significantly to greenhouse gas emissions, with Saudi Arabia’s per capita emissions (8.9 tCO2 in 2023) nearly five times the global average.
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Trends and Future Outlook
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Reduction in Oil Use: Saudi Arabia is actively reducing crude burn through investments in natural gas (e.g., Jafurah field) and renewables. Gas-fired plants, with up to 60% efficiency compared to 30% for oil-fired systems, are six to eight times cheaper per kilowatt-hour, driving the shift. By 2030, gas is expected to account for ~70% of power generation.
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Renewable Push: The $50 billion National Renewable Energy Program targets 58 GW of solar and wind by 2030, with projects like Sudair (1.5 GW solar) and Al Shuaibah (2.6 GW solar) already underway.
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Nuclear Ambitions: Plans for 110 GW of nuclear power by 2032, with 12 plants, aim to further diversify the mix, though progress has been slow.
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Energy Efficiency: Reforms since 2014, including subsidy cuts and price hikes (e.g., gasoline demand fell 8% in 2018), are reducing domestic energy consumption. By 2030, efficiency measures could cut energy use by 1.5–2 million barrels of oil equivalent per day.
Challenges
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Infrastructure Lag: Renewable and nuclear projects face delays, keeping oil relevant in the short term.
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Demand Growth: Electricity demand is projected to grow from 83 GW in 2023 to 110 GW by 2028, driven by population and economic growth, requiring rapid scaling of alternatives.
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Environmental Resistance: Despite climate commitments, Saudi Arabia’s oil-based economy and resistance to global fossil fuel reduction talks complicate the transition.
Summary
Saudi Arabia’s electricity mix in 2023 was 52% natural gas, 40% oil, 8% steam, and ~1.4% renewables, with total energy consumption dominated by oil (>60%). The country burned ~400,000–470,000 bpd of crude oil for electricity in recent years, peaking at 500,000–900,000 bpd in summer. Vision 2030 aims to eliminate oil from power generation by 2030, replacing it with gas (70%) and renewables (50% of the mix), supported by projects like Jafurah and major solar initiatives. However, infrastructure delays and rising demand pose challenges.
Saudi Arabia views things differently from the United States, and we should learn from them. We can not just look to the next election cycle for our policies. We need to consider the next decade and even consider the best interests of our next generation.
For the latest data, refer to Saudi Arabia’s Ministry of Energy or the International Energy Agency: IEA Saudi Arabia.
The post Saudi Arabia poised to increase summer crude burn for power appeared first on Energy News Beat.
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