Saudi Arabia moves towards diversification

Saudi Arabia moves towards diversification

Neil Ford

Oil continues to dominate the Saudi economy accounting for three quarters of government revenues, and a massive 90% of export earnings. Such figures have caused the government to focus almost exclusively upon the hydrocarbon sector, to the detriment of the rest of the economy. The need for diversification was clear long ago but little was achieved. Now, at last change is afoot.

In recent years, the political will has grown to reduce oil dependency and invest in others sectors. Lower oil prices during the late 1990s caused GDP per head to fall by 40% and triggered the current wave of enthusiasm for foreign investment in the country. The government has encouraged investment in agriculture, water projects and even tourism, but manufacturing and non-oil industrial enterprise remains limited. Even with the best will in the world, and with the highest oil prices, creating new economic sectors and the skilled staff to man them is easier said than done.

Apart from the government’s preoccupation with oil, Saudi Arabia’s complex regulations have done much to deter potential investors from the non-oil economy. Cumbersome bureaucracy and the exclusion of foreign companies from a whole host of sectors have often made investment more trouble than it is worth. Moreover, the government and the investment culture have favoured the activities of huge corporations, rather than encouraging the growth of enterprise within the country.

Large corporations dominate almost every sector, with little room for small players. As any good economist knows, it is usually a bedrock of thousands of small and medium sized companies that brings about economic strength and enables diversification. But developing this would require a massive cultural change and leap of faith, both on the part of the country and its people, and by potential investors.

As in many other closely controlled economies, too much attention has been given to a series of five year plans, which tend to focus on major infrastructural projects. Yet the sheer weight of the investment put into such plans has borne some fruit. In 1975, there were a total of 470 industrial plants in the country, accounting for combined investment of $2.7 billion. By 1999, thanks to financing through the five year plans, the number of installations had reached 2,557 with investment of $43.3 billion.

However, lower oil revenues have had an impact in curtailing such investment. According to government projections, the country’s balance of payments surplus is expected to fall from 53.7 billion riyals in 2001 to 31.3 billion riyals for 2002, restricting the Ministry of Finance’s room for manoeuvre. In December 2001, the Saudi cabinet decided to bar the creation of any new permanent state jobs, while simultaneously freezing all state sector pay.

Despite this, the government forecasts that the budget deficit will double from $6 billion in 2001 to $12 billion for 2002, with expenditure set at 202 billion riyals ($53.9bn) and revenues estimated at 157 billion riyals ($42bn). This would match the 1998 deficit, when the oil price averaged just over $12 a barrel. The level of the deficit, however, will depend almost entirely upon the oil price, and it is likely that the steady oil prices experienced during the first half of 2002 could reduce the shortfall.

Some commentators believe a growing budget deficit could be a good thing in the long term, forcing the government to pursue its diversification policies. The chief economist at the National Commercial Bank, Said Al-Shaikh, says: `I believe that pressure on reforms will build up … and the pace of privatisation will be faster.’

Apart from the obvious impact of oil revenue fluctuations, the budget deficit is largely the result of increased investment in education, the cost of maintaining the overmanned bureaucracy and the government’s determination to maintain social spending.

Ibrahim Al Assaf, the finance minister, is confident that overseas borrowing will not be required to cover the black hole in the country’s finances. He says: `Saudi Arabia’s financial establishments and national reserves are capable of meeting the shortfall … The position of our banks is excellent’.

Reform underway

The current economic difficulties have undoubtedly given a boost to the process of economic reform. The Supreme Economic Council (for Restructuring) and the Ministerial Committee for Privatisation were both set up in 1995 to attract private investment and to provide licences to foreign companies. However, enthusiasm for market liberalisation and privatisation seems to have mirrored the rises and falls in the oil price, and the rate of progress over the past seven years has been limited.

New foreign investment legislation was passed last year, permitting foreigners to own 100% stakes in industrial ventures and enabling foreign companies to operate within the country without working in partnership with Saudi companies. This sponsorship system gave the local partner enormous leverage over the foreign firm in question and discouraged investors. However, in practice it may still be advisable for overseas firms to co-operate with local partners and networking remains very much the name of the game.

