Saudi Arabia is the largest producer and exporter of oil in the world. Oil accounts for 90% of its exports and nearly 75% of the kingdom’s income.
Saudi Aramco is one of the biggest oil corporations in the world and through this the government manages its oil reserves.
Saudi Aramco is the fifth largest public sector company worldwide and has a valuation that is over $2 trillion. It produces the highest quantity of oil per day and has the second largest crude oil reserve around the globe. In 2020, it alone was representing 12% of global oil exports.
PANDEMIC & DECREASING TREND IN DEMAND
The demand for oil has been dripping over the years and the pandemic made it worse as oil prices hit its lowest, due to fall in demand.
Global demand for oil witnessed a decline by approximately 700,000 barrels per day in the first quarter of 2020.
The International Monetary Fund ( IMF) said “the world’s demand for oil was expected to grow more slowly and eventually begin to decline in the next two decades. Saudi Arabia, the UAE and their neighbors face a future of slumping income and reliance on debt to support spending.”
The kingdom’s revenue from other non oil businesses also slumped during the pandemic, thus further impacting its economy.
THE POST OIL ERA
Since people are becoming more conscious of the environment and the adverse impacts of oil mining and refining, the supply and demand market for oil witnessed drastic changes.
To cope up with these changes and build a more viable future the kingdom has been focusing to reduce its dependence on its oil and gas industry as well as meet and cater to the global emission standards for a sustainable future.
“Faster progress with economic diversification and private sector development will be critical to ensure sustainable growth,” the IMF said.
The kingdom unveiled its 2030 vision surrounding the themes of “vibrant society, a thriving economy and an ambitious nation”.
The nation will focus on diversity and improvement by investing in some major industries namely travel, general tourism & religious tourism, entertainment, education, petrochemical, renewable energy, defense and healthcare industry.
Plans and projects have been drawn to increase its non oil exports GDP from 15% to 50% by 2030 as well as improve non-oil revenues of the government to $267 billion from $45 billion.
The kingdom is hoping for small and medium businesses to play a grave role in this transformation. Their contribution to GDP is projected to jump from 20% to 35%.
Saudi Aramco is going the privatization way, through initial public offering (IPO). The kingdom is also focusing to get five of its universities in the top 200 list by 2030. The entertainment sector will receive an investment that is more than $2 billion.
To improve travel and tourism cities to be developed and tourist visas will be issued to people from 49 different countries for a visit to the kingdom for a period of 90 days at a minimal fee of $80. This visa can be either obtained on arrival or online.
Several other transformational projects are underway and the investment cost towards this 2030 program goes beyond $700 billion.
But the Saudi king was forced to abandon several transformational projects due to the impact on finances due to the pandemic.