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Assessing energy policy instruments: LNG imports into Saudi Arabia

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  • Shabaneh, Rami
  • Schenckery, Maxime

Abstract

Saudi Arabia relies heavily on oil-based generation to meet its power needs within a geographically unbalanced pattern of natural demand and supply. Many initiatives are currently being assessed to reduce the high opportunity cost of burning oil for the country. This paper examines the cost and implication of a disruptive policy where Saudi Arabia imports liquefied natural gas (LNG). To determine the possible and optimal sources to procure LNG into Saudi Arabia we use and configure a partial equilibrium model, specified as a linear programming problem. Two import scenarios were tested: the first assumes an import terminal with a capacity of 5 million tonnes per annum (MTPA) and the other scenario assumes 22 MTPA. Results show that Saudi Arabia can import LNG for power generation at a discount to the opportunity cost of oil. Especially during the summer months, as Saudi Arabia's gas demand is counter-seasonal to major importing regions it leads to even more interesting market pricing conditions. It also shows a small difference in landed cost of LNG between the two scenarios which implies the global LNG market can accommodate relatively large demand from Saudi Arabia without distorting significantly the global market pricing mechanism.

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  • Shabaneh, Rami & Schenckery, Maxime, 2020. "Assessing energy policy instruments: LNG imports into Saudi Arabia," Energy Policy, Elsevier, vol. 137(C).
    • Handle: RePEc:eee:enepol:v:137:y:2020:i:c:s0301421519306883
    DOI: 10.1016/j.enpol.2019.111101
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    References listed on IDEAS

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    1. Jorge Blazquez, Lester C. Hunt, Baltasar Manzano, and Axel Pierru, 2020. "The Value of Saving Oil in Saudi Arabia," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1), pages 207-222.
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    3. Maxime Schenckery & Rami Shabaneh & Kang Wu & Anne-Sophie Corbeau & Tim Boersma & Tatiana Mitrova & Simone Tagliapietra & Giovanni Occhiali & Manfred Hafner, 2018. "East Africa Shared Gas Initiative," Briefs, Fondazione Eni Enrico Mattei, February.
    4. Matar, Walid & Anwer, Murad, 2017. "Jointly reforming the prices of industrial fuels and residential electricity in Saudi Arabia," Energy Policy, Elsevier, vol. 109(C), pages 747-756.
    5. Farnoosh, Arash & Lantz, Frederic & Percebois, Jacques, 2014. "Electricity generation analyses in an oil-exporting country: Transition to non-fossil fuel based power units in Saudi Arabia," Energy, Elsevier, vol. 69(C), pages 299-308.
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