The new investment law also allows foreign interests to own the property utilised in any project. Previously, domestic partners had to hold a 51% stake in any venture. Ownership regulations and tax rates have both been made more favourable to investors, and tax holidays have even been introduced in selected sectors. Market liberalisation is also planned but faces stiff opposition from vested interests. The privatisation process has been making slow progress, largely because of the government’s hesitancy over the involvement of foreign companies and the effect upon the country’s culture.

The seventh five year plan, covering the period 2000-04, attempts to marry the reform programme with the country’s traditional ways of doing things. The government’s report on the proposals states: `The plan reflects the continuation of the kingdom’s development policy, which follows a free economic system in line with Islamic values. It also reaffirms the country’s commitment to its fundamental principles which aim at protecting Islamic values, defending the religion and the nation, and safeguarding social security and stability.’ The report sums up the government’s new fiscal and oil policy as: `Prudent use of funds and natural resources’. It will be interesting to see whether traditional values can be maintained alongside the introduction of market principles.

The head of the country’s investment authority, Prince Abdullah bin Faisal bin Turki, said at the end of 2001 that it was a realisation that the world had changed that `made us seriously think about plugging our economy into what is happening in the world’. He told the BBC’s World Business Report: `We had not been thinking about the global or the foreign direct investor, but we feel now is a good time and we have enough opportunities.’

He continued: `The direct investment process is the quickest way to economic growth. There is a realisation that we have to open up.’

Saudi-isation

The government’s reform programme has also been triggered by rising unemployment amongst Saudis. Between 15-20% of the working age population is looking for work and the rising population mean that many more are added each year. Of the 120,000 reaching working age each year, only just over 60,000 actually find jobs. Saudi Arabia is a country with first world economic expectations but a third world demographic structure. Half the population is under the age of 18.

The government is also worried by a rise in Islamic extremism and fears that rising unemployment could fuel political unrest. Given that foreign workers account for 65% of the workforce, it is feared that unemployed youths could be attracted to extremist groups and the country’s traditional internal stability and strong national identity could be under threat.

In an effort to boost Saudi employment, new regulations have been introduced to ban foreigners from taking up certain positions. Foreign workers are already excluded from many positions and a previous government decision restricted 13 job categories to Saudi nationals. Firms with over 20 staff must ensure that at least 30% of the workforce is made up of Saudis, while jewellery shops cannot employ foreigners less than 40 years of age. The laws impact upon both of the main types of foreign worker in the country: the well paid `expatriates’ in the oil and gas industry, and the poorly paid workers from India, Pakistan, North Africa and other Middle Eastern countries.

Dr Abdulhafeez Shaikh, of the World Bank’s Riyadh office says: `I think the challenges ahead really are first to find productive employment for its growing population. I think they have to benefit from the changes taking place globally by greater integration. They have to figure out ways to attract both foreign investment and the capital of their own citizens abroad.’

The government has already begun to tackle one of the main obstacles to enabling more Saudis to find jobs. Despite budgetary constraints, it is increasing investment in education but structural problems remain. By far the most popular degree level subjects for Saudis are literature and religious studies, so it will take many years before a switch can be made to increase the numbers of business and engineering teachers and students.

Oil revenues fund the large bureaucracy and although the civil service is massively overstaffed and inefficient, the government is unlikely to embark upon a cost cutting rationalisation scheme because of the impact this would have upon unemployment.

The current five year plan envisages 817,000 more Saudis in employment by 2004: over 300,000 of these will be in new positions, while 488,000 are expected to take up jobs currently filled by foreign workers. However, the government has yet to give firm proposals on how these targets are to be achieved.

With the number of Saudi nationals predicted by the Ministry of Planning to increase from 17.34 million in 2002 to 28.89 million by 2020, new employment will need to be created at an extraordinary rate. Alternatively, the number of foreign nationals employed within the country will have to fall drastically, but for Saudis to take up the jobs currently filled by foreign workers would take a major cultural switch. Moreover, it remains more costly to employ Saudi nationals because of the generous benefit packages required both while they remain in employment and if they are made redundant.

