Middle East overview
5 min

Beyond Oil

Saudi Arabia overview

Posted by: Mostafa Jassim Date: 22 Aug 2023

The deep-seated makeover being attempted in Saudi Arabia goes far beyond trying to wean the Kingdom off oil.

 An overview by Mostafa Jassim, Deputy CEO, TÜV SÜD Middle East

How does a nation whose economic mainstay is oil become sustainable and commit to a target of going Net Zero in less than four decades? What is being attempted in the Kingdom of Saudi Arabia (KSA) is not only remarkable but almost unparalleled.

Let’s look at a few simple facts. KSA is the largest exporter of oil in the world. Practically since its founding as a united kingdom in 1932, oil has been the mainstay of its economy. It has given the Kingdom unparalleled riches as the global dependence on "black gold" has only increased. 

According to the World Bank, in 2022, KSA had a GDP of USD 1.11 trillion (at current prices), ranking it among the 20 largest economies in the world.1 The biggest contribution comes, by far, from oil exports which contribute roughly 40% of the GDP.

Driven by climate change, as the world moves away from fossil fuels, how does KSA cope with the situation? After all, a reduction in demand for oil could threaten its very economic model. A foretaste of this became available during the Covid-19 pandemic. As the world shut down, the need for oil tanked sharply, adversely impacting oil prices and, consequently, all oil-exporting nations.

The answer lies in a bold vision articulated in 2016, four years before the pandemic, by His Royal Highness, Crown Prince Mohammed bin Salman (MBS) – Vision 2030.

Vision 2030

This holistic blueprint has four pillars: 

  • Accelerating growth through strategic investment, new industries and world-class leadership.
  • Bringing Saudi Arabia’s rich heritage, culture and hospitality to the world.
  • Delivering on climate and sustainability goals.
  • Reshaping the social and cultural landscape in pursuit of a new era of inclusive opportunity.

Since the unveiling of this blueprint, significant progress has been made in most areas.

Diversifying the Economy

One of the key components of Vision 2030 is diversifying the Saudi economy from its overwhelming dependence on oil. The primary engine for this is the Public Investment Fund (PIF) which has over USD 700 billion in assets. It plans to expand that to USD one trillion by 2025 and double that by 2030.2  

PIF has established more than 30 local companies, accelerating investment opportunities and asset growth. This has included launches in multiple new industries to diversify and localise the Kingdom's economy. By end-2020, the fund had seeded more than 331,000 direct and indirect job opportunities. The fund is using its enormous corpus to try and grow 13 industries, ranging from aerospace and defence to metals and mining, agriculture, clean energy, smart manufacturing, gaming, real estate and mining.

The last is especially critical. The Kingdom’s untapped mineral resources are valued at $1.3trn, according to Invest Saudi, with the nation accounting for a significant 37.9% of the Middle East and Africa’s $16bn metals and mining market. The plan is to triple the contribution of this sector by 2030, which is expected to provide 300,000 jobs.3

The government also seeks to leverage KSA's geographical position at the crossroads of trade routes between Asia, Europe and Africa and transform the country into a major trade and logistics hub by constructing ports, railways, roads and airports.

Another key sector for diversifying the economy is tourism. In September 2019, Saudi Arabia opened its doors to tourists for the first time by launching a tourist visa programme for 49 countries. Within the first four months, the Kingdom received 300,000 applications. KSA has much to offer tourists, from ancient cities to striking landscapes. The government also hopes that the Kingdom's emergence as a cultural and entertainment hub will attract visitors. Saudi Seasons, a string of 11 festivals across different regions of the country, was launched in 2019. According to the government, in 2020, it attracted 50 million visitors and generated more than 100,000 permanent and seasonal jobs.4

Pathway to Net Zero

KSA has announced its commitment to achieve Net Zero by 2060. The challenge in achieving this goal should be evident from the fact that on a per capita basis, Saudi Arabia emits more CO2 than the United States – 17 metric tons a year versus 14 in the US.5

But the journey to Net Zero, the Kingdom is making progress. The first in decarbonising its power sector. About 40% of the Kingdom's emissions flow from power generation, split between natural gas (61%) and oil-based fuels comprising nearly all the rest. Approximately 70% of power production is used to cool buildings.6 
KSA has announced its intention to switch 50% of its power production (58.7 GW) to renewable sources by 2030. Contracts for nearly 5GW of renewables capacity had been awarded as of Spring 2022, and another 15 GW is expected by the end of this year.7 The bulk of the 58.7 GW is expected to come from solar (40 GW of Solar PV and 2.7 GW of Concentrating Solar, according to the World Bank),8 where the Kingdom enjoys enormous advantages in terms of copious solar radiation and huge swathes of vacant land. The rest of the renewable power will likely come from wind turbines, especially in the Western regions where wind speeds are conducive to generation.

