- Cabinet approved economic plan to reduce energy subsidies
- State oil producer Aramco plans share sale in IPO by end-2018
Saudi Arabia will maintain the same level of crude production capacity until 2020 under a new economic reform plan that the government approved on Monday to reduce the kingdom’s reliance on oil.
The world’s biggest crude exporter will keep output capacity at 12.5 million barrels a day in 2020, according to a draft of the National Transformation Program distributed to reporters in Jeddah, Saudi Arabia. The program, approved by cabinet on Monday calls for the country to produce 4 percent of its power from renewable energy sources in 2020 and cut electricity and water subsidies by 200 billion riyals ($53 billion).
“They’ll either have to cut crude exports or they’ll be pumping closer to full capacity,” Robin Mills, chief executive officer at consultant Qamar Energy in Dubai, said on Monday. Saudi Arabia’s production capacity is the biggest in the world, said Mills, a fellow at the Brookings Institution in Doha.
Saudi Deputy Crown Prince Mohammed bin Salman, the king’s influential son, announced earlier this year a plan to overhaul the nation’s economy to make it less dependent on oil revenue amid a plunge in prices due to a global glut. The plan includes selling shares in Saudi Aramco by the end of 2018 in an initial public offering that could value the company at about $2 trillion. Al-Falih, who is also Aramco’s chairman, declined in his presentation to discuss the IPO.
Saudi Arabia pumped 10.27 million barrels a day of oil in April, data compiled by Bloomberg show. Output reached a record 10.57 million barrels a day in July, and the country has produced more than 10 million barrels in each of the last 14 months. The kingdom has the second-biggest crude reserves after Venezuela and more than double the deposits in Russia.
Prince Mohammed’s approach to reforming the economy has been forced, in part, by Saudi Arabia’s struggle to deal with oil prices that, at about $50 a barrel this week, are trading at half the average seen from 2010 through 2014. Cuts in government spending and lower subsidies on items like fuel will help trim Saudi Arabia’s budget deficit to 13.5 percent of gross domestic product this year, compared with 16.3 percent last, the International Monetary Fund said April 25.
Oil-refining capacity will rise to 3.3 million barrels a day in 2020, under the plan. Refining capacity was at 3.1 million barrels a day at the end of last year, the state producer Saudi Arabian Oil Co. said in its annual review last month.