Despite many new efforts related to alternative energy projects, portfolio diversification and other modernization, new studies show that Saudi Arabia is not going to pivot entirely away from the oil and gas resources that have supported the country's economy for decades.
An Oct. 13 press release shows national energy company Saudi Aramco poised to invest $300 billion in oil and gas projects over the next 10 years.
Citing a keynote address by Saudi Aramco CEO Amin Nasser at the 23rd World Energy Conference in Istanbul, the report suggests that in the midst of a “transitional phase,” where the use of renewables and sustainable energy models increase, up to 75 percent of global energy demand will still be met by fossil fuels until at least 2040.
In his speech, Nasser called for a blended approach, including responsible fossil fuel investment, attention to the economy and energy cost structures, and the development of alternative clean and sustainable energy sources.
The Saudi Vision 2030 plan is in the mix, as well -- an ambitious national plan that promotes diversification to help support economic goals like keeping Saudis at work and handling national deficits. Nasser also cited a key principle of Vision 2030, which is aimed at energizing domestic business activities.
“As part of Saudi Aramco’s In-Kingdom Total Value Add program (IKTVA), we will more than double our procurement of locally produced energy-related goods and services to reach 70 percent by 2021,” Nasser said in a press statement.
To promote future economic development, Saudi Arabia is working with Turkish officials to draft a memorandum of understanding (MoU) that will help look at business opportunities for the future.
“The MoUs will help further the development of business opportunities between the two countries, and we look forward to working with Turkish firms on future projects,” Nasser said. “This is a great opportunity for Turkish companies, particularly to bring their expertise and invest in the Kingdom’s future.”
For more on what this announcement means, Gulf News Journal interviewed Dr. Gautam Mukerjee Wednesday. Mukerjee is director of the economics program and associate professor of economics at the University of Pittsburgh Bradford.
“The global markets are totally awash in oil,” Mukerjee told Gulf News Journal.
OPEC, he said, could tighten up supply, but that is not going to lead to an imminent comeback in the traditional energy markets with clients like the U.S. moving toward decreased reliance on foreign oil production while China and the E.U. are bracing for a continued economic slowdown.
“Their situation is kind of precarious right now,” Mukerjee said of the Saudis.
He referenced economic shortfalls, political problems in Yemen and other challenges besetting Saudi officials right now.
“(Saudi officials) could be striking a note of optimism where it’s sorely needed,” Mukerjee said. “The Middle East economy is unsettled.”
Time will tell how Saudi Arabia’s big energy moves and other projects will help to make the difficult transition out of the “age of oil” and into an uncertain future.