The second pillar of KSA’s move to Net Zero is based on Carbon Capture, Utilisation and Usage (CCUS). The Kingdom also has numerous depleting oilfields and multiple stacked aquifers that can be used for long-term CO2 storage.

Two CCUS projects already exist in the Kingdom. Saudi Arabia Basic Industries Corporation (SABIC) has been capturing 500,000 metric tonnes of carbon and using it as a feedstock for producing fertilisers and methanol. Another facility at Uthmaniyah captures and sequesters up to 800,000 metric tons/year of CO2 from a natural gas processing facility.9
The Saudi oil giant Aramco has announced plans to reduce upstream carbon intensity by at least 15 per cent by 2035, against the 2018 baseline intensity. Its first Sustainability Report said it would cut carbon intensity to 8.7 kg of CO2 equivalent per barrel of oil equivalent (CO2e/boe) against a 2018 baseline of 10.2kg CO2e/boe. It also said that by 2030 its plans to produce 11 million tons of Blue Ammonia.10 In 2020, it exported its first pilot shipment of 40 tons of Blue Ammonia to Japan.

In another significant move towards alternate fuels, Neom Green Hydrogen Company announced the financial close of its USD 8.4 billion Green Hydrogen plant. The plant to be built in partnership with the US company Air Products is stated to be the world’s biggest Green Hydrogen production facility and is expected to go onstream by 2026.11 

Another sustainability target is to plant 10 billion trees by 2030 under the Saudi Green Initiative. Given the Kingdom’s harsh climate, this is an ambitious goal, but if achieved could go a long way towards mitigating carbon emissions. According to the government, 18 million trees were planted in 2022, rehabilitating 60,000 hectares of degraded land.12 

Engaging the Youth

More than half of KSA’s citizens are under the age of 25. As the Vision 2030 document says, these youth present a “catalytic force” to transform the nation. KSA is trying to engage with this population in multiple ways.

Education and Vocational Training: Since 2020, about 19% of the nation's budget has been assigned to education, focusing on developing both students and the wider academic infrastructure. Various initiatives like the Saudi Digital Academy, Digital Innovation Labs and Real Estate Academy are training thousands of young people to broaden their access to employment.

KSA's journey to Net Zero is very interesting, given the nation's massive economic dependence on the hydrocarbon sector. What works in its favour is that the Kingdom has the political will and financial wherewithal to make huge sustainability bets. 

Over a decade we have been working with stakeholders in KSA and is the trusted partner of choice for quality, safety, security and sustainability. Know how we can be your trusted partner on choice towards your ambition towards sustainability.



1 https://data.worldbank.org/country/SA

2 https://www.economist.com/business/2023/06/29/meet-the-worlds-most-flirtatious-sovereign-wealth-fund

3 https://www.vision2030.gov.sa/media/hzzcrhmu/story-of-transformation-v2.pdf

4 ibid

5 https://www.eprg.group.cam.ac.uk/wp-content/uploads/2022/10/2217-text.pdf

6 https://www.bakerinstitute.org/research/net-zero-saudi-arabia-how-green-can-oil-kingdom-get#_ftn33

7 ibid

8 https://documents1.worldbank.org/curated/en/099311005162231016/pdf/IDU0d2c7c1730fbdd04b560bdd5013e6eeea66ca.pdf

9 https://www.bakerinstitute.org/research/net-zero-saudi-arabia-how-green-can-oil-kingdom-get#_ftn33

10 https://www.aramco.com/en/sustainability/sustainability-report

11 https://www.neom.com/en-us/newsroom/neom-green-hydrogen-investment

12 https://www.greeninitiatives.gov.sa/about-sgi/sgi-targets/greening-saudi/plant-10-billion-trees/

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