Oil output deal is here to stay, new Saudi minister vows

Saudi Arabia’s newly appointed energy minister Prince Abdulaziz bin Salman said the kingdom is proceeding cautiously with its planned nuclear power program. (AFP)
Updated 10 September 2019

Oil output deal is here to stay, new Saudi minister vows

  • Prince Abdul Aziz bin Salman is center of attention at World Energy Congress in Abu Dhabi
  • Saudi Arabia has said it wants to tap nuclear technology for peaceful uses

ABU DHABI: A deal agreed a year ago by major oil producers to limit output was “until death do us part,” Saudi Arabia’s new energy minister pledged on Monday.

Prince Abdul Aziz bin Salman wants the Organization of Petroleum Exporting Countries (OPEC) to strengthen and extend its agreement with non-OPEC producers, including Russia, he said in his first public appearance since being appointed on Sunday.

Previous attempts to limit output had been “successful but temporary in nature…Now it is different in quality, size and perpetuity,” Prince Abdul Aziz told a packed house at the World Energy Congress in Abu Dhabi.

The output deal was sealed at an OPEC meeting in Vienna in December 2018. “Soon we will celebrate the anniversary of the charter that will continue to bring us together, and it is until death do us part,” Prince Abdul Aziz said.

The minister also hinted that it would desirable to widen OPEC to give non-members a more permanent role. “This industry has to have the institutions that can give the notion of support toward sustainable energy supplies commensurate with what the world economy requires,” he said.

But he said non-OPEC producers — including the biggest, Russia — should be subject to a process he summed up in the motto of President Ronald Regan: “Trust, but verify.” He will meet other producers, including Russian energy minister Alexander Novak, in the UAE later this week.

Many industry analysts see a greater threat to the oil price from falling global demand, mainly because of the economic fallout from trade disagreements between the US and China.

Prince Abdul Aziz appeared sanguine on this subject, though he said the “jury was out” on future demand projections. “I am fundamentally an optimist, and if I’m not optimistic, I’d make every effort to create a situation where I could regain my optimism. They are not yet trade wars,” he said.

The minister’s appeal for a stronger and deeper OPEC came in an eagerly awaited interview on the first day of the concgess. A career energy professional over more than three decades, the prince underlined his respect for his predecessor, Khalid Al-Falih, and his dedication to the Saudi energy industry.

“I haven’t lost a friend because he will always remain a friend. He was a schoolmate at university, and we spent 30 years working together,” he said in a voice tinged with emotion.

“You’ve seen Upstairs, Downstairs,” he said, the popular British TV drama. “Well, I am downstairs. I like to work in the kitchen serving my country and my king.”

Most of the audience thought his message went beyond a continuation of existing Saudi energy policy, and amounted to to a “doubling down” of the overall strategic direction in the run-up to the initial public offering of Saudi Aramco, expected imminently.

“It’s the same as before, but reinforced and reinvigorated,” said one oil expert.

On the recent change of management at the top of Saudi Aramco, Prince Abdul Aziz said it was correct to separate the oil company from his ministry. “There is nothing I would not do to protect the interests of this state-owned company,” he said.

“I think the best thing we could do was to ensure the commerciality of the company and the ‘arm’s length’ relationship — to keep it owned by the state and to work as any other international oil company. The IPO made us all focus on exerting every possible effort to highlight this and magnify this.

“That model saved us in terms of our economic well-being. The separation of the corporate from the ministry is a must,” he said, suggesting there would be further safeguards in Aramco IPO documents

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Prince Abdul Aziz said that when Saudi Aramco this year attracted interest of more than $100 billionn for its historic corporate bond, “it was one of the best days of my life.”

There were some surprising elements in his responses to questions from Helima Croft, energy expert from Canadian financial institution RBS Capital. On nuclear power, he made it clear that the Kingdom was keeping all its options open.

“We are proceeding with it cautiously. We are experimenting with two nuclear reactors. We are fortunate enough to have lots of uranium resource and if we scale up we want to go for the full cycle — from producing, enriching and using uranium, even acquiring new technologies….We want to make sure the energy mix is comprehensive,” Prince Abdulaziz said.

On domestic energy reform, he was adamant: “I’m not wasting my time discussing a la la land scenario whether Saudi Arabia will be a net importer of energy by 2030. We have made big improvements in consumption at home, with the energy mix, with efficiency and with price reform. Consumption will be conservatively reduced by 1.5m barrels per day,” he said.

Before his appearance on stage, the prince had reviewed displays at the congress, and lingered to chat casually with journalists at the big Saudi pavilion. “I’m not a horse that can be tamed. I’m known to be excessively spontaneous, a bit of an elephant in the room,” he quipped.

Prince Abdul Aziz also confessed to feeling emotional at the welcome he had received from Suhail Al-Mazroui, the UAE energy minister. “This is a city and a country that gives you a sense of belonging, a sensation of being part of the UAE fabric,” he said.

“I never bet my career on the notion of wanting to be minister of energy. I know energy, I like energy, and I want to be part of that energy, because I get to be energized by it.”