In international politics and the global economy, Saudi Arabia means just one thing–oil. With proven reserves of 264 billion barrels and eventual recoverable reserves estimated at up to one trillion barrels, the country is sitting on the mainstay of its current and future wealth. Even based on proven reserve estimates, it possesses 26% of global crude oil reserves. Although Russia has recently overtaken Saudi Arabia in production terms, as Table six below demonstrates, it remains by far the biggest oil exporter.

While Saudi Arabia is important to the world economy because of its massive oil reserves and production levels, it is even more important as a regulator of crude oil prices and supply volumes. As a result of reducing production in order to maintain oil prices, Saudi Arabia has a large amount of excess capacity and can bring new supplies on stream quickly if required. At any given time, it takes only 30 days to boost production by three million barrels, while an additional 500,000 barrels can be brought on stream within a further two months.

While the Saudi economy has not been as strong over the past few years as during the 1980s, the dominance of both the oil sector within the national economy and of Saudi oil on the world market looks assured. If political crises bring production or export to halt anywhere ill the world, global production levels can be maintained by Saudi production. It is this, above all else, which makes the kingdom the kingpin in the oil sector.

Eight oil fields account for over half of all reserves, while half of all production capacity lies on the massive Ghawar field, the world’s biggest offshore field with 70 billion barrels. Saudi Arabia also possesses the world’s biggest onshore field: the Safanyiah structure with the Khafji and Hout offshoots holds proven reserves of 19 billion barrels. To top it all, production costs are some of the lowest in the world at around $1.50 a barrel. The development of a number of other fields has been put on hold through a combination of modest oil prices and slack growth in world demand. A total of $4.5 billion of investment is planned for the development of the Khurais and Qatif fields, which could be producing 800,000 b/d and 500,000 b/d respectively by 2005. However, given the extent of existing surplus production capacity in the kingdom, it would be expected that a large and sustained rise in world demand, or possibly a major geopolitical upheaval, would be required to prompt such investment. On the other hand, the Saudi Supreme Petroleum Council (SPC) is believed to have sanctioned new investment with the express aim of increasing oil production capacity. While this may go some way towards maintaining the country’s position in the oil world, some would argue that the resources would be better spent in opening up new areas of the economy.

The gas sector

Despite the decades old preoccupation with oil, the gas sector is not being ignored. Exports in the form of liquefied natural gas (LNG) or as natural gas via pipeline are on the rise, while gas is increasingly being used as a power generation feedstock. Saudi Arabia possesses the world’s fourth biggest gas reserves, mostly concentrated on the offshore Safaniya and Zuluf fields, plus the giant onshore Ghawar field.

At the heart of the country’s gas plans lies the $25 billion deal drawn up between Saudi Aramco and eight of the world’s biggest oil firms in June 2001. The eight companies involved in the Saudi Gas Initiative are BP, Conoco, ExxonMobil, Marathon, Occidental, Philips, Shell and TotalFinaElf. The deal would mark the first major foreign investment in the sector since nationalisation in 1975 and aims to integrate the development of major gas fields with the expansion of the power generation and petrochemical sectors. Both Prince Abdullah and the foreign minister Prince Saud Al Faisal lent their support to the deal at an early stage, overcoming opposition from Saudi Aramco to the increased participation of the foreign companies in the sector.

The three core projects of the Gas Initiative will involve BP, ExxonMobil, Phillips and Shell developing South Ghawar; ExxonMobil, Marathon and Occidental on the Red Sea; and Conoco, Shell and TotalFinaElf on Shaybah. The South Ghawar project is the biggest of the three, requiring $15 billion of investment in upstream gas development, gas gathering and transportation pipelines, gas fired power generation, two desalination units and two petrochemical plants. It would be a huge undertaking.

However, the deal has run into difficulties and newspaper reports around the world claim that it is under threat. The oil companies are not believed to be prepared to accept the level of taxation imposed on them and several reports have also indicated that they would not be given access to enough of the gas reserves. Prince Abdullah has held meetings with chief executives of some of the majors on the matter but no resolution has been forthcoming and it is possible that the government may re-offer the projects.

