Saudi Arabia’s energy diversification TEY_post_Al_Rushaid

Saudi Arabia is diversifying its energy mix to include cleaner energy sources while improving the growth in its living standards.

Sheikh Rasheed AL RUSHAID Chairman and CEO AL RUSHAID GROUP

Saudi Arabia’s energy diversification

March 22, 2023

Sheikh Rasheed Al Rushaid, chairman and CEO of Al Rushaid Group, talks to The Energy Year about the progress of Saudi Arabia’s Vision 2030 programme and the target to power half of the country’s electricity with renewables in 2030. The Saudi-owned Al Rushaid Group is involved in construction, engineering, manufacturing, trading, and technology covering a wide range of sectors.

How do you evaluate Saudi Arabia’s Vision 2030 progress?
Saudi Arabia, and indeed the world, is diversifying its energy mix to include cleaner energy sources while improving the growth in its living standards. Al Rushaid Group plays a significant role in Saudi Arabia’s energy sector reform and Vision 2030 programme. Saudi Arabia will achieve its goals through sustained investments covering multiple sectors and technologies.
Like most investments, some might lead to a quicker investment payback, while others might take longer, but they will generate a much greater impact further down the line.

What are the main opportunities under Saudi Arabia’s target to power 50% of the country’s electricity with renewables by 2030?
As an example, Saudi Arabia’s first solar power plant was commissioned in 2011 with only 500 kWh. Less than 10 years later, in 2020, Saudi Arabia grew its renewable electricity generation capacity 1,000-fold to 500 MW, with ambitious plans to grow this capacity to an astounding 60 GW by 2030.
Another example is the Jafurah unconventional gas programme, whereby Saudi Aramco will be investing more than USD 100 billion to develop cleaner, less carbon-intensive natural gas for domestic electricity generation in order to displace traditional crude oil burning as part of the diversification of Saudi Arabia’s energy mix. As technology matures, such as carbon capture and sequestration at the industrial scale, Jafurah will also provide the natural gas feedstock to produce blue hydrogen for domestic consumption and international export.


How will global socioeconomic trends affect the demand for oil and its derivatives in the future?
Global demand for traditional energy sources will continue to grow in the foreseeable future, driven primarily by population growth, urbanisation and a growing middle class. This is true particularly within emerging economies. Not only will the demand for fuel used for transportation continue to grow, but so will the need for a myriad of valuable byproducts, including chemicals, plastics and more.
This growth in demand presents a particularly acute challenge, as years of underinvestment by the industry has led to structural supply deficits due to pressure by external organisations or internal pressure to return capital via share buybacks or increased dividends to shareholders.

What are Saudi Aramco’s main initiatives to upgrade its production capacity?
Saudi Aramco’s unique position as the world’s leading oil producing company and pre-eminent energy supplier shows it is stepping up to meet this challenge, as it has done throughout history.
Through the development of the Marjan and Zuluf offshore fields, among others, Saudi Aramco will grow its crude production capacity by 1 million bopd by 2027. These projects, in addition to the aforementioned Jafurah unconventional gas mega-project, will drive strong economic activity throughout the economy, especially in the construction and engineering fields.
Among G20 countries, Saudi Arabia recorded the highest annual growth in 2022 at 8.7%, and there is reason to believe that the tailwinds to support strong economic growth will continue for a long time.

What are Al Rushaid Group’s priorities for localising the manufacturing of strategic commodities in Saudi Arabia?
Localising supply chains is a strategic priority for Al Rushaid Group. Supported by Saudi Aramco’s IKTVA [In-Kingdom Total Value Add] programme, we actively work with our international partners, such as SLB, Halliburton, Flowserve and Weatherford International, to drive local sourcing where available or achieve a pathway to localisation where not yet available.
We have healthy and active discussions with all of our partners at both the senior management and operating levels around introducing new technologies and techniques into Saudi Arabia, while continuously investing in new equipment, people and processes.
Saudi Aramco is the largest and most well-respected energy company in the world, and it deserves no less than the best quality and quantity of local suppliers.

What kind of business diversification opportunities does the group identify within the energy transition?
We recognise that in the coming decades, the world will require oil and gas to be produced with lower carbon footprints. This will be achieved through delivering greater energy efficiency as continuous technological progress and modernisation allows countries to generate greater GDP per million Btu of energy input, combined with ongoing investments in carbon-capture and sequestration technologies.
Al Rushaid is also currently in early-stage evaluations of projects revolving around the manufacturing of fuel cells, electrolysers and advanced battery materials. The evaluations are done in conjunction with major international conglomerates that are technological leaders in the space and want to partner with Al Rushaid to invest, at a large scale, to serve not only the domestic Saudi market but also global customers.
While the final investment decision for these initiatives will depend on the ongoing due diligence, our existing mining businesses will grow organically to meet the expanded scope and programme of Ma’aden, Saudi Arabia’s state-owned mining company, to include minerals that are crucial to the clean energy storage technology of today and tomorrow.

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