 


Saudi pursuit of ‘green Kingdom’ goal gets a boost

Updated 18 November 2019

Saudi pursuit of ‘green Kingdom’ goal gets a boost

  • Agreement between agriculture ministry and Dubai's ICBA aimed at conserving natural resources
  • Kingdom's biosaline agriculture research and systems stands to benefit from ICBA's expertise

DUBAI: Agricultural development and environmental sustainability in Saudi Arabia will receive a boost in the coming years, thanks to a new agreement between the International Center for Biosaline Agriculture (ICBA) in Dubai and the Saudi Ministry of Environment, Water and Agriculture.

The agreement aims to enable Saudi Arabia to achieve its goal of preservation and sustainable management of its natural resources by raising the quality of biosaline agriculture research and systems.

The ministry says that the agreement will make use of the ICBA’s expertise in capacity development besides agricultural and environmental research, especially in the fields of vegetation development, combating desertification and climate change adaptation.

“It also includes training programs for Saudi technicians and farmers,” the ministry said. “In addition, it will localize, implement and develop biosaline agriculture research and production systems for both crops and forestation, which contributes to environmental and agricultural integration.”

Dr. Ismahane Elouafi, the ICBA’s director general, told Arab News: “The agreement had been in the making for about two years. That was when we were approached by the Saudi government.”

Dr. Ismahane Elouafi, ICBA Director General, at the center's Quinoa fields in Dubai. (Supplied photo)

She said: “We put forward a proposal to demonstrate how the ICBA can help the Saudi government to implement its Green Kingdom Initiative, through which the ministry is trying to restore green coverage in the country and revive old conservation practices.”

Geographical features and climatic conditions very greatly from one part of the country to the other.

In the past, experimentation with such crops as potatoes, wheat and alfalfa proved detrimental to the Kingdom’s environment and natural resources due to faster rates of groundwater withdrawal.

“The ministry wanted to put a halt to over-abstraction of water, so they went through different policies,” Elouafi said.

“They made sure, for example, that farmers stopped producing wheat because about 2,400 liters of water is consumed to produce 1 kg of wheat. It was a huge amount,” she added.

“The new strategy is to find more appropriate crops for the farming community, which is quite large in the Kingdom.”

Saudi Arabia has been trying to grow its own food on a large scale since the 1980s. 

The objective of the Green Kingdom Initiative is to reduce the agricultural sector’s water demand by finding alternatives to thirsty crops.

The agreement will require the ICBA, over the next five years, to build for Saudi Arabia a new biosaline agriculture sector. 

As part of this shift, cultivation of a number of crops, notably quinoa, pearl millet and sorghum, will be piloted in high-salinity regions and then scaled up.

“The crops did very well in the UAE,” Elouafi said. “We’re looking at Sabkha regions, which have very high salinity and wetlands, and are on the ministry’s environmental agenda.”

Another objective is “smart” agriculture, which will involve raising water productivity, controlling irrigation water consumption and changing farming behavior.

Elouafi said that getting farmers in the Kingdom to stop cultivating wheat took some time as they had become accustomed to heavy government subsidies. In 2015, wheat production was phased out, followed by potatoes a year later and then alfalfa. 

“Farmers were provided everything to the point where they got used to a very good income and a very easy system,” she said.

“Now farmers are being asked to start producing something else, but the income won’t be the same, so it’s very important at this stage that the ministry has a plan and it’s fully understood.”

The agreement envisages preparation of proposals for ministry projects that involve plant production, drought monitoring, development of promising local crop and forestation varieties, and conservation of plant genetic resources.

“We’re also discussing capacity building because the ministry is big and has many entities. Because Saudi Arabia is a large country and has the capacity to meet some of its food requirements internally, what’s required is a better understanding of the country’s natural capabilities in terms of production of the crops it needs, like certain cereals,” Elouafi said.

“The way the authorities are going about it right now is more organized and more holistic. They’re trying to plan it properly.”

Elouafi said that having a better understanding of Saudi Arabia’s water constraints and managing the precious resource is essential.

 

Although almost the entire country is arid, there is rainfall in the north and along the mountain range to the west, especially in the far southwest, which receives monsoon rains in summer.

 

Sporadic rain may also occur elsewhere. Sometimes it is very heavy, causing serious flooding, including in Riyadh.

“They (the government) are very interested in drought management systems. The Kingdom has a long history of agriculture,” Elouafi said.

“It has large quantities of water in terms of rainfall, and certain regions have mountainous conditions, which are conducive to agriculture.”

Clearly, preservation of water resources is a priority for the Saudi government. But no less urgent is the task of conversion of green waste to improve soil quality, increase soil productivity and water retention, and reduce demand for irrigation.

The Kingdom is one of at least three Gulf Cooperation Council countries that are taking steps to develop a regulatory framework for the recycling of waste into compost.

Saudi Arabia, the UAE and Oman are respectively aiming to recycle 85 percent, 75 percent and 60 percent of their municipal solid waste over the next decade, according to a report by the Economist Intelligence Unit (EIU) entitled “Global Food Trends to 2030.”

Saudi Arabia and the UAE rank in the bottom quartile of the 34 countries covered by the EIU’s Food Sustainability Index, with low scores for nutrition and food loss and waste. 

The answer, according to many farmers, policymakers and food-industry experts, is a shift toward more sustainable management of each country’s natural resources.