Interview: Abdulkarim Alnujaid
To what extent can changes in tariffs on Saudi liquefied petroleum gas (LPG) strengthen confidence among investors in hydrocarbons?
ABDULKARIM ALNUJAIDI: When there is competition in the market, there is increased efficiency in the system across the value chain, and it allows investors to get a fair return on investment. Higher competition does not necessarily mean that there will be greater downward pressure on prices, but it will help to make every marketable product economically feasible on its own. For the last 20 years LPG tariffs have been fixed by the government and have not changed, while production inputs and costs have increased with rates of inflation of 2-3% on an annual basis. Hence, without reviewing the current tariffs, it will be a challenge to create a competitive environment that promotes investment in the sector. As such, and as part of the latest step in the development in our industry, the Electricity and Cogeneration Regulatory Authority – the body in charge of regulating the electricity and water desalination industries – has the main objective of establishing fair competition among investors and ensuring fairness to customers by offering the best quality services and products.
What expectations do you have regarding growth in the supply of energy derived from greener, renewable sources of energy?
ALNUJAIDI: There is currently no issue in supporting and meeting the local demand for gas in Saudi Arabia, and the industrial sector is supported by natural gas in the industrial cities. In line with the commitment of making Saudi Arabia’s economic activity more environmentally sustainable, there is an interest in using the greenest fuels possible. In comparison to other fossil fuels like diesel or gasoline, there is a good opportunity to use LPG as a greener fuel type to reduce the country’s overall carbon footprint. In terms of residential consumption, there is a huge initiative under way to increase the usage of solar energy panels in each household. The goal is for residents to produce the energy they need, rather than being mere consumers. Nonetheless, the efficiency of solar energy production is not yet on par with that of other, traditional sources of energy, and therefore its impact on LPG demand may be delayed. Based on their availabilities and costs, one may lose some customers to certain types of fuels, but one may also be able to win over customers who decide to use cleaner sources like LPG. Natural gas is another more environmentally friendly type of fuel that can potentially be supplemented with the use of LPG. While LPG is an associated gas that needs to be refined, natural gas is directly excavated from the ground and can therefore be distributed to end-users.
How can investment in technologies and infrastructure ensure steady LPG supply?
ALNUJAIDI: Investment in infrastructure is definitely a priority. First of all, making sure that storage is available at the right operational level is key to avoiding any disruption to the supply. Second, the continuous availability of assets is crucial, though maintaining and upgrading the tools used to deliver those assets is also required. New technologies should introduce further efficiency, especially in tracking gas delivery from the source to the locations of end-users. Indeed, automation can help increase both the availability and efficiency of assets. It can also drive value to the consumers and have a positive impact on prices. Avoiding disruption in production and distribution is important to the country. Ensuring the sustainability of LPG supply in the long term will be made even easier with continuous infrastructure upgrades alongside technological advancements. In the history of Saudi Arabia, thanks to government support, there has never been a supply shortage, and this will continue to be the case moving forward.
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