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For decades, Saudi Arabia has been considered the de facto leader of OPEC and an influential manufacturer in limiting significant cost overruns in both directions. In recent years, the Arab country has borne the brunt of OPEC’s output cuts after recently agreeing to cut 1 million barrels per day, virtually a fraction of the 2. 2 mb/d pledged by the group. Well, it turns out that Saudi Vision 2030 is already bearing fruit, and Riyadh probably won’t feel the consequences of those cuts as much as many feared. Saudi Arabia’s Ministry of Economy and Planning has revealed that non-oil revenues reached 50% of the Kingdom’s gross domestic product (GDP) in 2023, the highest point ever recorded.
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GCC diversification will pay off
Three years ago, Saudi Arabia’s Crown Prince Mohammed bin Salman unveiled Saudi Vision 2030, the Kingdom’s ambitious roadmap for economic diversification, global engagement and a better quality of life. The main objective of this vision is to diversify the Saudi economy and create dynamic employment. opportunities for its citizens through the privatization of state-owned assets, adding the partial IPO of Saudi Aramco; Unlocking underdeveloped industries such as renewable energy, manufacturing, and tourism and modernizing the curriculum and criteria of Saudi educational institutions, from formative years to higher education. Related: Bloomberg Survey: Brent to Break Above $80 Through End of Year
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In its economic plan, Saudi Arabia has set a target of expanding around 60 GW of renewable energy capacity by 2030, several times more than the country’s existing installed capacity of just 2. 8 GW and comparable to around 80 GW of power plants that burn fuel or oil. With its constant Red Sea breezes and sun-scorched expanses, Saudi Arabia is, in fact, prime territory for renewable energy production. Meanwhile, Saudi Aramco has announced plans to spend $110 billion over the next two years to expand the Jafurah fuel field. It is estimated at two hundred trillion cubic feet of fuel. The fuel will then be transformed into a much cleaner fuel: blue hydrogen.
The Saudi government is also building a $5 billion hydrogen plant that will power the planned megacity of Neom. Called Helios Green Fuels, the hydrogen plant will use the force of the sun and wind to generate four GW of blank force that will be used to produce hydrogen.
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But Saudi Arabia has not been successful in its economic diversification. Last year, the World Bank released its Gulf Economic Report (GEU), which indicates that diversification efforts in the Gulf Cooperation Council (GCC) region are bearing fruit.
“The region has shown remarkable innovations in the functionality of the non-oil sectors despite the slowdown in oil production for the maximum until 2023. The diversification and progression of non-oil sectors has a positive effect on the creation of employment opportunities. across all sectors and geographies. GCC regions,” said Khaled Alhmoud, Chief Economist at the World Bank.
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By Alex Kimani for Oilprice. com
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