Saudi Arabia to direct more investment from oil industry to non-oil sectors than expected, report reveals

Saudi Arabia aims to direct significantly less of its $1 trillion strategic investments to its oil industry than was previously expected, a recent report has revealed.

According to a report by prominent American investment bank Goldman Sachs this week, Saudi Arabia’s capital expenditure [capex] plan is set to amount to a “capex super-cycle” at $1 trillion worth of investments across six of the kingdom’s strategic sectors by 2030.

As part of that plan, however, “the oil industry is likely to receive a smaller portion of this than previously forecast”, the report stated. Instead of spending 66 percent of the investments in non-oil sectors, Saudi Arabia will reportedly spend approximately 73 percent of it on those sectors, the report cited Faisal AlAzmeh – a Goldman Sachs executive director who focuses on the Middle East’s natural resources and infrastructure – as saying.

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It reportedly comes under a directive from Saudi Arabia’s energy ministry, which could see capex in the kingdom’s oil sector be reduced by $40 billion between 2024 and 2028.

The plans come at a time when Riyadh is increasingly taking steps to broaden the diversification of its economy, further develop its economy away from oil amid long-held predictions that the resource will soon be depleted in coming decades, as well as to boost energy production methods that rely less on carbon output. A “key contributor to those aims, as AlAzmeh noted, is through natural gas.

The kingdom may well face a series of challenges in funding that ‘capex super-cycle’, however, with the report citing analysts as estimating that the Gulf state would have a funding gap of approximately $25 billion per year. “Saudi Arabia will have to tap alternative sources of financing”, the report stated.

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