Saudi Arabia’s Non-Oil Revenue Hits 50% Of GDP
For decades, Saudi Arabia has been regarded as the de facto leader of OPEC and a swing-producer critical to curtailing large price overshoots in either direction. Over the past few years, the Arab nation has borne the lion’s share of OPEC+ production cuts after recently agreeing to cut 1 million barrels per day or nearly half of the group’s 2.2 mb/d in pledged cuts. Well, it appears that Saudi Vision 2030 is already bearing fruit, and Riyadh might not be feeling the pinch from those cuts as much as many feared. Saudi Arabia’s Ministry of Economy and Planning has revealed that non-oil revenues hit 50% of the Kingdom’s gross domestic product (GDP) in 2023, the highest level ever. The country’s non-oil economy was valued at 1.7 trillion Saudi Riyals (approximately 453 billion U.S. dollars) at constant prices, driven by steady growth in exports, investment and consumer spending. Last year, the Kingdom’s private-sector investments expanded by a brisk 57 percent, reaching a record high of 959 billion Saudi Riyals (254 billion dollars) while arts & entertainment and real service exports grew in triple-digits to the tune of 106 percent and 319 percent, respectively, reflecting the Kingdom’s transformation into a global destination for tourism and entertainment. Meanwhile, the food sector recorded 77 percent growth; transport and storage services grew 29 percent, health and education recorded growth of 10.8 percent, trade, restaurants and hotels at 7 percent while transport and communications increased 3.7 percent. GCC Diversification Paying 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 enhanced quality of life. The main thrust of the vision is to diversify Saudi Arabia’s economy and create dynamic job opportunities for its citizens through privatization of state-owned assets, including partial IPO of Saudi Aramco; unlocking underdeveloped industries such as renewable energy, manufacturing and tourism and modernizing the curriculum and standards of Saudi educational institutions from childhood to higher learning. In the economic plan, Saudi Arabia has set a target to develop ~60 GW of renewable energy capacity by 2030, multiples higher than the country’s current installed capacity of only 2.8 GW and comparable to ~80 GW of power plants burning gas or oil. With its steady Red Sea breezes and sun-scorched expanses, Saudi Arabia really is prime real estate for renewable energy generation. Meanwhile, Saudi Aramco has announced plans to spend $110 billion over the next couple of years to develop the Jafurah gas field, estimated to hold 200 trillion cubic feet of gas. The gas will then be converted into a much cleaner fuel: Blue hydrogen. The Saudi government is also building a $5 billion green hydrogen plant that will power the planned megacity of Neom. Dubbed Helios Green Fuels, the hydrogen plant will use solar and wind energy to generate 4GW of clean energy that will be used to generate green hydrogen. Last year, Aramco made the world’s first blue ammonia shipment–from Saudi Arabia to Japan. Japan is looking for dependable suppliers of hydrogen fuel with Saudi Arabia and Australia on its shortlist. But it’s not just Saudi Arabia that’s succeeding with its economic diversification. Last year, the World Bank published the World Bank Gulf Economic Update (GEU) that states that diversification efforts in the Gulf Cooperation Council (GCC) region are paying off. “The region has shown notable improvements in the performance of the non-oil sectors despite the downturn in oil production during most of 2023. Diversification and the development of non-oil sectors has a positive impact on the creation of employment opportunities across sectors and geographic regions within the GCC,” said Khaled Alhmoud, Senior Economist at the World Bank. The World Bank estimates that GCC saw its GDP grow by 1% in 2023 with the weaker performance driven primarily by lower oil sector activities–which contracted by 3.9%–to reflect OPEC+ successive production cuts and the global economic slowdown. Thankfully, the region will see economic activity picking up again to grow at 3.6 and 3.7 percent in 2024 and 2025, respectively. According to the World Bank, the reduction in GCC’s oil sector activities will be compensated for by non-oil sectors, which are expected to grow by 3.9 % in 2023 and 3.4 % in the medium term driven by accommodative fiscal policy, strategic fixed investments and sustained private consumption.
