Saudi Arabia must keep the balance between gas demand and oil production. The kingdom and its OPEC+ partners have agreed to cut soil supply by about 9.7 million bpd this and next month. Earlier this week, Saudi Arabia, along with Kuwait and the UAE, even pledged to deepen their production reductions by a further 1.180 million bpd in June.
However, lower oil production means reduced output of associated gas, which the country uses as feedstock for its petrochemical industry and to power air conditioners during the summer months. Hence, Saudi Arabia is expected to concentrate output cuts on offshore fields which produces heavier grades with lower gas output.
Sadad al-Husseini, Aramco’s former senior executive, said a barrel of heavy crude from Manifa might contain 90 cubic feet of associated gas, compared to 500-600 cubic feet of gas from a barrel of Arab Light.
By concentrating output reduction on heavy crude, the kingdom can fulfil its supply cut pledge and meet its domestic gas demand. As a result, Saudi Arabia is expected to drift oil output more towards the lighter grades, which can pose another problem because such grades are already oversupplied in the market.
Analysts expect that combined production cuts by OPEC+ are estimated to drive down Middle Eastern ethane-based ethylene supply by about 1.5 million tons. Ethylene is a basic petrochemical feedstock to produce plastics.
