International Energy Policies
City and State
Table of Contents
The country of choice in this paper is Saudi Arabia with the renewable energy source being solar energy. Saudi Arabia has the world’s largest crude oil capacity for production and 16% of the global oil reserves. The production rate of the country has been rising each year, although countries such as the United States and Russia still surpass it (Midstream Monitor, 2014, para 6). The economy is very dependent on this sector as studies indicate that 85% of the total export revenue. The paper discusses the SWOT analytical tool, which is effective in assessing and evaluating the impact and potential of unconventional oil and gas exploration in Saudi Arabia. Another renewable source of energy discussed is solar energy in Saudi Arabia, which is on the rise because of the readily available raw materials and the low cost of energy (Ghafour & P.K, 2011). Saudi Arabia has a rising demand for domestic energy; consequently, the country is developing natural gas. Additionally, the country seeks to establish a shale gas, which requires the hydraulic fracturing technique. There is a framework for the energy policies that affect the exploration of unconventional gas and oil in Saudi Arabia and other countries equally. The renewable source of energy chosen is solar energy, which has been on the rise in production because the country is among those that get the most intense sunrays in the globe. If this energy source is harnessed well, it could compete with the oil productions because of the degree of resources of Direct Normal Irradiation (DNI) and the fact it’s a cleaner sustainable source.
Saudi Arabia has been putting emphasis on the exploration of unconventional gas to match up with the demand. The Division for Unconventional Gas Exploration, chief executive explorationist, said that the emphasis is because of the growing population in Saudi Arabia, which puts pressure on the existing water and power utilities and therefore, gas energy would help in catering for the growing demand. Additionally the development of the unconventional gas exploration will lead to the creation of employment because the process utilizes human resources as it is labor intensive. The estimate on unconventional resources in Saudi Arabia is five to ten times higher than the conventional resources. Saudi Aramco, which is the company in charge of exploring gas, categorized the unconventional resources into tight sand and shale gas reservoirs (Weeden, 2012). There are countries that have successfully established shale gas, which is under unconventional exploration, such as the United States. This method provides organic energy that is affordable and reliable and therefore benefits a significant part of the population. The economy of Saudi Arabia is on the rise because of the internal and foreign investments in energy related sectors such as crude oil refining.
The demand for electricity is on high rise, leading to the Kingdom’s need to identify a new source of energy to ensure the demand is met both locally and internationally (Taher & Hajjar, 2014). Only 1% of this energy is harnessed globally out of the 170,000 terawatts of energy that the sun produces per day (Think Global Green, 2008). If solar energy if harnessed to its full potential, it can supply Saudi Arabia with an average of 5 – 10 megawatts of electricity (Saudi Gazette, 2014).The feasibility of solar energy is very impressive and the Gross Domestic Product of $727 billion makes the kingdom have the ability to acquire such an alternative to energy supply (Salah, 2012).
The exploration of this renewable source of energy has led to innovation and new technological advances that have produced the cheaper alternative source of energy which is cleaner and more efficient as solar energy has no carbon emissions. Almasoud and Gandayh (2014) have also stated that solar energy is cheaper than fossil based fuels produced by in the Kingdom of Saudi Arabia especially if health and environmental issues are considered.
Source: Almasoud and Gandayh (2014)
Figure one illustrates the increasing level of carbon emissions and how the rate of emission is much higher than the rate of consumption. To control the emissions, cleaner energy sources such as solar energy have been targeted.
Solar production is an easy process after the installation, this is because it needs very little maintenance and do not make a lot of noise during the production process. This has led to the rising popularity of this source of energy. The ultimate strength of this source of energy is that it is inexhaustible. The production can continue so long as the sun shines.
The technology utilized in the unconventional exploration of oil and gas in Saudi Arabia is hydraulic fracturing, which involves creating or opening of cracks in underground rocks that contain hydrocarbon. The processes involve transmission of pressure by gas or fluid in the rocks to create cracks. The use of unconventional reservoirs has grown popularity because unlike the conventional reservoirs, it can stimulate the flow of hydrocarbons (Canadian Society for Unconventional Gas, 2014, para 7). The weaknesses of using this form of unconventional reservoir include its use of water resource, which is limited in most places in Saudi Arabia. The fracturing fluid, which is often five million gallons approximately, contains 90% water and it is used up in a single operation. Consequently, the water resource is strained, especially in dry areas. The chemicals used in the process of hydraulic fracturing have been debated to be a health risk factor for people living near the gas and oil wells. The use of unconventional reservoirs requires the application of advanced technology, which can strain the economy of a country. Regulatory policies are therefore effective in dealing with environmental risks that are posed by the fracturing. The environmental issues related to unconventional reservoirs are mainly the strain on the quality and quantity of water (Willie, 2011, p.1758). At a Manama conference in Saudi Arabia, the company setting up unconventional reservoirs raised its concerns on the water challenges in places where the hydraulic plant will be set (Mahdi & Guo, 2013).
