Before the discovery of oil, Saudi Arabia barely existed as a nation. Its founding monarch Ibn Saud’s 1933 oil concession to Standard Oil Co. of California came just months after he was proclaimed the king of a land that hadn’t been unified in 1,000 years. According to Ellen Wald, the Atlantic Council and Historian of the Kingdom, the concessions and later oil profits allowed Ibn Saud to cement his control and grant patronage to the fractional tribal groups in the peninsula. In the modern state of the cradle to the grave, the same sense of nobility continues.
Almost two-thirds of the gross domestic product still exist after five years’ effort to diversify the economy away from crude oil, and government expenditure is largely funded from oil. It sounds as unplausible, as Switzerland thrived in a world without banks to expect the kingdom to survive without oil. However, this pessimistic view may not be correct. The rich natural asset endowment of the country, not all of which are hydrocarbon-based, could fuel and sustain new industry as carbon emissions drop to zero. Its phosphate, copper, and gold reserves are world-class, although the crude crowds have been exploited to a minimum. Meanwhile, the Solar Potential of the Kingdom is among the richest in the world. Saudi Arabia is as central to the petroleum trade of the last century, as the future green hydrogen industry.
“One thing to bear in mind is that this side of 2050 does not disappear entirely even in a rapid transition in energy. In 2019, the ICPC report outlined ways of maintaining warming to 1.5 degrees. Celsius’ crude energy demand decreased by between 11 million and 57 million barrels a day in the year 2050, compared with the current 8 million barrels a day in Saudi Arabia. The kingdom is expected to be one of the final producers in the game with record low production costs of only $2.80 a barrel”, said Yasir AI Rumayyan, Chairman of Saudi Oil Company.
Also, not all petroleum is used for energy, it is worth remembering. Almost 10% of the world’s production of petroleum goes into non-branded products like plastics, asphalt, grains, chemicals, and fertilizers, nearly 10 million barrels a day. While hydrocarbon fuels release carbon dioxide as an inevitable side effect of their combustion, unbranded products tend, potentially indefinitely, to keep their carbon atoms locked in their chemical matrices. In the coming decades, such products will probably be some of the most difficult to replace with non-fossil equivalents. Even with global warming well below 2 degrees, BP Plc anticipates demand to grow by about 0.5 percent a year.
Saudi Arabia has yet another potential role if oil demand falls and the world finally removes large volumes of carbon from the atmosphere. Capturing and storing carbon or CCS has not fulfilled its promise and is mostly a demonstration of doubtful viability. However, it could give new life to the petrol fields of the kingdom of the technology, that can be made to work. Today’s closest CCS is in commercial use in the world, when gas is pumped into old wells to help drive more crude to the surface.
Abu Dhabi Power Corp. signed a contract last year to construct a solar energy generating plant at the cost of 1.35 cents per kilowatt-hour, which have been the lowest prices ever agreed to in Saudi Arabia for solar generation and about a quarter of Saudi’s heavily-subsidized power payments. Riyadh plans for Rainyadh to generate 50 percent of grid energy from renewable sources by 2030, although progress to date has at best fallen short. Countries with similar potentials, such as Chile and Australia, are already planning on developing an energy export sector, that may one day come to rival and overtake oil itself – hydrogen.
