Saudi Arabia, which is actively looking to expand its economy beyond its dependence on fossil fuels, believes it can save over $200 billion over the next decade by replacing liquid fuel used for domestic consumption with gas and renewable energy sources, according to its finance minister.
The top oil exporter is modernizing its economy and create new jobs for its citizenry by venturing into new modern industries beyond oil. Hit by the volatile oil prices and the economic downturn due to the pandemic, the desert kingdom has ventured into a multi-trillion-dollar spending push led by state oil company Aramco and the powerful $400 billion sovereign fund, Public Investment Fund.
“One initiative we’re about to finalize is the displacement of liquids,” said Finance Minister Mohammed al-Jadaan. “This program would represent savings for the government of about 800 billion riyals ($213.34 billion) over the next 10 years which can be utilized for investment.”
Earlier this month, the government signed seven new solar power purchase agreements to optimize the energy mix used for electricity production. “Instead of buying fuel from the international markets at $60 and then selling it at $6 for Saudi utilities, or using some of our quota in OPEC to sell at $6, we’re going to actually displace at least 1 million barrels a day of oil equivalent in the next 10 years and replace it with gas and renewables,” said Jadaan.
“Between now and 2025, and possibly until 2030, fiscal sustainability is a priority for us. We believe that until we achieve all the targets that Vision 2030 has set, we need to maintain fiscal sustainability and control government expenditure,” said Jadaan.
The whole shift in outlook in Saudi Arabia is led by Crown Prince Mohammed bin Salman’s Vision 2030, envisaged as a mega plan to wean the economy off oil and invest in other industries such as infrastructure and technology, all with private participation and create jobs for the people.
The Kingdom is facing unprecedented unemployment, with figures running up to 15 percent last year. It has been pushed down to 12.3 percent this year. The aim is to bring it down to 7 percent by 2030. ”We are maintaining our unemployment target for 2030 but because we are not out of the woods yet it is very difficult to say what the unemployment rate is going to be for 2021,” said Jadaan.
“Our aim is to reduce the number so we will end up the year below where we ended up in 2019, pre-COVID, but I can’t tell you this is going to happen for certain.”
The Vision 2030 launch has seen renewed interest in the country from foreign investors. Foreign investment in Saudi Arabia passed the SR2 trillion ($0.53 trillion) mark for the first time at the end of 2020, despite the financial impact of the COVID-19 pandemic.
The total value of investments from overseas rose 9 percent year-on-year, or SR173.3 billion, in 2020, from SR1.833 trillion at the end of 2019, according to the Saudi Central Bank (SAMA).
According to an analyst, the increase in capital flowing into the country was due to an improvement in the investment environment and some relaxation in investment laws in the Kingdom.
