saudi arabia and its expanding economy
TRANSCRIPT
1Introduction
SaudiArabia’seconomyislargelybasedoffitsoilproductionandexportation.Saudi
Arabiaistheworld’sleadingoilexporterandhasthesecondlargestoilreservesinthe
world(Pierru2014).AccordingtotheSaudiArabiangovernmentthereareprojectedtobe
260billionbarrels(36400MTOE)ofprovenoilreservestotalingonequarteroftheworld’s
totalreservesinSaudiArabia(Pierru2014).MuchofSaudiArabia’soilisnearthesurface,
whichmeansthatlessworkisrequiredtoextracttheoil.Thisallowsforcheaper
productionandmoreprofitsintheoilsector.SaudiArabiahasaveryhighpercentageof
lightcrudeoilthatsellsforahigherpriceonthemarket.Thepetroleumsectoraccounts
forroughly92.5%ofSaudiArabia’sbudgetrevenues,90%ofexportearnings,and55%of
itstotalgrossdomesticproduct(GDP)(Pierru2014).Another40%oftheGDPcomesfrom
theprivatesector.Anestimated7.5millionforeignersworklegallyinSaudiaccordingto
2013figures,playingacrucialroleintheSaudieconomy,especiallyintheoilandservice
sectors(Rajhi20013).SaudiArabiahasaGDPof$748.4billionwithanaveragegrowthof
theirGDPatanastonishingsevenpercentperyear(Alshehry2015).SaudiArabia’sGDP
percapitais$53,780.GDPbysectorisasfollows:agriculture:3.2%;industry:60.4%;
services:36.4%(Rajhi2003).
ThelaborforceinSaudiArabiaisabout7.63million,accordingtoa2009estimate.
Interestingly,80%ofthelaborforceisnon-national(Rajhi2003).Thelaborforceby
occupationisasfollows:agriculture:6.7%;industry:21.4%;services:71.9%withan
unemploymenttotalat5.7%(Rajhi2003).Thecountryissodependentonoilproduction
thatthegrossdomesticproductofSaudiArabiafluctuatesdramaticallyaccordingtothe
globalpriceofoil(Pierru2014).However,SaudiArabiadoeshavemanyfutureendeavors
2andiscontinuallytryingtosourcemorerenewableandefficientpowersources.Theyhave
committedtocreatingnuclearpowerplants,solarpowereddesalinizationplantsandnew
“economiccities”thatwillhelpdiversifytheirportfolioawayfromtheoildependency.
SaudiArabiahasplannedacitysolelybasedonrenewablepowerplannedforthenear
future(Parajuli2015).SaudiArabiahasdevelopedsignificantplansfortheproductionof
energy,muchofwhichisintherenewableenergysector.
CountryContext
SaudiArabiaisoneofthefoundingmembersoftheOrganizationofPetroleum
ExportingCountries(OPEC)aswellasaprominentmemberoftheOrganizationofMuslim
PetroleumExportingCountries(OMPEC)(Pierru2014).OPEClimitsitsmembers'oil
productionbasedontheir"provenreserves"(Pierru2014).SaudiArabia'spublished
reserveshaveshownlittlechangesince1980,withthemainexceptionbeinganincreaseof
about100billionbarrels(1.6×1010m3)between1987and1988(Pierru2014).Matthew
Simmons,whoservedasanenergyadvisertoU.S.PresidentGeorgeW.Bush,andwasa
memberoftheNationalPetroleumCouncilandtheCouncilonForeignRelations,has
suggestedthatSaudiArabiaisgreatlyexaggeratingitsreservesandmaysoonshow
productiondeclines(Simmons2006).
SaudiArabiaisinanariddesert,whichattributestoitbeingagreatareaforoil
drilling.ThecountryisinthemiddleoftheMiddleEastwithalargecoastline,whichgives
thecountryanadvantageinportaccessandtrading.SaudiArabia’slargelandmassand
accesstotheoceanmeansthiscountryisidealforpotentialeconomicdevelopment.
