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.
Russia Oil Revenue Falls As Some Buyers Shun Its Crude, IEA Says
Russia’s oil-export revenue declined in February as tougher monitoring of western sanctions against the Kremlin reduced some buyers’ appetite for the nation’s barrels, according to the International Energy Agency. The top-three global oil producer earned $15.69 billion from crude and petroleum product exports last month, down 0.95% from January, the Paris-based agency said in its monthly oil report on Thursday.
Brent Soars Past $85 As IEA Recalculates Supply, Demand
Crude oil prices hit a four-month high on Thursday, with the U.S. benchmark crossing over the $80 mark and Brent passing $85 per barrel after changes in supply and demand predictions that bring OPEC+ and International Energy Agency (IEA) forecasts into closer alignment. After gaining nearly $3 on Wednesday, at 3:43 p.m. ET on Thursday, Brent crude was trading at $85.23, up 1.43% on the day. West Texas Intermediate (WTI) was trading at $81.13, up 1.77% on the day. Earlier on Thursday, the IEA tweaked its forecasts for this year, predicting a tighter market and higher demand growth than previously anticipated, primarily due to disruption from Houthi attacks on Red Sea shipping lanes. Since November last year, the IEA has upwardly revised its oil demand growth forecasts for 2024 four times–each time primarily as a result of Red Sea-related supply disruption potential, noting that the “global economic slowdown acts as an additional headwind to oil use”. The IEA’s forecasts have contradicted OPEC+ forecasts for some time, with the international energy agency in May 2021 saying there was no need for new oil and gas exploration any longer due to the pace of the energy transition. February 2024 oil demand forecasts from the IEA and OPEC+ diverged by over 1 million bpd. The IEA has now slashed its 2024 supply forecast to 102.9 million bpd this year. In its Oil Market Report for March, the IEA now assumes that OPEC+ would continue with the voluntary cuts through 2024, which prompted the agency to change its view on the supply-demand balance this year. “Demand is staying high, while supplies are getting tighter, particularly on the fuel side. The refining margins are also very strong and a positive for crude demand,” Reuters quoted Dennis Kissler, senior vice president of trading at BOK Financial, as saying on Thursday, noting that near-six-month-high crack spreads were prompting refiners to process more crude.
India Poised for $4.95 Billion Natural Gas Infrastructure Investment
India is expecting significant investment of 410 billion rupees ($4.95 billion) to build a natural gas pipeline infrastructure in its northeastern states and the federal territories of Kashmir and Ladakh. This investment is part of India’s efforts to increase the use of cleaner fuel and reduce carbon emissions. Prime Minister Narendra Modi aims to raise the share of natural gas in India’s energy mix to 15% by 2030, up from the current 6.2%. The development of natural gas infrastructure in the northeast region will also help in utilizing domestically produced gas. Licenses have been awarded to supply natural gas to small industries, automobiles, and households in the northeastern states and the territories of Kashmir and Ladakh. The city gas distribution network is expected to cover the entire northeastern region by the end of 2025. State-run companies Bharat Petroleum Corporation Ltd (NSE: BPCL) Hindustan Petroleum Corp Ltd (NSE: HINDPETRO), and Oil India Ltd (NSE: OIL) have licenses to set up city gas distribution networks in various areas. Additionally, the pipeline network will enable the monetization of surplus gas from Oil India and Oil and Natural Gas Corporation Ltd (NSE: ONGC) in the northeastern states. Why This Is Important for Retail Investors Investment Opportunities: The massive investment in natural gas infrastructure in India offers potential investment opportunities for retail investors. As the industry expands, there will be a growing demand for companies involved in pipeline construction, gas distribution, and exploration. Clean Energy Focus: With India’s commitment to reducing carbon emissions and increasing the share of natural gas in its energy mix, there will be a significant shift towards cleaner fuel sources. This presents opportunities for retail investors to support environmentally responsible initiatives and be part of the transition to a greener economy. Economic Growth Potential: The development of natural gas infrastructure is crucial for economic growth in the northeastern states and territories. Retail investors can benefit from investing in companies operating within these regions, as the increased access to clean energy will unlock new business opportunities and drive economic development. Diversify Portfolio: Including investments related to natural gas infrastructure in India can help retail investors diversify their investment portfolios. By investing in different sectors and regions, investors can spread their risk and potentially enhance their returns. Long-Term Sustainability: Investing in the natural gas sector aligns with the global trend towards cleaner and more sustainable energy sources. By investing in this sector, retail investors can contribute to long-term sustainability while potentially reaping financial rewards as the industry grows and evolves. Capitalize with Renowned Leaders in Energy Investment This under-the-radar stock presents an alternative investment idea in the small-cap sector. Leading the company is a renowned and accomplished team with a strong track record in energy and capital markets. With their exceptional track record, robust financial backing, industry expertise, resilient leadership skills, and extensive experience, this team provides a solid foundation for the company. Heightened geopolitical tensions have sparked a pressing need for Europe to strengthen its energy security.
India Faces Clean Energy Challenges As Energy Demand Soars, Global Fossil Fuel Subsidies Rise
The 2022 global energy crisis, together with India’s growing energy demand, has led the country to adopt a hybrid approach, expanding all forms of supply in 2023. This approach has pushed India’s total energy subsidies to 9-year high of Rs 3200 billion (USD 39.3 billion) for the fiscal year ending 2023, states new report titled ‘Mapping India’s Energy Policy: A Decade in Action’ by International Institute for Sustainable Development (IISD), an independent think tank working for a stable climate, sustainable resource management. It states in recent years, India has positioned itself as an international climate leader, steering the G20 under its presidency to call for global renewable energy capacity to triple by 2030 while also funding decarbonization measures to decouple the fast-growing economy from greenhouse gas emissions and reach net-zero targets. However, clean energy subsidies accounted for less than 10% of total energy subsidies in FY 2023, while coal, oil, and gas subsidies contributed around 40%. The majority of the remaining subsidies were for electricity consumption, particularly in agriculture. In 2023 rising energy demands and the impact of the international energy price crisis following Russia’s invasion of Ukraine led India to put several measures in place that significantly increased support for fossil fuels. With an aim to protect low-income households, India responded to peaking fossil fuel prices in 2022/2023 by capping retail prices of petrol, diesel, and domestic liquefied petroleum gas; cutting taxes; providing direct budgetary transfers to businesses and consumers; and supporting existing energy supplies. As a result, oil and gas subsidies rose by 63% in FY 2023 compared to FY 2022, according to a report by the International Institute for Sustainable Development (IISD)