Challenges facing the gas and oil industries in Saudi Arabia include domestic supply shortages and low prices. In Saudi Arabia, there is no importation or exportation of oil and gases and therefore the domestic energy is always under pressure to meet the demand of energy in the country. In Middle East, Saudi Arabia is the nation with the largest consumption of oil and gas energy and therefore, cases of shortages are common. The production, processing and distribution of natural gas are expensive and therefore funds can limit the amount of gas produced. Saudi Arabia has subsidized prices for their oil and gas, energy, compared to other stakeholders in the Persian Gulf. The country has been receiving pressure from international bodies because of the low prices, which lead to unfair competition in the industry (US Energy Information Administration, 2014).
The production of solar energy faces an acute shortage of photovoltaic equipment. These are the mounted panels which are used to convert the sunshine into electricity (National Renewable Energy Laboratory, 2014). Even with enough supply of photovoltaic equipment, the production still has a weakness of time. Solar energy can only be produced at during the day when sunlight is available. The production is also minimized by angle of the panel and during days when there is cloud cover even though production still continues slowly. Technology available to increase the low conversion efficiency of solar panels, which only converts 20% -40% of available rays, is readily available. To increase efficiency the costs of the panels will go even higher because of the increased efficiency. Installation costs of the solar panels is quite high and is one of the factors that has hindered the adoption, however government subsidies might help reduce such costs (Conserve Energy Future, 2014). Another difficulty faced is the efficiency of operating machines is decreased by the rise in temperatures; this results to application of frequency regulation services which tend to be very expensive, leading to increased costs of operations.
The Aramco Company responsible for exploring the unconventional gas should utilize the stakeholder management theory which puts more emphasis on the relationship between an organization, internal and external stakeholders. According to Wanyama, Burton and Hellier, based on the premise of this theory, an organization should be recognized as an artificial entity, operating in a community and therefore, the groups associating with the firm should be given priority in terms of their interests and needs (2013,21). The stakeholder theory offers opportunities for the oil and gas, unconventional companies to interact with the external world, which increases sales.
The use of unconventional reservoirs has provided opportunities for technological advancements, which affects the Saudi Arabia economy positively. The hydraulic fracturing utilizes complex and advanced technology and therefore research on the unconventional method of exploration ad on to the industry knowledge of the country. Technology has increased production of oil and gas and therefore, there is increased exportation.
The Saudi Government has offered subsidies in the solar energy sector by creating markets in other countries such as Germany and Japan either through mandates or incentives. Mandates such as renewable portfolio standards (RPS) penalize those who do not use renewable energy, whereas incentives such as the tax credits, offer financial relief to those who adopt the usage of renewable energy sources. The Kingdom is also favored by the climatic conditions which can allow it to harness solar energy almost all through the year.
The government of Saudi Arabia in 2008 established the National Energy Efficiency Program, which hopes to reduce energy intensity. The program was commissioned under the United Nations Development Program to regulate and audit energy in commercial sectors. The policies and regulations can be a threat to the production and consumption of energy in Saudi Arabia because of taxation and other laws that limit the use of the hydraulic fracturing, especially near residential areas (Smart Grid, 2012, p.5). Competition on oil supply is another threat facing the oil and gas industries in Saudi Arabia, but the country is confident bearing the fact that it dominates the Persian Gulf, which is the world highest oil producer (Williams, 2004, p.18).
The US Energy and Information Administration has indicated that the Kingdom of Saudi Arabia intends to generate half of its electricity supply from renewable sources such as solar power by 2032. This vision has been faced with threats such as the bottlenecks caused by lack of adequate supply of silicon. The production was formerly enough, but the sudden excessive demand from the solar energy sector has led to that shortage. This shortage led to hiked prices of the product. Bottlenecks are also consequences slow delivery of the steams turbines and molten salt/ storage media supplies which as of 2009 was at 3 years (King Abdullah University of Science and Technology, 2009, p.23). The inadequate supply and high cost of the silicon plates led to introduction of cheaper thin film cells of solar which are very toxic to the environment because of the cadmium chloride, which could kill a lot fish if leaked in water; this could be replaced with magnesium chloride which is less toxic but the suggestions have not been acted upon (Walter, 2014). Such environmental hazards threaten the production of solar energy.
After analyzing the unconventional gas and oil energy in Saudi Arabia, the economy is projected to improve as the country export of oil and gas increases. Unconventional oil and gas exploration is more economical as compared to the conventional method, which has challenges in the production process. Additionally, solar energy has its advantage as a renewable energy because of its financial capabilities and applicability in Saudi Arabia, where the climate is convenient.
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