Saudi Arabia to spend $170bn on energy projects

Saudi Aramco has spent over $62bn over the past five years on increasing production capacity to reach 12 million barrels per day. The head of Saudi Aramco, Khalid Al-Faleh revealed while attending the Cambridge Energy Research 2010 in Houston, that the company plans to spend approximately $90bn over the next five years on increasing production capacity.

Such investments reflect the belief that oil will remain a key player on the global energy stage for the foreseeable future. Saudi Arabia is committed to maintaining a large spare production capacity, based on its vision of the importance of the supply of affordable energy, and the need to stabilise the market. The country has research and development programs that range from advanced formulas for fuel to the desulphurisation of crude oil, carbon capture and separation, reflecting its commitment towards improving the environmental performance of oil.

Al-Faleh has warned that the unrealistic drift towards an immediate transition to alternative energy sources is of concern, as it may lead to less adequate investment in energy sources that are tried and tested. Saying that fossil fuels will meet about 80% of the total world energy consumption for the next twenty years, he renewed his call for oil companies around the world to share the burden of promoting the investment required to keep pace with expected demand for oil, which will reach about 105 million barrels per day by 2030.

This expenditure by Saudi Arabia aims to maximize the benefit of its hydrocarbon wealth and to enhance infrastructure development projects that will be undertaken in the kingdom over the next few years in different areas.

Natural gas investment

The kingdom is working to expand investment in natural gas, it ranks fourth in the world in terms volume of natural gas reserves, through intensive exploration with the aim of raising reserves by 40% by the end of 2018.

The energy strategy includes the focus by the government on spending on capital projects in electricity, as well as solar and other renewable energy research and environmental programs and using oil revenues to promote sustainable development and the provision of suitable investment for industrial projects, especially in the economic cities that will contribute to establishing major developments for the country.

Currently, the demand for oil comes from Asian countries, and China and India in particular, while other countries are experiencing a strong decline in consumption levels that have led to a rise in petroleum inventories in major industrial countries and the fluctuation of oil prices. This makes it difficult to determine a fair price while conducting feasibility studies for projects, and oil projects are characterized by their high costs and the difficulty of securing funding from international banks which continue to suffer from the consequences of the financial crisis.

Most studies indicate that performance rates of the implementation of oil projects previously planned are progressing quite slowly, with most of these projects delayed or cancelled due to lack of funding or the feasibility of the project. Opec member states had planned to undertake around 120 projects until 2013 in the upstream "exploration and production" area at costs exceeding $120bn, but it is estimated that 70% of these projects are not proceeding as planned.