3SaudiArabiahasapopulationof30,770,375andapovertyrateof12.7percent,
whichisrelativelylow,evenlowerthantheU.Spovertyrateof14.5percent.The
populationwithaccesstoelectricityis94.1percent,whichislowerthanmanydeveloped
countries(Bawah2013).Withitsabsolutemonarchysystemofgovernment,largestate
sectorandsupplyofwelfarebenefits,theSaudieconomyisdescribedasa“bewildering
combinationofafeudalfealtysystemandamoremodernpoliticalpatronageone”(House
2012).Inmanyaspectsoftheirbusinessrelateddealings,Saudisoperatebymanipulating
individualprivileges,favors,obligations,andconnections(House2012).Likewise,the
governmentbureaucracyisamazeofcoincidingoropposingpower,focusedunderthe
helpofnumerousroyalprinceswiththeirownprioritiesandagendastopursue.Saudi
Arabia’sgovernmentisextremelycorruptandalmostallprofitsofoilexportationgotothe
governmentofficialsandroyalty.EventhoughSaudiArabiareceivedascoreof49onthe
corruptionindexthisputsthemasthe55thleastcorruptcountryoutof175.Comparatively
theUnitedStatesscoreda74,makingthemthe17thleastcorruptcountryintheworld.In
theMiddleEasttherearefivecountriesthatareratedlesscorruptthanSaudiArabia
includingJordanandtheU.A.E.(TransparencyInternational2014).Morethan95percent
ofallSaudioilisproducedonbehalfoftheSaudiGovernmentbytheoilgiant,Saudi
Aramco,andtheremaining5percentbysimilarcompanies(Pierru2014).Thecostof
maintainingtheRoyalFamilyisestimatedtobeapproximately$10USbillionperyear
(Darley2015).A2005surveybytheRiyadhChamberofCommercefound77percentof
businessmenpolledfelttheyhadto`bypass`thelawtoconducttheiroperations.Sincethen
"businessmensayithasonlygottenworse"(Darley2015).Overall,corruptionplaysahuge
4roleinthewaytheeconomyfunctionsinSaudiArabiacostingthecountrybillionsof
dollarsperyear.
EnergyPortfolio
Thegovernmenthasencouragedprivatesectorgrowthformanyyearstolessenthe
kingdom'sdependenceonoil,andtoincreaseemploymentopportunitiesfortheswelling
Saudipopulation.Inrecentdecadesthegovernmenthasbeguntopermitprivatesectorand
foreigninvestorparticipationinsectorssuchaspowergenerationandtelecom,andhas
alsocompliedtotheWorldTradeOrganization(WTO).
AsofAugust2009,asreportedbytheWorldBankSaudiArabiaisthestrongest
MiddleEasterneconomy.SaudiArabiahasannouncedplanstoinvestapproximately$46
billioninthreeoftheworld’slargestandmostambitiouspetrochemicalprojects.These
includethe$27billionRasTanuraintegratedrefineryandpetrochemicalproject,the$9
billionSaudiKayanattheWaybackMachinepetrochemicalcomplexatJubailIndustrial
City,andthe$10billionPetroRabighrefineryupgradeproject(Rajhi2003).Together,the
threeprojectswillemploymorethan150,000techniciansandengineersworkingaround
theclock(Rajhi2003).Uponcompletionin2015–16,theRasTanuraintegratedrefinery
andpetrochemicalsprojectwillbecometheworld’slargestpetrochemicalfacilityofits
kindwithacombinedproductioncapacityof11milliontonsperyearofdifferent
petrochemicalandchemicalproducts(Rajhi2003).
SaudiArabiaproduces558milliontonsofoilequivalent(MTOE)ofoilperyearand
consumesalittleover1.095MTOE/yearandproduces85.3MTOE/yearinnaturalgasand
consumesalmosttheexactsameamount(Table1)(Pierru2014).Naturalgasiswhatruns
5manyofSaudiArabia’spowerplants.SaudiArabiaproduces524,327,190totaltonsofCO2
pollutionperyearbutonapercapitabasis,thisequals17.04tons/personandCO2
EmissionperUS$2000GDPareequalto.635tons(Table1)(Alshehry2015).Saudi
Arabia’semissionsareveryhighcomparedtomanycountriesandalmostrivalthatofthe
UnitedStates.
SaudiArabiaplanstoincreaseelectricity-generatingcapacityto120gigawatts(GW)
by2040tomeetthecountry'srapidlygrowingdemandforelectricity(Parajuli2015).
SaudiArabiaplanstoconstruct16nuclearpowerreactorsoverthenext20yearsatacost
ofmorethan$80billion,withthefirstreactorcomingonlinein2022(Garwan2014).It
projectsa17GWenuclearcapacityby2040toprovide15%ofthetotalrequiredpower,
alongwithover40GWeofsolarcapacity(Garwan2014).SaudiArabiawantstohavea
goodstartonswitchingfromitsdependenceonoiltootherenergyresourcesby2020.
