Daily Management Review

Saudi Arabia Targets To Save $200 Bln From Energy Reforms


Replacing liquid fuel used for domestic consumption with gas and renewable energy sources could help Saudi Arabia to save more than $200 billion over the next decade, said the kingdom’s finance minister said even as the country tries to reduce its reliance on fossil fuels and find new ways of revenues.
In recent years, an ambitious plan to modernize its economy, create jobs, and reduce its dependence on oil revenues has been initiated by the top oil producer of the world.
"One initiative we're about to finalise is the displacement of liquids," said Finance Minister Mohammed al-Jadaan. "This programme 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."
As a part of its plans to optimise the energy mix used for electricity production, the country signed new agreement for power purchasing with seven new solar projects earlier this month.
"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.
The coronavirus induced lower crude prices hit the kingdom hard last year and plans for accelerating domestic investment – which runs into trillions of dollars in spending push led by state oil giant Aramco and the $400 billion sovereign fund, Public Investment Fund was announced by the kingdom recently.
Some of the companies of the country have been asked to reduce the dividends that they pay to the government so that they can use that money to increase their capital spending in an effort to shift the burden of some of the planned investments away from the treasury.
"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.
Crown Prince Mohammed bin Salman created the kingdom’s Vision 2030 plan which aims to wean away the country’s economy off oil and setting up new industries and mega projects with the help of the private sector so that large number of jobs are created.
Compared to the record 15.4 per cent unemployment in the country in the second quarter last year when the economy was in the throes of the pandemic, the rate of unemployment reduced to 12.6 per cent at the end of 2020. However that rate was well over the 7 per cent mark that the kingdom had targeted to achieve 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."