2016 growth in Saudi oil sector to remain positive

Updated 07 February 2016

2016 growth in Saudi oil sector to remain positive

JEDDAH: Annual growth in the Saudi oil sector will remain positive in 2016 with average oil output expected to increase slightly, as the Kingdom continues to protect its share in the oil market, according to a report.

The current period of low prices is set to remain throughout 2016 pulled down primarily by persistently high oil supply, stated the report from Jadwa Investment.
“Saudi crude production averaged 10.2 million barrels per day in 2015 and we do not see any cuts in production to support upward movement in prices going forward. We therefore expect 2016 Saudi production to be unchanged, year-on-year, at 10.2 million barrels per day in 2016,” added the Jadwa economists.
So far Saudi policy of market share has worked with lower prices undercutting both OPEC and non-OPEC competitors in key markets, they pointed out.
The combination of low oil prices, oil hedges expiring and tighter lending conditions will result in total US production declining by 7 percent or 0.5 million barrels per day in 2016, to a total of 8.8 million barrels per day, compared to an average growth of 16 percent between 2012-14, according to the report.
But Saudi Arabia’s non-oil private sector will continue to grow albeit at a slowing pace, as reduced government spending will most likely have a negative impact on business activity. However, growth in all sectors in the non-oil private economy will remain positive, added the Jadwa report.
“As oil prices fall further, the current account balance will record a second consecutive external deficit, while the fiscal deficit will remain in double digits. However, we believe the government will continue to gradually diversify its revenue base and consolidate its spending,” added the Jadwa economists.
They expect the Saudi economy to continue to slow in 2016, dragged down by slower growth in both the oil and non-oil sectors.
“We expect economic growth to slow to 1.9 percent in 2016, down from 3.4 percent in 2015,” said the report.
It said that oil sector growth is expected to slow to 0.9 percent in 2016 compared to 3.1 percent in 2015.
The slower growth in the oil sector will mainly be due to a marginal rise in oil production following a more pronounced increase of 4.3 percent in 2015. This is likely to come as the Kingdom continues to satisfy its growing domestic energy consumption as well as maintain its market share in the global oil market, added the Jadwa report titled ‘The Saudi Economy in 016.
Growth in the non-oil private sector is expected to continue to slowdown but remain positive at 2.6 percent, it added.
“We predict a growth of 4 percent in the utilities sector which makes it the fastest growing sector in the Kingdom in 2016,” said the Jadwa economists. “This is because the sector is expected to benefit from significant additions to power and water generation, transmission, and distribution projects,” the report said.
The non-oil private sector should continue to be the engine for growth in the economy, with government spending remaining central for the growth in private sector activity. Corporate lending and domestic consumption will also be primary drivers for growth. Within the non-oil private economy, wholesale and retail and transport are likely to also be among the fastest growing sectors.


Taps and reservoirs run dry as Moroccan drought hits farmers

Updated 22 October 2020

Taps and reservoirs run dry as Moroccan drought hits farmers

  • The problems caused by increasingly erratic rainfall and the depletion of groundwater are growing every year in Morocco

RABAT: Two years of drought have drained reservoirs in southern Morocco, threatening crops the region relies on and leading to nightly cuts in tap water for an area that is home to a million people.

In a country that relies on farming for two jobs in five and 14 percent of its gross domestic product (GDP), the problems caused by increasingly erratic rainfall and the depletion of groundwater are growing every year.

In the rich citrus plantations of El-Guerdan, stretching eastward from the southern city of Agadir, more than half of farmers rely on two dams in the mountains of Aoulouz, 126 km away, to irrigate their trees.

However, that water has been diverted to the tourist hub of Agadir, where mains water has been cut to residential areas every night since Oct. 3 to ensure taps in households did not run entirely dry.

“The priority should go to drinking water,” Agriculture Minister Aziz Akhannouch said in parliament last week.

In El-Guerdan, Youssef Jebha’s crop of clementine oranges has been compromised by reduced water supply, he said, which affects both the quality of fruit and the size of the harvest.

“The available ground water is barely enough to keep the trees alive,” said Jebha, who is head of a regional farmers’ association.

“Saving Agadir should not be at the expense of El-Guerdan farmers,” he added, speaking by phone.

‘We hope for rain’

El-Guerdan is not alone in facing drought. Morocco’s harvest of cereals this year was less than half that of 2019, meaning hundreds of millions of dollars of extra import costs.

Despite lower production, Moroccan exports of fresh produce have risen this year by 8 percent. 

Critics of the government’s agricultural policy say such sales are tantamount to exporting water itself, given the crops use up so many resources.

A report by Morocco’s social and environmental council, an official advisory body, warned that four-fifths of the country’s water resources could vanish over the next 25 years.

It also warned of the risks to social peace due to water scarcity. In 2017, 23 people were arrested after protests over water shortages in the southeastern city of Zagora.

In January the government said it would spend $12 billion on boosting water supply over the next seven years by building new dams and desalination plants.

One $480 million plant, with a daily capacity of 400,000 cubic meters, is expected to start pumping in March, with the water divided between residential areas and farms.

Until then, “We hope for rain,” the agriculture minister said in parliament.

In El-Guerdan, the farmers are digging for water. A new well costs $20,000-30,000. However, “there is no guarantee water can be found due to the depletion of ground reserves,” said Ahmed Bounaama, another farmer.