ComparedtotheUnitedStates,SaudiArabiaisverybehindinrenewableresources
(Table1).SaudiArabiahasvirtuallynodevelopedsourcesofrenewableenergywhilethe
UnitedStateshasapproximately14.2percentrenewableenergysources.TheUnitedStates
oilconsumptionpercapitaishigherthanthatofSaudiArabia’seventhoughtheUnited
Statesproducesmuchlessoil(Table1).TheenergydemandofSaudiArabiaismuchless
thanthatoftheUnitedStatesevenwhencomparingitonapercapitabasis.TheUnited
Statesconsumesanextremelylargeamountofenergyperperson,almost6,800kgofoil
equivalent,morethananyothercountryintheworld(Table1).EventhoughtheKingdom
ofSaudiArabiauseslessenergyperpersonthantheUnitedStates,greatstridesareneeded
inordertomakeadentintheirenergyconsumptionandCO2emissions.
6PotentialEnergySupply
SaudiArabiahasaveryhighpotentialforsolarenergysinceitisalmostalways
sunnyandisclosetotheequator(Figure2).TheKingdomofSaudiArabiahasmany
proposedsolarprojectsandhasevencommittedto41gigawatts(GW)ofsolarcapacityby
2040.Itisprojectedtobecomposedof25GWofsolarthermal,and16GWofphotovoltaic
(Garwan2013).SaudiArabiahasalotofopenlandthatwouldbegreatforsolarandwind
farms.Onthecoast,highwindspeedshavebeenobservedwhichwouldbeidealforwind
farms(Parajuli2105).Geothermalventshavealsobeenfoundnearthecoasts,whichcan
beusedforgeothermalpower.Solar,windandgeothermalplantsareintheplansforSaudi
Arabia’sfuture.AllthreeoftheserenewableenergysourceswillbeimportantifSaudi
Arabiaeverywantstowaneoffnaturalgaspowerplants.Withatotallandareaof
2,149,690km2or830,000squaremiles,thismakesSaudiArabiaidealforwindandsolar
power,especiallysincemuchofthislandisdesolatewithlittledevelopmentandscarce
vegetation.(Parajuli2015).
PoliciesGoverningResources
SaudiArabiahasvirtuallynopoliciesregardingenergyefficiencyoruseand,in
general,hasbeenlargelyopposedtotheUnitedNationsclimatenegotiationsalthough
someprogresshasbeenmade.InregardstotheKyotoprotocol,SaudiArabiaaspartof
theircommitmenttoacleanerfuture,announcedtheyarelaunchingtheworld’slargest
solarpowereddesalinizationplant(Figure3).SaudiArabiaisalsotryingtoenactlawsto
reduceemissionsaswellasfindalternativesourcesofenergyotherthannaturalgasand
7oil,suchasnuclear,solar,andwind(Figure3).KingAbdullahhasalsoorderedauniversity
tobeestablishedthatfocusessolelyonenergyefficiencyandadvancement.
SaudiArabiahasplanstolaunchsix"economiccities"(e.g.KingAbdullahEconomic
City),tobecompletedby2020inanefforttodiversifytheeconomyandprovidemorejobs
tocitizenswithinitsborders.(Alshehry2015).Theseeconomiccitiesarebeingbuiltata
costof$60billionandare"expectedtocontribute$150billiontotheeconomy"(Alshehry
2015).Asof2013fourcitieswerebeingdevelopedandsixteennuclearplantsareplanned
forthefuturetohelpreduceoilandcoalpowerplantemissions.
TheKingdomofSaudiArabiahasnotsetemissionsreductiontargetsfor2020or
2030.Greenhousegasemissionsareexpectedtoincreaseby30%by2020comparedwith
2010levelsandby60%in2030ifcurrentpoliciesarenotimprovedupon(Alshehry2015).
In2013,theKingAbdullahCityforAtomicandRenewableEnergy(K.ACARE)releaseda
whitepapertoinstall54GWofrenewableand17GWofnuclearpowerby2040.Theplan
hasthepotentialtocurbemissionsin2040byaround200MtCO2e,areductionof25%
comparedtocurrentprojectionlevels.However,fulfillmentoftheplanwithinthetimeline
isnon-binding.SaudiArabiahasstillnotsubmittedanationalmitigationpledgetotheUN.
In2011,SaudiArabiadescribedtheinitiativestoensuresustainabledevelopmentinthe
Kingdom.Thesemainlycoverenergyconservationmeasures;renewableenergyresearch
anddevelopment,withafocusonsolarenergy,aswellascarboncaptureinitiatives.After
theDohaconferencein2012,itstatedinalettertotheUNFCCCthatthecountrywould
soonbereadytosubmititsnationalmitigationpledgegivenitsspecialcircumstancesasan
economyhighlyreliantonhydrocarbonproductioninwhichmitigationactionsconflicts
withnationaldevelopmentobjectives.Todate,nopledgeorNationallyAppropriate
8MitigationAction(NAMA)hasbeensubmittedandthereisnoshiftexpectedinpolicy
regardingthecurrentoversupplyofoil.