Saudi Arabia’s Non-Oil Revenue Hits 50% Of GDP
For decades, Saudi Arabia has been regarded as the de facto leader of OPEC and a swing-producer critical to curtailing large price overshoots in either direction. Over the past few years, the Arab nation has borne the lion’s share of OPEC+ production cuts after recently agreeing to cut 1 million barrels per day or nearly half of the group’s 2.2 mb/d in pledged cuts. Well, it appears that Saudi Vision 2030 is already bearing fruit, and Riyadh might not be feeling the pinch from those cuts as much as many feared. Saudi Arabia’s Ministry of Economy and Planning has revealed that non-oil revenues hit 50% of the Kingdom’s gross domestic product (GDP) in 2023, the highest level ever. The country’s non-oil economy was valued at 1.7 trillion Saudi Riyals (approximately 453 billion U.S. dollars) at constant prices, driven by steady growth in exports, investment and consumer spending. Last year, the Kingdom’s private-sector investments expanded by a brisk 57 percent, reaching a record high of 959 billion Saudi Riyals (254 billion dollars) while arts & entertainment and real service exports grew in triple-digits to the tune of 106 percent and 319 percent, respectively, reflecting the Kingdom’s transformation into a global destination for tourism and entertainment. Meanwhile, the food sector recorded 77 percent growth; transport and storage services grew 29 percent, health and education recorded growth of 10.8 percent, trade, restaurants and hotels at 7 percent while transport and communications increased 3.7 percent. GCC Diversification Paying 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 enhanced quality of life. The main thrust of the vision is to diversify Saudi Arabia’s economy and create dynamic job opportunities for its citizens through privatization of state-owned assets, including partial IPO of Saudi Aramco; unlocking underdeveloped industries such as renewable energy, manufacturing and tourism and modernizing the curriculum and standards of Saudi educational institutions from childhood to higher learning. In the economic plan, Saudi Arabia has set a target to develop ~60 GW of renewable energy capacity by 2030, multiples higher than the country’s current installed capacity of only 2.8 GW and comparable to ~80 GW of power plants burning gas or oil. With its steady Red Sea breezes and sun-scorched expanses, Saudi Arabia really is prime real estate for renewable energy generation. Meanwhile, Saudi Aramco has announced plans to spend $110 billion over the next couple of years to develop the Jafurah gas field, estimated to hold 200 trillion cubic feet of gas. The gas will then be converted into a much cleaner fuel: Blue hydrogen. The Saudi government is also building a $5 billion green hydrogen plant that will power the planned megacity of Neom. Dubbed Helios Green Fuels, the hydrogen plant will use solar and wind energy to generate 4GW of clean energy that will be used to generate green hydrogen. Last year, Aramco made the world’s first blue ammonia shipment–from Saudi Arabia to Japan. Japan is looking for dependable suppliers of hydrogen fuel with Saudi Arabia and Australia on its shortlist. But it’s not just Saudi Arabia that’s succeeding with its economic diversification. Last year, the World Bank published the World Bank Gulf Economic Update (GEU) that states that diversification efforts in the Gulf Cooperation Council (GCC) region are paying off. “The region has shown notable improvements in the performance of the non-oil sectors despite the downturn in oil production during most of 2023. Diversification and the development of non-oil sectors has a positive impact on the creation of employment opportunities across sectors and geographic regions within the GCC,” said Khaled Alhmoud, Senior Economist at the World Bank. The World Bank estimates that GCC saw its GDP grow by 1% in 2023 with the weaker performance driven primarily by lower oil sector activities–which contracted by 3.9%–to reflect OPEC+ successive production cuts and the global economic slowdown. Thankfully, the region will see economic activity picking up again to grow at 3.6 and 3.7 percent in 2024 and 2025, respectively. According to the World Bank, the reduction in GCC’s oil sector activities will be compensated for by non-oil sectors, which are expected to grow by 3.9 % in 2023 and 3.4 % in the medium term driven by accommodative fiscal policy, strategic fixed investments and sustained private consumption.
