Saudi mulls natural gas price hike to reduce expensive subsidies and curb energy waste

26-Dec-12

In 2013, Saudi Arabia may raise what is currently the world's lowest price for natural gas, in order to reduce expensive subsidies and curb energy waste, as per Reuters. A price hike would be an important economic shift for the country but a difficult one, since it would risk hurting the competitiveness of industries such as petrochemicals. Energy-hungry industries have boomed in Saudi Arabia over the last decade, largely due to the cheap gas, priced for domestic industrial users at just US$0.75 per million British thermal units (mmbtu) - a small fraction of prices paid by competitors around the globe. The Saudi price, unchanged for decades, was set when gas was a plentiful by-product of the country's giant oil fields. Since then, Riyadh has shied away from raising the price, despite escalating production costs, for fear of hurting companies which provide jobs for a young and growing population. But sources of gas that can be tapped cheaply have now run low, a shortage intensified by waste. So Saudi Arabia is increasingly having to look at costly offshore or unconventional sources of gas to meet soaring demand.