Saudi Arabia is likely to burn less crude in its power plants this summer thanks to rising output from dedicated gas fields and gas that would be associated with any increase in oil output to make up for lower Iranian production, said experts.

Last summer the world's leading oil exporter burned an average of 730,000 barrels a day (bpd) of crude for electricity to keep the population cool in the hottest months from July to the end of September, official figures indicate.

Hundreds of thousands of barrels of the kingdom's biggest export will again go up in smoke at power plants each day this summer, but the volume of oil used for power is likely to fall.

More supply from the Karan gas field and a likely rise in crude output, which would bring a bonus benefit of more gas as well, should save at least 100,000 bpd in crude use.

'We have spent a lot of money on gas ... and we have many tricks in our pocket in the summer. When we peak in summer, we will surge our gas,' Saudi Oil Minister Ali al-Naimi said last week.

Naimi said some 500 million cubic feet a day (mcfd) more gas, or around 90,000 barrels of oil equivalent (boed), would be made available for three or four months.

'So don't think we are just saying, 'OK, the crude demand is going to go up',' he told reporters in Doha. 'We are far more concerned about crude burn. Not because we want to export it, but because it is a shame to burn it.'

Most countries outside the Middle East cut back oil-fired power generation long ago in favor of gas, nuclear and renewable energy sources.

But in a country sitting on the world's largest oil reserves, the consumption of oil for power rose by an implied 260 percent from 2004 to 2010, official figures available through the Joint Oil Data Initiative (JODI) indicated.

While crude output from Saudi oilfields is constrained by Opec production limits, state-run Saudi Aramco aims to find gas that can be pumped independently to supply rapidly rising demand for electricity.

Saudi Aramco now manages known gas reserves of 279 trillion cubic feet, the fourth largest in the world, and hopes to increase its gross gas production from 10.2 billion cubic feet per day (bcfd) in 2010 to over 15 bcfd by 2015.

While it has raised output significantly over the past few years, the company has not been able to keep up with a 6 percent per year increase in demand, driven by population growth and a boom in petrochemicals and other industries.

'Whenever there is gas, we are utilizing it. We are always trying to use gas rather than other types of fuel. Gas is cleaner, cheaper and more efficient,' Ali Bin Saleh Al-Barrak, the chief executive of Saudi Electricity (SEC), told Reuters. 'We are expecting more gas to come this year and in the future.'

About half of Saudi power demand is now met with gas, but in a sign SEC does not expect to obtain enough gas to replace oil soon, SEC announced plans this month to build another big fuel oil plant.

Low fixed gas prices paid by industry of just 0.75 US cents per million British thermal units are the major impediment to the unlocking of gas reserves.

After rising from an average of 145,000 bpd in 2004 to 526,000 bpd in 2010, implied Saudi oil burning was little changed at 522,000 bpd in total last year, according to an analysis of JODI data by HSBC.

Implied crude burning - or crude that cannot be accounted for after exports, refinery intake and changes in stocks - doubled from 2008 to 2009 as a 1 million bpd fall in crude production at the height of the global financial crisis cut the availability of associated gas.

A 1.15 million bpd rise in average daily crude production from 2010 to 2011 - as Riyadh filled a Libyan oil supply drop - would have added roughly 70,000 boed of gas, HSBC's Saudi energy sector analyst John Tottie estimated.

'Crude burning was unchanged in 2011, but there was some more diesel and gasoil in the power sector mix,' Tottie said. 'Higher associated gas and Karan probably contributed.'

Last summer, record imports of diesel, gasoil and fuel oil, which is used to generate power in parts of the country far from oil or gas fields, contributed to the first hiatus in the rise of crude burning since 2003.

Tightening western sanctions on Iranian oil sales, particularly a European ban from July 1, offers Riyadh a chance to pump even more oil and associated gas this summer. Because the kingdom holds most of the world's spare oil capacity, it will be the biggest source of alternative supply.

Last year's 9.31 million bpd average Saudi crude production could be surpassed this year.

Production averaged 9.84 million bpd in the first two months of 2012, Saudi industry sources have told Reuters, compared with 8.77 million bpd in the same period of 2011, according to JODI data.

As 50 to 60 per cent of Saudi gas comes from oilfields, another 1 million bpd increase in crude production above current levels could increase associated gas output by 5 to 6 percent, which could further increase the amount of crude for export by reducing the amount burnt in power plants.

'Burning crude oil is a crime,' independent Kuwaiti energy analyst Kamel al Harami said.

'This summer, I think Saudi will depend more on gas and buying oil products and less on burning their own crude.'

Vital to this effort will be the ramp-up of Karan, Saudi Aramco's first non-associated offshore gas field, which is expected to lift raw gas production from 400 mcfd last summer to 1.5 bcfd by June to 1.8 bcfd in summer 2013.

'Gas supplies coming from Karan this year are very important as a substitute for crude oil burning,' Sadad al Husseini, a former top executive at Aramco said.

Of Karan's 1.1 bcfd output increase since last summer, industry observers estimate about 75 per cent (or 146,000 boed) could go to power plants after removing liquids and sulphur.

Karan might not be the only addition to Saudi gas supplies. Oil minister Naimi said last week a little-known gas field in the Gulf, called Rabib, could boost supplies by 500 mcfd, or nearly 90,000 boed, sometime this year.

Information about Rabib is scarce, but Naimi said its gas could be pumped into turbines with minimal treatment. An industry analyst said as much as 95 percent of Rabib's gross gas output could be usable by power plants.

With Rabib and Karan both running flat out and sending all usable output to power plants, which is far from certain, that would mean around 236,000 boed could be saved.

A 1 million bpd crude output rise could add roughly another 73,000 boed of associated gas, allowing for a 25 percent reduction for removal of liquids and impurities.

The overall impact on Saudi oil consumption is impossible to predict accurately because power demand is tightly bound to temperatures; it is unclear how much oil it will pump; and the power generation mix will change as these variables shift.

Nearly half the potential increase from the two dedicated gas fields could be canceled out by the annual increase in Saudi demand for power generation, which HSBC estimated in a March study would amount to 100,000 boed, or 600 mcfd.

'There are competing demands for that gas, and the power sector has been last in line,' Tottie said.

'This means that Saudi Aramco may need to meet its 15 bcf/d target just to avoid burning even more oil ... It's a moving target,' he added.-Reuters