InorderforSaudiArabiatoaccomplishthesegoalsofeconomicdiversification,they
haveaskedforoutsideinvestmentandthesharingoftechnology.AsSaudiArabiagrows
financially,theyaretryingtobecomemoreefficientandenvironmentallyfriendly.With
theuniversityofefficiency,greatstrideswillbemadetofurtherSaudiArabia’s
commitmenttoagreenermoreefficientfutureprimarilypoweredbyrenewable,green
energy.
ProposedPortfolio
IfSaudiArabiaconsumedthesameamountofenergypercapitaastheUnitedStates,
thenitwouldneedtoreallyinvestalotofmoneyinnuclear,windandsolarenergy.Saudi
Arabiahasthetechnology,finances,andresourcestoeventuallyhaveasolelyrenewable
energyportfoliowithinthenextfortyyears.SaudiArabiahasthefinancialbackingand
perfectgeologicallandscapetogoonehundredpercentrenewable,greenenergyby2060.
OnehundredpercentofSaudiArabia’senergyisalreadyproducedinsideitsborders;
however,theproblemitcurrentlyfacesistryingtogetoffitsoildependency(Parajuli
2105).SincemostoftheGDPisbasedoffoil,ifpricesfalldramaticallythatcould
potentiallybeverydevastatingtotheeconomy,whichiswhyKingAbdullahwantsSaudi
Arabiatohavealternativesinenergyproduction.Atthecurrentrateofextraction,Saudi
Arabianoilisonlyprojectedtolastanotherninetyyearsbeforethereservesrunout.This
meansthattheSaudigovernmentneedstostarttheireffortsonothersourcesofenergy
andincomeintheverynearfuture.(Garwan2013).KingAbdullahproposedacitytobe
9builtsolelybasedoffatomicandrenewablepower,thedesignofthecityhasalreadybeen
completedandconstructionwillbecommencingsoon(Parajuli2015).
Conclusion
SaudiArabiahasthepotentialtobeontheforefrontofrenewableenergyinthe
MiddleEastaswellastherestoftheworld.Theyhavemadeambitious,yetachievable
goalsinregardstorenewableenergy.SaudiArabiaisdeterminedtomakeseveralthriving
economiccitiesforwhichatleastoneistoberunonlywithrenewableenergy.Their
commitmenttomaketheworld’slargestsolarpowereddesalinizationplantisverygood
foragreenerfuture.Convertingsaltwatertofreshwaterinatimeofdroughtisvery
important.Desalinizationisanexpensivepracticebutwithitbeingstrictlyrunbysolar
power,whichwouldoffsetexpensesimmensely.
Altogether,thenewlyplannednuclearpowerplants,solarplants,windfarms,
geothermalplantsandeconomiccitieshavethepotentialforcreatinghundredsof
thousandsofjobsintherenewableenergysector.SaudiArabia’scommitmentstoa
greenermorerenewablefuturecomesassomewhatofasurprise,butwhenyouaccount
foritsboomingeconomy,growingpopulationofforeignlabor,anditsconstructionofthese
“citiesofthefuture”itisofnosurprisethat“goinggreen”willbeoneofthecountry’smain
concernsinthenearfuture.Sinceallthesenewcitiesarebeingbuiltfromthegroundup,it
iseconomicallyandenvironmentallysensibleforthemtobeself-sufficientandrunoffof
atomicandrenewableenergysources.ItseemsfeasibleandlikelythatSaudiArabiaison
therighttrackforagreenerfuture,possiblysurpassingthatoftheUnitedStates.
10
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12
AppendixA
Table1:SaudiArabia&TheUnitedStatesEconomiesCompared.
CountryName Population GDP %Accessto
Electricity
Povertyrate(%livingbelow
US$2/day
UnitesStates 318,900,000 $16,770,000,000,000 100% 14.50%
SaudiArabia 30,770,375 $1,652,000,000,000 94%
12.7%(lessthan
$1.25/day)Netoil
importer(oilproduction/o
ilconsumption
)
TotalEnergyConsumptio
n(MTOE/yr.)
TotalEnergyConsumptionpercapita
(TOE/person)
TotalEnergyConsumptionper$2000US
GDP
CO2Emission(totalinkilotons)
0.55 254 0.7965 0.000015146 5,433,057480.365 208 0.6167 0.104594431 524,327
CO2Emissionpercapita
(tons/person)
CO2Emission(tons)perUS$2000GDP
Renewableresource
potentialas%oftotal
consumption
OilProduction(MTOE)
OilConsumption(MTOE)
17.56 0.017036 12.90% 558 1.09517.04 0.635 0%
NaturalGasProduction(MTOE)
NaturalGasConsumption(MTOE)
85.3 85.3