Waad Al-Shamal: A future that won’t rely on oil
Waad Al-Shamal: A future that won’t rely on oil
An array of ministers recently gathered in a tent near this barren outpost, 1,100 km from Riyadh, to sign contracts to develop an industrial complex around a phosphate mine, with a new railway link to a Gulf port and total investments estimated at more than $9 billion.
The Waad Al-Shamal project, or “Northern Promise,” is part of a wider strategy in the Kingdom, the world’s largest oil exporter, of building downstream industries and boosting the private sector instead of simply exporting raw materials.
It follows in the footsteps of Jubail and Yanbu, massive industrial cities on the Gulf and Red Sea coasts that were built in the 1980s as Saudi petrochemical production grew.
Riyadh is also pushing the King Abdullah Economic City near Jeddah, run by Emaar Economic City, as a private-sector scheme along the same lines.
“I think this approach is something that will help diversify the economic base,” said Paul Gamble, director, sovereign risk, at Fitch Ratings.
“It will help diversify export revenues. It will have an impact on employment, though not a large one. The one thing it doesn’t address is diversifying budget revenues.”
Recent diversification efforts through industrialization have had little impact on official figures showing the size of the oil industry relative to the wider economy as increased crude revenues have outpaced growth in non-oil sectors.
Oil and gas accounted for 49.7 percent of GDP in 2012, up from 37.7 percent in 2002, the most recent central bank data shows, as the price of Brent crude quadrupled over the period.
But many analysts expect oil prices to fall in the next few years as the US ramps up shale oil production, which will shine a light on the virtues of diversification.
“We started out exporting crude oil, then we moved into refining, then we moved into gathering gas and creating a petrochemical industry. Then we moved into large-scale mining. The benefit of it is that it has large downstream industries,” Economy Minister Mohammed Al-Jasser said at Turaif.
The desert stretches in all directions from the spot where he spoke to an unbroken horizon, but when complete, Waad Al-Shimal will be a major producer of phosphate products including the industrial fertilizer ammonia, animal feedstock, plastics and detergents.
The project could make its biggest shareholder, Saudi Arabian Mining Company (Maaden), a significant player in the global minerals industry, modeled perhaps on Saudi Basic Industries Corporation (SABIC), which was built from nothing in the 1980s and is now one of the world’s biggest industrial chemical companies.
SABIC is not only Saudi’s main source of non-oil exports, but provides the raw materials for a host of downstream factories in Jubail and Yanbu.
“There (will be) many industries that also have high employment value in the region,” Finance Minister Ibrahim Al-Assaf said.
A measure of the importance attached to job creation at Waad Al-Shimal is that the Kingdom’s technical training institute plans a new college nearby, to educate 300 graduates a year for white-collar jobs in industrial fields.
Saudis increasingly work in technical fields that were once the preserve of expatriates, something government labor reforms are aimed at encouraging.
However, many companies still say they prefer to hire foreigners, who cost less and often have more experience.
Mineral production has been largely neglected by the Saudi Oil Ministry and for decades has been restricted mostly to smallscale gold mining.
The government set up Maaden in 1997 and opened the sector to private and foreign investors in 2001.
“Saudi Arabia is hardly explored. We expect very high potential for additional mineral resources. Saudi Arabia is virgin. There is a lot of activity and interest in the development of minerals,” Petroleum and Mineral Resources Minister Ali Al-Naimi said.
Maaden was part privatized in 2008, floating half its shares on the Saudi bourse, and it moved toward large-scale minerals developments supported by extensive state-funded infrastructure.
The thinking behind Maaden and other former state-owned companies set up with an eye to privatization was as a means of distributing wealth and bringing private-sector nous to development projects.
“They have so many foreign partners for these big projects, which gives more confidence in the due diligence process, and therefore their chances of success,” said Fitch’s Gamble.
A first project, Maaden Phosphate Company (MPC), started up in 2011 in partnership with SABIC, had capacity to produce 11.6 million tons a year (t/y) of ore at Al-Jalamid in the Northern Borders region, supplying a 3-million-t/y diammonia phosphate (DAP) plant at Ras Al-Khair on the Gulf coast.
Last year Maaden inaugurated a second major development, a $10.8 billion aluminum joint venture with US-based Alcoa , with an alumina refinery, aluminum smelter and rolling mill at Ras Al-Khair.
It currently imports raw material, but will eventually use bauxite from a mine at Al-Ba’itha near Quiba in Qassim Province scheduled to start up this year with output of 4 million t/y.
The phosphate mine at Al-Jalamid, the bauxite mine at Qassim and the processing facilities at Ras Al-Khair are connected by a new rail network built by state-owned Saudi Arabian Railways that will be extended to Waad Al-Shimal.
The government built the port and some other facilities at Ras Al-Khair, but Maaden developed a power and water desalination plant for its aluminum and phosphate projects.
Waad Al-Shimal, a joint venture with SABIC and US phosphate and potash producer Mosaic, builds on these earlier developments with a mine at Umm Wual near Turaif and nine large processing facilities.
In December Maaden said it had secured $4.2 billion financing commitments from banks, while government bodies would supply $3 billion. First production is expected in 2016. Government agencies will also pay for rail and port expansions.
Engineering, procurement and construction contracts for the main facilities have already been awarded, with the largest jobs going to Daelim Industrial Co, Spain’s Intecsa Industrial, SNC Lavalin, Sinopec Engineering Group and Hanwha Engineering & Construction Co.
The engineering consultant is Fluor Corp, and the project manager is Bechtel.
Saudi Arabia is already a major exporter of urea and ammonia, two of the most common artificial fertilizers, via Saudi Arabia Fertilizers Co. (SAFCO), a unit of SABIC.
“It’s about using what they have and producing value-added goods instead of just exporting the raw material. Around that is an industrial cluster strategy that you hope will create jobs and industries you never had before,” said John Sfakianakis, chief investment strategist for Saudi investment company Masic.
Can a hungry Mali turn rice technology into ‘white gold’?
- Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change
- Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983
BAGUINEDA: When rice farmers started producing yields nine times larger than normal in the Malian desert near the famed town of Timbuktu a decade ago, a passerby could have mistaken the crop for another desert mirage.
Rather, it was the result of an engineering feat that has left experts in this impoverished nation in awe — but one that has yet to spread widely through Mali’s farming community.
“We must redouble efforts to get political leaders on board,” said Djiguiba Kouyaté, a coordinator in Mali for German development agency GIZ.
With hunger a constant menace, Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change.
Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983. It involves planting fewer seeds of traditional rice varieties and taking care of them following a strict regime.
Seedlings are transplanted at a very young age and spaced widely. Soil is enriched with organic matter, and must be kept moist, though the system uses less water than traditional rice farming.
Up to 20 million farmers now use SRI in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast, said Norman Uphoff, of the SRI International Network and Resources Center at Cornell University in the US.
But, despite its success, the technique has been embraced with varying degrees of enthusiasm. Uphoff said that is because it competes with the improved hybrid and inbred rice varieties that agricultural corporations sell.
For Faliry Boly, who heads a rice-growing association, the prospect of rice becoming a “white gold” for Mali should spur on authorities and farmers to adopt rice intensification.
The method could increase yields while also offering a more environmentally-friendly alternative, including by replacing chemical fertilizers with organic ones, he said.
He also pointed out that rice intensification naturally lends itself to Mali’s largely arid climate.