Saudi Electricity seeks Aramco help

Saudi Electricity Co. needs state oil firm Aramco to invest in more gas exploration and fuel pipelines to avoid the power outages that hit the world's top oil exporter last year, a document obtained by Reuters showed.

The document, authored by a Saudi Electricity technical committee, said one of the biggest challenges facing the struggling utility was transporting fuel from oil refineries to power plants during the summer peak demand period.

The committee said the high proportion of Saudi nationals in the company's workforce was hurting productivity and encouraged an early retirement scheme that would cut the total workforce by at least 17 % over five years.

The state-run firm, the Gulf's largest utility by market value, had to ration power last summer to firms in the Riyadh and Eastern provinces, the kingdom's main industrial hubs.

"Limited loading capacities during the summer of 2006 at (the) Aramco (refinery in Riyadh) was one of the main reasons behind the decline in (fuel) stocks at these power plants during peak demand period, which has led some plants to stall," the committee said in the document, dated April 21.

In a cover letter signed by Saudi Electricity Chief Executive Ali Saleh al-Barrak, the committee said it had prepared the report to propose ways to improve the utility's performance.

The Supreme Economic Council, chaired by King Abdullah, requested the report, it said.

Abdusalam al-Yamni, vice-president for public relations and relations with shareholders, said he could not immediately comment on the document.

Saudi Electricity power plants rely on trucks to ship fuel from Aramco's Riyadh refinery to provinces in the north and south of the kingdom, a process that costs at least 300 million riyals ($80 million) a year, the document said.

The committee recommended Saudi Electricity switch to using natural gas as the main fuel for power plants to boost productivity and reduce the environmental impact.

The main feed stocks used at plants now are diesel and crude. The committee also wants Aramco to build pipelines that would transport fuel directly to plants, enhancing productivity, it said.

"Aramco should be instructed to include in its strategy expansion and investment in gas production," the committee said.

Saudi Oil Minister Ali al-Naimi said earlier this month domestic gas sales were expected to rise 40 % through 2012. Aramco was stepping up gas exploration to boost reserves 40 % in the next 10 years to meet rising demand, he said.

The kingdom holds the world's fourth-largest natural gas reserves at 252 trillion cubic feet.

CUTTING JOBS

Saudi Electricity has been struggling to cut costs to find cash to meet growing power demand in the kingdom, the largest Arab economy and home to around 24 million people.

Saudi Electricity said last week it would lay off workers through an early retirement scheme, an unusual measure from a state-controlled company in a country with an unemployment rate of 12 %, according to the World Bank.

The %age of Saudis in the company's workforce, at 83 %, was one of the highest in the country, which had "explicitly affected performance", the committee said.

Saudi Electricity had 28,679 employees in December.

The committee recommended that Saudi Electricity should keep the proportion of Saudi employees at no more than 83 % over the next five years "with the expectation that it could be reduced slightly, without wasting foreign expertise".

The committee said some of the company's departments were being pressed to lay off skilled foreign workers to meet a quota for the number of Saudi employees.

"Yet it cannot dismiss the unproductive Saudi employee. This becomes manifestly counter-productive on the level of work and productivity," the committee said.

The Supreme Economic Council recommended in a document obtained by Reuters last week that the firm cut 5,000 jobs over six years, including around 970 in the first year.

Saudi Electricity denied the contents of the document, saying it would cut 900 jobs, without giving a timeframe.

Shares of Saudi Electricity rose 2.13 % on Tuesday, the only gainer among the 15 largest stocks.

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