At ACHEMA, which was held in Frankfurt, Germany from 15 - 19 June, I sat in on the Saudi Arabia downstream forum. The session was a discussion between a wide selection of people active in the Saudi downstream sector and was indeed very interesting. So much so that it sparked my own internal discussion of what lies ahead for the country, which is one of the world’s most important players in the oil, gas and petrochemicals sector.
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Firstly I’m going to address the challenges that the nation is likely to face. A problem that must be addressed sooner rather than later is that of the young age of the population and, therefore, the workforce. As more and more people retire, skills and knowledge in the oil and gas sector are lost, and are not being replaced due to the significant age gap across the country. The only way to combat this problem quickly is through the employment of expats. However, there are two hurdles to be crossed here. Firstly, there are always Visa issues that need to be addressed, and these are causing problems across the sector when it comes to employing the much needed experienced staff from overseas. The second hurdle is that all Saudi companies must employ a certain percentage of residents, and there isn’t the skilled pool to fill this quota from.
The next challenge is that of expanding export markets. At the moment, the US and China are large threats to Saudi Arabia being able to access broader markets. The US is making fast ground with export markets due to the volume of oil and oil products it has available at a low price due to the shale revolution, and China has a broad grasp on the export markets near to Saudi Arabia. The other factors holding Saudi Arabia back from increasing its share of the export market is that of pricing and international standards, as it was argued at ACHEMA that the country has a long way to go when it comes to both.
But it’s not all bad as far as I can see. Saudi Arabia is home to an incredible number of industrial cities (Jubail and Yanbu being two of the most important in this discussion). In fact, between 2008 and 2014, the number of industrial cities in the pipeline across the country rose from 14 to 34. The developments of these vast projects can only be good for the nation as they bring big investments from overseas and create infrastructure in the forms of ports, airports and roads for utilisation around the country. Residences are also built, high volumes of labour intensive manufacturing is required so jobs are created and, as more and more industrial cities are developed, sustainability for the country is cemented along with growing platforms for market access, which we know is a problem.
Furthermore, Saudi Arabia is rich in fossil based resources and money, so while increasing pressure is put on the nation by the US and China, the country is not going to disappear from the global market place any time soon, and in my opinion, at all.