Saudi Arabia’s “Vision 2030”: What It Means

China, Company Strategy, Middle East, Oil & Gas, Technology



Demand: The New Direction for Profit


By John Richardson

SAUDI ARABIA’S “Vision 2030”, which was released on Monday, underlines what has been clear from government statements for a long while – that the Kingdom knows it has to move beyond just exporting crude oil. It needs to break what Saudi Deputy Crown Prince Mohammed bin Salman has called an “addiction to oil”.

If you have been caught blindsided by Vision 2030, it is worth looking again at the above triangle. Many people were similarly caught unawares by China’s change in economic direction in 2014. This again had been clearly flagged-up by government officials well in advance.

The message that needs to be repeated is that you cannot depend on cost curve analysis alone to understand the oil, gas and chemicals businesses, as too many people still tend to do. You instead must keep track of changes in the wider social and political context.

What “Vision 2030” further underlines is the following:

  • Saudi Arabia realises that oil will end up being left in the ground, like coal.  This means that it makes no sense for the Kingdom to support high oil prices.  It has the lowest production cost in the world, and high oil prices simply allow other, higher-cost producers, to sell more of their oil at Saudi Arabia’s expense.
  • This is why it is assuming future oil prices of $30/bbl. Yes, that’s right – not $80 or $100/bbl – but $30/bbl. An assumption of $30/bbl makes a lot of sense. So, ask yourself this question: “Do I really know better than the world’s biggest, and most experienced, oil producer?”
  • This is not a new strategy.  Saudi Arabia recognised some time ago that oil was losing market share to natural gas and renewables.  Last December’s climate change conference in Paris reinforced this message, making it essential that the country moved quickly to reduce its current dependence on oil revenues, and diversify its economy.
  • Social factors are the other key driver for the new policy.  With a median age of just 28 years, Saudi Arabia urgently needs to create jobs, if it wants to avoid the social unrest that has been spreading across the Arab world.  And this can only be achieved by abandoning the focus on oil exports, and diversifying its economy downstream. Evidence for the new policy can be seen in Saudi Arabia’s major expansion of its downstream volumes over the past few years.  It will soon be the world’s second-largest exporter of refined products – with 3mbd of production in 2018.  It has also developed world-scale joint ventures with Dow Chemical (Sadara) and TOTAL (SATORP) in petrochemicals.
  • These volumes are in addition to its actual oil exports – and confirm that the days of OPEC oil quotas are in the past.  The Vision therefore reinforces existing Saudi policy and creates the basis for the new Transformation Plan, due by the end of June.

Exactly like China again, these are the two key takeaways from Vision 2030 for overseas refiners and chemicals players:

  1. The viability of future new Saudi investments cannot be measured solely on how many dollars per tonne a particular project may, or may not, make over variable or cash costs – and on standard measures of returns on investment. Success will instead be measured over decades from a national perspective, as Saudi Arabia transforms its overall economy. This will require companies that do operate on these standard measures to think again about their own investment strategies.
  2. That’s the challenge. But the fantastic opportunity is working with the Kingdom, through providing the technology and expertise it needs, to help it realise this vision.

Sitting On The Fence Involves Choosing Failure


By John Richardson IF you choose not to decide, you still have made a choice. ...

Learn more

Oil Prices: You Must Answer The Supercycle Argument


By John Richardson THE continuing failure of genuine price discovery in oil mark...

Learn more
More posts
Focus of petchems business must be on meeting medical and food needs

By John Richardson SEVERAL contacts have said to me over the last two weeks that increased medical a...

Be very, very cautious about buying into the idea of a Q2 crude price rally

By John Richardson IT IS the unprecedented nature of the demand shock that’s the thing, regardless...

No business as usual despite re-ordering of global polyethylene competitiveness

By John Richardson THERE ARE sadly no business as usual scenarios, in my view. Under normal circumst...

China: temper your expectations of a H2 recovery for supply as well as demand reasons

By John Richardson CHINA IS gradually getting back to work, but only gradually because the governmen...

Petrochemical feedstock purchasing managers: What to think about and what do next

By John Richardson ALL THE old assumptions about how oil, feedstock and petrochemicals markets work ...

Vital work to maintain petrochemicals supply for essential services must continue

By John Richardson INDUSTRY associations around the world are lobbying governments about the importa...

Polyethylene: How to plan sensibly as we face threat of new Global Depression

By John Richardson I SINCERELY want to help you guys. That’s what I am here for. To this end, here...

Coronavirus may take as much as two years to be brought under control

By John Richardson The only honest answer is that none of us know how events will turn out because o...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more