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No let up. Saudi Arabia to increase oil production

Do Not UseDo Not Use 11/05/2016 By Simon Jack
Saudi Aramco offices © Getty Images Saudi Aramco offices

"Welcome to Saudi Aramco" - that's not a message you see very often as a foreign journalist.

The normally secretive state-owned oil company has invited a select group of journalists - including the BBC - to its HQ in Dhahran, eastern Saudi Arabia.It's a rare opportunity to meet senior executives and hear about the company's planned role in Saudi Arabia's modernisation efforts, as part of a corporate charm offensive.

But sadly for other oil producers that will not extend to pushing up oil prices by cutting production.

In fact, chief executive Amin Nasser says that production will increase in 2016, ahead of a share sale that could value the company at over $2 trillion (£1.4 trillion) - four times the value of Apple.

Vision 2030

The sale of up to 5% of the state giant is an eye-catching part of a plan to dramatically expand the Saudi economy by 2030 and reduce the Kingdom's reliance on oil and gas.

The timescale is tight because the Kingdom has left it too long, according to Mr. Nasser. "It is timely and overdue to identify more resources, and rely more on investment for additional streams of revenue," he told me.

But just to be clear, the planned diversification is not in place of fossil fuels - it's in addition.

Saudi Arabia's so called Vision 2030 will require coffers full of oil money to invest in other industries such as petrochemicals, mining, tourism and construction.

The plan hopes to double the size of the economy and create 6 million Saudi jobs over the next 15 years. It will require massive foreign investment.

The proposed sale of a 5% stake in the Saudi state's corporate crown jewel may represent a goodwill gesture to get the investment ball rolling.

It's a very tall order for a country that currently derives 90% of its income from oil and gas.

Even if it succeeds, oil production may not get reined in any time soon. And that could spell more trouble for rival producers in Venezuela, Nigeria and, indeed, the North Sea.

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