Further improving the Saudi Arabian economy whilst maintaining good environmental standing through the diversification from oil production exports and as an energy source.
Sherpa Fahad Almubarak, as you well know Saudi Arabia is a global powerhouse when it comes to oil, and we have been highly successful in the production thereof. However, we have not been as successful in living up to our climate pledges: in November 2015 we were the last G20 member to submit our climate pledge that we would cut emissions up to 130Mt CO2e by 2030.
, in the present day 2020 we have in reality, increased our export reliance on oil and have failed to make any real changes to reach our emissions goals year after year. By applying the recommendations that will be further discussed in this memorandum, we can reach our climate goals and pledges, but only through our strongest asset: the economy.
The main environmental issue in Saudi Arabia is that we are the world’s largest oil-producing country and as a result, one of the top ten major greenhouse gas (GHG) emitters.
Our GHG emissions have been projected to exceed the maximum before the 2030 climate deadline; which means that our economical reliance on fossil fuel will be our own economy’s downfall. We have acknowledged the climate change science and have assigned goals to slow it down, but we have struggled to achieve those goals because oil plays an almost exclusive role in our economy. Such exclusivity is exemplified through the fact that oil accounts for 90% of our total export revenues, based on the fact that majority of other countries rely on our oil fields for energy.
In the present time oil is in high demand; however, upon an (eventual) international shift to renewable energy our oil supply will exceed demand and 90% of our export income will be severely reduced. The oil industry’s internal factors will suffer as well: in the 1990s oil prices were in a stagnation period and our unemployment rates (which included highly educated individuals) severely increased; therefore, the repercussions are too great to continue the way we are, both economically and environmentally.
The below recommendations will integrate environmental needs into our economy thus respectively create:
As you know, the Crown Prince Mohammad bin Salman is the Minister of “Vision 2030”, a strategy that has been specifically designed to reduce Saudi dependence on oil. Through the creation Vision 2030, it is obvious that we understand our detrimental dependence on oil, and this recommendation should not be difficult to implement. Currently, our other economic sectors are not prioritized simply because they do not yield as much revenue as oil extraction does. As a country we invested $71 billion USD into the oil sector to increase production from 12 million barrels per day (BPD) to 12.5 BPD in a span of six years; as well as a $20 billion USD investment to increase the spare amount even further in 2018. Since Aramco is owned by the Saudi royal family, I do not need to tell you that we have projected to raise our price per barrel (PPB) to $70 by early 2021. We can allocate resources and wealth to sectors that can arguably bring us the same revenue and employment, but with a smaller carbon footprint and that could very well be the finance sector. As of 2017, the Saudi Arabian capital, Riyadh, is ranked 77th in relation to other Middle Eastern and African financial centers, which shows that we have not prioritized the financial sector despite our great amounts of cumulated wealth.
Moreover, our Minister of Finance Mohammed Al-Jadaan has informed you that our oil production and our GDP are closely related; if we were to decrease our oil quota, we would reduce our GDP by ~0.6% in the first quarter of 2020. This hypothetical situation would happen exactly because of our lack of investment in other sectors. Since we have placed such heavy emphasis upon oil extraction, we have our allowed for our economy to be dangerously reliant on oil production that we have no diversification necessary, in case oil falls in demand. As environmental concerns gain traction and climate change becomes an increasing urgent matter, oil and natural consumption will be on the decline and Saudi Arabia will be left in economic insecurity.
Since drastically reducing oil production would almost destroy our economy, it is important that we slowly wean our economy’s reliance on the extraction and export of it. That way, our economy will be well-rounded and reliable in times of oil market uncertainty, and we will have reduced amount of fossil fuel emissions with virtually no detraction from our own revenues, nor our GDP. Three types of oil are extracted within Saudi Arabia: Zuluf, Safaniya, and Ghawar oil, from highest to lowest GHG emissions respectively. Currently, we are tending towards the extraction of Ghawar oil, which means that we are already capable of determining more environmentally friendly alternatives. Ghawar emits roughly 491 kg of CO2 per barrel compared to Zuluf oil that generates 503 kg CO2 emissions per barrel. Emissions from Ghawar can be reduced even further if we can utilize unwanted gas: instead of flaring the additional gas, we could reinject it into the oil wells, which means that on a long-term basis we will end up extracting more oil, as well as completely eliminating flaring’s emissions altogether. Yet another solution could be to compress the methane into cylinders for automobiles with natural gas engines which are lower in emissions than gasoline-run cars, which is viable but will require an extended amount of time that we simply do not have at the moment.
Saudi Arabia is one of the hottest desert countries, and instead of merely tolerating the sun we should be utilizing it to its fullest extent. As you know, in 2018 SoftBank and the Saudi Public Investment Fund’s proposition of ‘the world’s largest solar project’ was shut down mostly because our top officials failed to be consulted in the negotiations. Regardless as to what caused such an exclusion, we have not tried very hard to reinstate the movement towards renewable energy sources, and that is in part because extracting oil is so much easier and lucrative for our economy. However, we are increasingly cutting into our oil production profits by allocating nearly 3 million BPD for our own energy consumption. To maximize profits as well as decrease our environmental impact, the installation of solar panels can instead restrict our country’s energy consumption to solar; which will provide us further incentive to decrease oil production, since our energy needs will be satisfied through solar power.
The above recommendations are laid out for your consideration; however, I highly endorse investing in other economic sectors to ease the process of implementing the additional two recommendations. I believe that if we limit our revenue reliance on oil production, we will not be averse to employing further climate change conscious framework, and such an initiative will certainly bolster our reputation amongst other G20 countries. Saudi Arabia already has the means to diversify ourselves from oil, as seen in our already existent “Vision 2030” program. Once Vision 2030 is made top priority within our nation, the other two recommendations will naturally fall into place, and our economy will be thriving under good environmental conscience through the use of renewable energy and the minimization of our overall carbon footprint.