Most readers are aware of the Natural Gas Initiative. They will know that it is the country’s biggest opening to foreign investors in 25 years. They will have heard the figures: in the short term it will bring investments of $25 billion, in the medium term some $50 billion. Even so, many have not yet taken on board either the sheer scale of the project — the biggest area of exploration in the world, the largest of the three fields, south Ghawar, covering an area larger than Ireland — or its potential to massively expand the Kingdom’s economic base.
Foreign Minister Prince Saud Al-Faisal, who led the negotiations, was not exaggerating when he described the venture as being “of unprecedented scale” and representing “a new way of doing business in the Kingdom”.
This initiative, officially launched this week with the award of contracts to eight international petrochemical corporations to explore and develop three colossal gas fields, is an event of the first importance in the Kingdom’s economic history. It will attract the largest inflow of foreign investment ever.
This project was set rolling three years ago by Crown Prince Abdullah, deputy premier and commander of the National Guard. During a visit to the United States he invited the international oil giants for talks. The project is not simply about pumping out and selling gas. It is about developing new sources of gas to service a new generation of power stations, water desalination plants and petrochemical industries, both on the east and west coasts. An extra 4,000 megawatts of electricity and 300 million gallons of water a day and two million tons a year of petrochemicals is a massive boost to the economy, and that is only from South Ghawar.
There will be major opportunities for the domestic private sector — in construction, in services, as consultants, in the hydrocarbon industry itself. It should draw back a goodly slice of that estimated $500-$600 billion of private sector funds which, invested abroad, have contributed nothing to the Kingdom’s development. And there will be jobs — 20,000 are anticipated, direct and indirect. The NGI is the answer to diversification. It is even bigger than that. The massive investment from foreign companies should play a pivotal role in stimulating the infant Saudi stock market.
Saudis will be attracted to ventures arising from the gas program, either as passive investors in the new Saudi-based petrochemical businesses or, more actively in businesses that arise as a result. It is not coincidental that Minister of Finance and National Economy Dr. Ibrahim Al-Assaf just recently announced that the law regulating the Saudi Stock Market is under discussion in the Supreme Economy Council and could be in place by the end of the year.
Nor can the environmental benefit be ignored. The NGI means not only more electricity, more water — a joy to many a resident in parts of Jeddah — but with gas replacing oil as the feed stock, it means cleaner electricity, cleaner water distillation, even cleaner cement production and cleaner petrochemical plants, difficult though that might be to imagine. The sooner that happens, the better.
There are those who worry about the return of powerful multinationals to the Kingdom’s all-important petrochemical sector. They are wrong. The country has moved on since the gas industry was nationalized 25 years ago. It is a folly to turn our backs on international partners, on their skills, their latest know-how, their investment. As for those who feared that Saudi Arabia was irrevocably bound to oil, dependent wholly on its fluctuating price to fund an ever expanding economy this bold step forward should bring great comfort. The authorities have produced a masterstroke that resolves so many issues at once: investment needs, economic diversification, more water, more electricity, the environment, jobs, new skills. It should ensure a bright future for generations to come.