One of the main problems with the deal may lie in its size. As it breaks down into a number of different, interlinked projects, failure of one part would impact upon other contracts. The government may be better advised to offer a number of separate contracts in order to get the project off the ground. The government has now asked the foreign companies to submit their `final offers’ but the Saudi Foreign Minister Prince Saud Al Faisal, emphasises that sector liberalisation will proceed `under all circumstances’.

Downstream oil and gas

Although Saudi Arabia possesses the biggest refining sector in the Middle East, with capacity of 1.75 million b/d, there is room for expansion. The country has not entirely fallen into the development trap of exporting raw materials to the industrialised West, where much of the value is added during processing, but much Saudi oil continues to be exported as crude. Saudi Aramco already has additional capacity of 1.6 million b/d overseas and further capacity both at home and abroad could be added over the next decade through the construction of new oil refineries.

Oil refining aside, the biggest area of processing and manufacturing growth has been in the petrochemical sector. One of the biggest hopes of diversification lies in the exclusion of foreign oil companies from operating oil fields, as this could encourage investment into other sectors. Oil giants such as Shell for example have begun to make substantial investment into petrochemicals. This is already a successful sector and Saudi Basic Industries Corporation (SABIC) installations turn out around 10% of world petrochemical production, while the company’s Yanbu plant is the world’s biggest polyethylene facility. Shell and SABIC have invested $1 billion in a methyl tertiary butyl ether plant.

Power and water

As with refining and petrochemicals, other parts of the economy with linkages to the oil and gas sector have prospered. Power sector generating capacity has grown from just 1,173MW in 1975 to 25,000MW today, including at least 2,500MW from desalination plants. Total consumption and the number of consumers have both risen tenfold over the same period. The government’s 25 year Electricity Plan aims to maintain the pace of growth, and requires $117 billion of investment leading to eventual capacity of 70,000MW. As part of this, the current five year development plan dedicates $5.6 billion to boosting generating capacity and a further $7.2 billion to distribution.

Power generation is now considered an industrial activity and therefore comes under the aegis of the foreign investment code, enabling foreign companies to invest in generation, whilst benefiting from such benefits as a 10 year tax holiday and concessionary finance up to 50% of the capital cost of the project from the Saudi Industrial Development Fund.

The biggest foreign investment was the $3.1 billion deal secured by Asea Brown Boveri (ABB) to construct the Shuaiba power plant, 75 miles south of Jeddah, in the Western Province. Apart from improving the efficiency of the domestic power sector, the government hopes that increasing the use of gas in power generation will enable the country to free up oil production for export. Although the power sector has been listed for privatisation, it is uncertain how quickly this will take place.

Despite the very arid nature of the country, massive investment has also made the water sector a success story. The Saline Water Conversion Corporation (SWCC) produces 800 million gallons of desalinated water per day at its 25 plants and a steady stream of new plants are being brought into operation. SWCC produces 70% of the country’s water requirements, equivalent to 30% of world desalinated water production. Under the current five year plan, 12 new desalination plants are to be built on the Red Sea and another five on the Arabian Gulf. The water sector is one of the most active for foreign companies, which operate in areas from consultancy and construction to operation and management.

Opec

Oil politics are important to an examination of the Saudi economy for two main reasons. Firstly, rising oil prices and increased quotas lead to increased production in Saudi Arabia and investment in field development. And secondly, if the Saudi government is really serious about investing in diversification programmes, higher oil revenues are required to fund such programmes. With all its eggs in one basket, the government cannot afford to take its eye off the oil sector. The government will certainly continue to prioritise the oil sector, so if oil revenues were to fall, non-oil investments would probably be the first to suffer.

On the other hand, the Saudi government does not want to see oil prices at too high a level over a sustained period, as a high oil price encourages the development of more technically difficult and high expense production such as deepwater. Technological advances are reducing deepwater production costs and increasing competition with Saudi oil.

Although Opec quotas have been cut 10 times since the beginning of 2001 in an effort to boost the world oil price into the $22-28 a barrel target range, the price has failed to climb higher and continues to stick around the $25-26 level. A combination of increasing oil production by non-Opec members and overproduction in member states has held prices down. Overproduction has caused stock levels to rise, further ruling out quota rises in the short term. However, the Saudi Arabian oil minister, Ali Naimi, said in April that while the level of oil stocks is `fairly good now, that does not mean a month or two months from now it’s going to be good, and we will probably have to take action to increase the supply side.’