No delay over IOC-Mercator petroleum deal: DIPAM
The Department of Investment and Public Asset Management (DIPAM) has clarified that its approval was not sought for Indian Oil Corp’s acquisition of Mercator Petroleum Ltd through the insolvency process and that there was no delay on its part that affected closing of the transaction Responding to a March 13 ET report that said IOC’s Mercator buyout was held up due to a delay in getting DIPAM’s approval, the department said Mercator informed it about the deal on February 6. Following this, the department explained its position to Mercator and the Ministry of Petroleum and Natural Gas (MoPNG) on February 7, it said. “Thereafter, the proposal was received from MoPNG only for information to DIPAM and as such no nod of DIPAM was sought in the process, which was noted,” the department said. IOC, the country’s biggest fuel retailer, has yet to complete the acquisition of oil and gas company Mercator, more than four months after the National Company Law Tribunal allowed the sale of the distressed asset.
Union Minister Launches Indian Oil’s ETHANOL 100 Automotive Fuel”
Hardeep Singh Puri, Union Minister for Petroleum & Natural Gas and Housing and Urban Affairs, launched ‘ETHANOL 100, a revolutionary automotive fuel at Indian Oil Retail Outlet M/s. Irwin Road Service Station, New Delhi today. Customers can avail ETHANOL 100 at select 183 retail outlets of Indian Oil across five states – Maharashtra, Karnataka, Uttar Pradesh, New Delhi, and Tamil Nadu. Pankaj Jain, Secretary, Ministry of Petroleum & Natural Gas; Shrikant Madhav Vaidya, Chairman, senior officials from MoP&NG, functional Directors of Indian Oil also participated in the launch ceremony. Speaking on the occasion, Puri said that the launch of ETHANOL 100 was inspired by the vision of the Prime Minister of India to transform Annadatas to Urjadatas. “It reflects the government’s commitment to reducing import dependency, conserving foreign exchange, and boosting the agriculture sector.
India’s oil imports to be disrupted as US-Venezuela tensions escalate
Indian imports of cheap Venezuelan oil, the country’s fifth-biggest crude supplier in 2019, may face disruptions from April as the US and the South American country are embroiled in a dispute over renewing a six-month permission for crude exports. Uncertainty over Venezuelan supplies for Indian refiners comes amid reduced discounted Russian flows also targeted by the US
Bloomberg Survey: Brent To Exceed $80 By Year’s End
The Brent crude oil benchmark is set to exceed $80 per barrel by the end of this year, according to a new Bloomberg Intelligence oil price survey. The survey showed that the majority of respondents—53%–see Brent crude oil prices above $80 per barrel at the end of 2024. A much smaller percentage—5%–see crude oil prices exceeding $100 per barrel. The new Bloomberg Intelligence survey also showed that nearly a quarter of respondents see peak oil demand to hit prior to 2030—that’s down from 50% of those surveyed in 2022 who saw peak demand by that time. As for geopolitical risk, the overwhelming majority of respondents—92%—say that the geopolitical risk premium already baked into crude oil prices is less than $5 per barrel. So even with Russia invading Ukraine, Houthi rebels attacking vessels in the Red Sea, causing oil tankers to take the long way around, and tensions between the United States and Iran continue to fester, oil prices are not too far off the mark from where they would be without all that tension. “The turmoil in the Red Sea and the Israel-Hamas conflict has arguably had a limited effect on prices, given there hasn’t been any substantial disruption to oil flows, and OPEC+ has a meaningful amount of spare capacity. However, the Middle East tensions and the geopolitical risk premium may be slowly starting to become more baked into oil prices. That’s after they were outweighed by weak economic prospects and a bleak demand picture in the past few months, as Brent oil price tests $85 a barrel,” Salih Yilmaz, Senior Industry Analyst for Bloomberg Intelligence, said. While survey respondents largely agreed that the geopolitical premium for crude oil was small and peak oil wouldn’t happen before 2030, few agreed on what will drive oil prices over the next few years. 27% of respondents said OPEC+ will be the driving force. 27% said China’s demand. 22% said non-OPEC+ supply growth, and just 14% named Fed policy and interest rates.