Saudi Arabia's energy minister urges 'extreme caution' from oil producers

Saudi Arabia's energy minister, Prince Abdul Aziz bin Salman, did not want to show an overly optimistic face regarding his country's oil forecasts at the International Energy Forum. The effects of the pandemic we are still trying to put behind us remain incalculable and it is unknown when we will stop suffering its direct consequences. He warns that it is still too early to claim victory against the virus and that oil producers must be "extremely cautious" in these uncertain times: "We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high," the minister told the forum.  

The event was held virtually and organised from Riyadh. As usual, the main focus was on the pandemic. Ahead of the forum, the communiqué released by official sources stated that "the impact of the COVID-19 pandemic on energy supply and demand balances is unparalleled in the history of energy markets". It also stressed the importance of the economic blockade suffered as a result of the virus: "The restrictions imposed on the global economy caused a systemic shock that most severely affected short-term trends in liquid supply, demand and stock changes, as shown by extensive reviews".  

The document praised the measures taken by the Organisation of Petroleum Exporting Countries (OPEC) under the 2016 Vienna Declaration as, it says, they cushioned the effects of the COVID-19 pandemic. The communiqué also stresses the importance of a recovery that is conditional on a number of variables including the evolution of the health and macroeconomic situation. On the other hand, Abdul Aziz bin Salman warns those who seek to predict OPEC's next moves:  "Don't try to predict the unpredictable," he warned.

The International Energy Forum also addressed the issue of renewable energy, which is increasingly in demand throughout international society. The same is true for electricity, while, according to the forecasts presented at the forum, fossil fuels will gradually lose their importance from the current 80 per cent to 20 per cent. The commitment to renewable energies is not a new front for Saudi Arabia, which last January announced its intention to make 50% of the country's energy emission-free: "We will be another Germany when it comes to renewable energy sources," converting 50 percent of the Kingdom’s energy reliance to renewables, Saudi Energy Minister Prince Abdulaziz bin Salman said. The Kingdom’s clean energy plans will save hundreds of thousands of barrels of oil, Prince Abdulaziz added.

All these initiatives are part of Vision 2030 in an attempt to diversify the economy away from the Kingdom's heavy dependence on oil. To this end, the Saudi Public Investment Fund (PIF) will invest 150 billion rials a year - roughly 33 billion euros - in the national economy for at least the next five years.  Crown Prince Mohammed bin Salman himself said that this would make the fund "it will represent an important pillar in achieving our country's aspirations and aims to achieve the concept of comprehensive development". However, the situation must undergo a major change as, according to OPEC, the oil and gas sector still accounts for approximately 50 per cent of the country's Gross Domestic Product (GDP) and 70 per cent in terms of exports. On top of this, crude exports plummeted to an all-time low of 4.98 million barrels per day in 2020.  

Saudi Arabia's intention is to lead investment in renewable energies and be a pioneer in the fourth industrial revolution. Moreover, the diversification project it intends to carry out seems fundamental due to the significant drop in the price of oil as a result of the COVID-19 pandemic. And one of the bases on which the Saudi state also intends to rely is tourism. A prime example of this is the new Coral Bloom project. It is a tourist complex located on the island of Shurayrah, the main island of the Red Sea Project. The architectural firm Foster + Partners will be in charge of shaping this initiative, which will include 50 luxury resorts and an international airport, and which will be the cornerstone of the Vision 2030 initiative.