According to a survey by consultancy firm Petrologistics, Opec quota compliance fell to 70% at the start of the year to 63% in July. Even Saudi Arabia was reported to be producing well above its quota level. A similar Reuters’ survey of June production reported Opec production of 23.56 million barrels a day, around 9% above quota levels. The level of production around the world no doubt partly reflects rising short term demand, as many countries increase their stock piles in preparation for a possible US attack on Iraq. This is unlikely to last, however and, as always, it may take a substantial price fall to bring Opec members back in line.

While quota cuts have managed to keep oil prices within the target range, production increases outside the organisation have reduced the possibility of quota rises in the short term. Russia, in particular, has made the most of mid-range oil prices to boost production. Although Russian production volumes fell from 10.4 million b/d in 1991 to 6.1 million b/d in 1998, they have since rebounded to 7 million b/d and look set to keep on rising. For the first time ever, Russia has begun to make direct oil deliveries to the US. Moreover, the rising profits of Russian oil companies are enabling them to increase investments in modern reservoir management techniques and new technology.

The stability of Opec has also been hit by both overproduction and rumours that Nigeria plans to withdraw from the organisation. Over the past two years, a series of major discoveries has convinced many that the Nigerian government could actually achieve its long stated aim of doubling crude oil production capacity to four million b/d and reserves to 40 billion barrels by 2010. Nigeria’s Opec quota is less than half this figure, so production volumes approaching the four million level would seem to be incompatible with the cartel’s policy. In addition, the US has been keen to attract a greater proportion of its oil imports from outside the Middle East in order to improve its oil security. Several influential think tanks have argued that the US should seek to boost imports from the Gulf of Guinea in particular.

However, the Nigerian government has scotched the rumours. Current Opec chairman and the Nigerian presidential advisor on petroleum matters, Rilwanu Lukman, insisted in July that Nigeria wished to remain a member of Opec. He said: `Of course we want our quota increased, just like every other member of Opec’ but added that his government would bid for an increase `at the appropriate time’. In line with other members, Nigeria’s quota has fallen by a fifth since the start of 2001. The withdrawal of Nigeria would weaken the cartel and bring about another change in the balance of power between Opec and non-Opec producers.

Opec’s dilemma was neatly summed up by Lukman: `There is no point in just going for market share to sell at $10 per barrel. It is not helpful to increase production only to earn less. On the other hand, Opec cannot keep on reducing market share just to keep the price up for someone else to enjoy.’

World oil demand is rising at last, but in the short term at least, it may take a deteriorating political situation in either Israel/Palestine or in Iraq before quotas need to be increased. It is unlikely that global economic growth will boost demand at any great speed, given that world demand for oil grew by only 14% over the decade 1991-2001. In the long term, despite the growing importance of new Gulf of Mexico, offshore Brazil and the Gulf of Guinea deepwater arenas, the importance of Saudi Arabia and the entire Middle East in the oil industry seems assured, especially given low production costs in the region. Production capacity in the region as a whole is predicted to reach 30 million b/d by 2010 and 44.5 million b/d by 2020, allowing Saudi Arabia and the other Gulf producers to maintain their share of the Opec cake. However, as a result of increased production by Russia, Norway and others, there remains a great question mark over just how big that cake will be.

Telecoms

As in most countries pursuing a policy of market liberalisation, the government plans to restructure parastatals in preparation for privatisation. However, little progress has been made in many state owned corporations, such as Saudi Arabian Airlines. The telecoms sector is one of the most advanced on the path to privatisation and Saudi Telecommunications Company (STC) was set up in 1998, with the intention of eventually privatising the company.

Although the market has grown by around 30% a year since 1998, STC net profits fell from 3.95 billion riyals in 2000 to 3.47 billion riyals ($928 million) for 2001. The company puts the fall down to payments to an early retirement fund and temporary staff. However, with its monopoly intact, the parastatal is likely to maintain its profitability in the run up to sale of shares to Saudi citizens. A final date for the sell-off has not yet been set.

