Saudi Arabia, which broke the recent negotiations on the freezing of oil production, which should support prices, increasing production. Market experts warn that this will put pressure on quotes, and so went down after records last week. The Saudis declare that they intend to reduce dependence on oil through the high-tech, tourism and renewable energy.
On Monday Saudi Arabia presented their plans for reducing dependence of the economy on oil as main source of income. In particular, one of the main points of the new strategy of Saudi Arabia called Saudi Vision 2030, is to sell 5% in the state-owned Saudi Aramco. The Saudi Prince Mohammed bin Salman praised the oil company Saudi Aramco in $2 trillion.
During his speech Ben Salman also said that he is confident that Saudi Arabia in 2020 will be able to exist without reliance on oil. “We depend on oil. It’s dangerous… it delays the development of other sectors,” said the Prince. Earlier he announced that Saudi sovereign Fund Public Investment Fund (PIF) will unite with assets of $2 trillion and will be used by the Kingdom for investment in non-oil sectors of the economy.
In particular, it is planned to develop information technology, health and tourism. In addition, in the framework of the Vision 2030 plan to increase the share of small businesses in GDP from 20 to 35%. It is expected to reduce unemployment from 11.6% to 7%, while the participation of women in the workforce increased from 22 to 30%, according to CNBC. It is also expected to create state holding military-industrial company, which by the end of 2017 will hold an IPO.
As for energy, in mid-March, the Minister of oil of Saudi Arabia Ali al-Naimi said the country will focus on renewable energy. “I don’t think there is a more ideal country for renewable energy than Saudi Arabia,” said al-Naimi. He explained that this abundance of sunlight in the Kingdom and a large number of unused areas.
The leading expert of the Union of oil & gas producers of Russia Rustam Tankaev said that Saudi Arabia would be extremely difficult to reorient its economy from oil to renewable energy and new technologies. “Japan has on the development of high-tech industry took several decades” — recalls the expert. According to Tankaev declared by the refusal of the Saudis from oil is only a Declaration. “In terms of developing technologies SA can only catch up and copy other countries, to create something of their own, she will be very problematic,” — says the expert.
Contrary to the stated intentions for phasing out of oil the Saudis are increasing production.
As reported on Monday by Bloomberg, citing a source familiar with the decision of the authorities of the Kingdom, production at the field “sheyba” will be increased by 250 thousand barrels per day and reach 1 million barrels. This will be possible thanks to the modernization of production capacity, which is scheduled to be completed in may.
Despite the fact that Saudi Arabia was one of the initiators of the agreement on freezing of oil production at the levels of January (it had to sign the OPEC countries and a number of producers outside the cartel, including Russia), the Saudis foiled the signing of this agreement on April 17. This was due to the position of Iran, which refused to record production, appealing to the country only in January had lifted sanctions the U.S. and the EU, which over the last few years, limiting exports, and hence oil production.
Analyst Raiffeisenbank Andrey Polischuk said that the increase in production in Saudi Arabia would strike the price of a barrel. “But it is the goal of the Saudis, since at low prices from the market will start substituting volumes of oil producers with high production cost that will clear niche for raw materials from SA,” explains the expert.
After records last week, when oil quotations showed a maximum in the current year the level came up to around $46, the barrel began to fall. On the evening of Monday the price of oil at the Intercontinental exchange ICE in London averaged $price of 44.63 (-1,07%).
According to OPEC, in March, Saudi Arabia was extracted 10,22 million barrels per day. But, says Rustam Tankaev, now production in the Kingdom dropped to about 10 million barrels, and the Saudis are trying to increase (maximum value was in July of 2015, 10,29 million barrels). By the way, earlier, SA said can in the shortest possible time to increase oil production to 12.5 million barrels a day.
But, according to Tankaev, large-scale production increase SA only in case of resumption of the program on the shelf of the red sea, which was frozen because of the low prices. Now Saudi Aramco is increasing production through infill wells (i.e. drilling wells between the existing ones). But this process is close to its maximum and will soon lose its meaning because of the rapid flooding of wells.