The growth of the internet and other communications sectors is restricted by heavy state control and censorship. For example, in February 2002 more than 400 websites were closed down by the authorities, although no explanation was given for the move. However, numbers of internet connections are increasing, many of them through illegal links via the UAE and Bahrain. It is reported that 65% of users are women, probably because of restrictions on their movement outside the home.

Beyond infrastructure

Success stories outside the oil economy and the country’s well financed infrastructure are harder to pinpoint, but the agricultural sector is one of the mainstays of the non-oil economy, with income growth averaging 8.7% since 1970. It now accounts for around 9% of GDP but the most impressive statistic is that the total amount of cultivated land rose from 370,000 acres in 1975 to 14 million acres by 1998. Around three million tons of cereal is produced ever year, while the country is the world’s biggest producer of dates with 18 million date palms yielding 600 million tons in 1998.

Saudi Arabia is around 85% self sufficient in vegetables and provides 60% of its own fruit but growth in the sector is reined in by water shortages and the food import bill stood at $4.7 billion in 2000. Over the past three years, the government has promoted several crops in particular: alfalfa, corn, dates, millet, palm seedlings, rice and wheat.

Tourism is another area of possible diversification. A national tourism authority was set up in 2000. Saudi infrastructure and weather are both attractive but the process of obtaining a visa remains difficult. Much of the drive to attract tourists has centred on persuading those making the Hajj to remain in the country for a holiday afterwards. Several tour companies from Japan, Western Europe and North America offer tours around the historical sites but whether the country is ready for independent western tourists is another matter entirely. Yet again, it will take a major cultural change–one that will take years to effect.

The financial sector

The influx of oil revenues over the past fifty years has resulted in a strong banking sector, with a secure regulatory system. Foreign investors are involved in most of the ten commercial banks in the country, although since the banking reforms of the 1980s, Saudi shareholders must hold at least of 60% of equity and a minimum of 60% of staff must be Saudis. Banking licences are issued by the Council of Ministers based on recommendations from the Ministry of Finance.

In 1998, total assets of all ten banks were $108 billion, of which net foreign assets stood at only $11.4 billion. In terms of profitability, the three leading banks are Al-Rajhi Banking & Investment Corporation, Riyad Bank and Saudi American Bank.

The Saudi Arabian Monetary Agency (SAMA) manages the country’s overseas assets, acts as the government’s bank, and regulates and monitors commercial banks. Monetary policy focuses on retail price and riyal/dollar exchange rate stability, in addition to promoting economic expansion. SAMA issues currency together with private banks and it has invested heavily in new technology in share trading, electronic clearing and a network of ATMs. The agency granted its first licence to a non-Saudi bank in 1999, enabling Gulf International Bank (GIB) to open a Riyadh branch.

The Saudi stock market is the biggest in the Middle East and stock market capitalisation stands at $42.7 billion. However, the stock exchange has few listings and remains dominated by bank stock and SABIC, so the privatisation of STC would be a major addition.

Outlook

In many ways it is no surprise that successive generations of political leaders have been tunnel-visioned when it comes to non-oil sector investment. But with a growing population, high unemployment and insufficient oil revenues, it is time diversification was given a higher priority. While the gas and refining sectors are being developed in conjunction with the oil industry, other branches of the economy could benefit from a cohesive development strategy and sustained investment. A key test of the government’s willingness to change will be provided by the Saudi application to join the World Trade Organisation (WTO). Restrictive regulations and practices in the banking, insurance and telecoms sectors could block membership, and it will be interesting to see how far the country is prepared to go in opening such sectors up to foreign investors.

With an economic and investment culture based on oil it will take decades for attitudes to change and it is likely that only necessity will bring about the required political impetus. The biggest threat to the process of economic reform is that the current relatively high oil prices are sustained long enough to cause enthusiasm for privatisation and increased foreign investment to slacken. As ever, oil and the future of the Saudi economy remain closely entwined.

Saudi Arabian economy

GDP $169.5 billion (2001 est.)

Real GDP growth rate 4.5% (2000 est.) and 1.3% (2001 est.)

Total government debt $168 billion

Unemployment 15% (2001 est.)

Main trading partners US, Japan, EU

Exports $69.7 billion (2001 est.)

Imports $29.7% billion (2001 est.)

Main exports Crude oil and refined petroleum

products

Main imports Industrial materials, processed and

manufactured goods, food.

(Sources: Ministry of Finance and National Economic; Saudi American

Bank)

Saudi balance of payments ($ million)

1997 1998 1999 2000 2001

Merchandise Trade

Exports 60,731 38,822 50,757 77,584 73,032

Imports 26,370 27,535 25,717 27,741 28,645

Trade balance 34,361 11,287 25,040 49,843 44,387

Services

Income 4,257 4,730 5,380 4,785 5,182

Payments 25,963 16,882 18,855 25,262 19,307

Services balance -21,706 -12,152 -13,475 -20,477 -14,125

Balance on 12,665 -865 11,565 29,366 30,262

goods and

services

Income

Credit 5,756 5,810 5,811 3,349 4,130

Debit 2,971 3,041 2,887 2,869 4,650

Balance 2,785 2,769 2,924 480 -520

Balance on 15,440 1,904 14,489 29,846 29,742

goods, services

and income

Transfers 15,134 15,053 14,077 15,511 15,240

Current account 306 -13,149 412 14,335 14,502

(Sources: IMF; Middle East Economic Digest)

Leading figures

* Head of state King Fahd ibn Abd Al-Aziz Al-Sa’ud

* Crown Prince Abdullah ibn Abd Al-Aziz Al-Sa’ud

(and First Deputy

Prime Minister)

* Second Deputy Prince Sultan Bin-Abd-al-Aziz Al Sa’ud

Prime Minister

* Foreign Minister Prince Sa’ud Al-Faisal Bin-Abd Al-Aziz

Al Sa’ud

* Interior minister Prince Nayif Bin-Abd-Al-Aziz Al Sa’ud

* Minister of Ali bin Ibrahim Al-Naimi

Petroleum and

Mineral Resources

* Deputy Minister Prince Abdelaziz bin Salman

for Petroleum Affairs

* Minister of Industry Hashim bin Abdullah Yamani

and Electricity

Oil sector: Energy sector

Proven oil reserves 264.2 billion barrels *

Crude oil production 7.1 million b/d (January 2002) *

Natural gas liquids

(NGLs) production 682,000 b/d

Opec production quota 7,053,000 b/d

Oil production capacity 10 – 10.5million b/d

Oil consumption 1.3 million b/d (2001 est.)

Crude oil refining capacity 1.75 million b/d

Natural gas reserves 219.5 trillion cubic feet (tcf) (2002) *

Natural gas production

and consumption 1.63 tcf (1999)

Power generating capacity 25 gigawatts (GW) (2000)

Power production 120 billion kilowatt hours (1999)

(Source: US Energy Information Administration)

* includes half of neutral zone

Saudi Arabian demographics (2002)

Total population 23.37 million

Population growth rate (1990-2000) 3%

Population of Saudi nationals 17.34 million

Population of expatriates 6.03 million

(Source: Ministry of Planning)

Top Five oil net exporters (2001)

Country Net exports (million b/d)

1 Saudi Arabia 7.38

2 Russia 4.76

3 Norway 3.22

4 Iran 2.74

5 Venezuela 2.60

(Source: US Energy Information Administration figures)

Overproduction by Opec members

Country Quota Actual production

(‘000 b/d) (July)

Algeria 0,693 0,880

Indonesia 1,125 1,100

Iran 3,186 3,390

Kuwait 1,741 1,910

Libya 1,162 1,320

Nigeria 1,787 1,920

Qatar 0,592 0,640

Saudi Arabia 7,053 7,650

United Arab Emirates 1,894 1,980

Venezuela 2,497 2,770

(Source: Reuters)

Saudi Telecoms sector

Land lines 3 million

Mobile phone users 2 million

Internet users 400,000

(Source: STC).

COPYRIGHT 2002 IC Publications Ltd.

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