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Written and read by Erik William Welle-Strand, commercial intern at the Royal Norwegian Embassy in Riyadh, Saudi Arabia

Written and read by Erik William Welle-Strand, commercial intern at the Royal Norwegian Embassy in Riyadh, Saudi Arabia. Introduction to the economy of Saudi-Arabia and the other GCC countries.

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Written and read by Erik William Welle-Strand, commercial intern at the Royal Norwegian Embassy in Riyadh, Saudi Arabia

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  1. Written and read by Erik William Welle-Strand, commercial intern at the Royal Norwegian Embassy in Riyadh, Saudi Arabia Introduction to the economy of Saudi-Arabia and the other GCC countries Disclaimer: All statements made are the personal beliefs of the author and do not represent Norway, The Embassy or its other employees. 30.11.2011

  2. Outline • Section 0 – Purpose and Outline • S 1 – Introduction to the Region - 17m • GCC cooperation and Saudi Arabia • Section 2 – Oil and Gas - 21m • Section 3 – Economic Diversification and Industrialization Part I - 16m • Regulative • Industrial and Economic Cities • Section 4 – Economic Diversification and Industrialization Part II -14m • Petrochemicals and Mining • Section 5 – Domestic Energy Usage and Power Production - 25m • Section 6 – Construction and Transportation Infrastructure - 25m • S 7 –Education and Labour Market - 12m • S 8 – Banking/Finance and Healthcare - 20m • Section 9 – Summary and Challenges Going Forward - 10m

  3. Section 1Introduction to the region • Please see section 0 for the purpose, outline and disclaimer for this presentation.

  4. The GCC • Oil and Gas • Currency • Customs union • Defence • Transport • Tax • Power • Expatriates Map of GCC countries

  5. The Kingdom of Saudi-Arabia (KSA)

  6. Trade flow - KSA

  7. Section 2Oil and Gas • Please see section 0 for the purpose, outline and disclaimer for this presentation. 7

  8. Oil

  9. Saudi Aramco • Controls all production • 2004 -2010: 4,25M bbl/d new capacity • Projects waiting to lift capacity to 15M bbl/d • Will not be developed in the near future

  10. Ghawar is the worlds largest oil field • Production capacity approx 5m bbl/d • 50 % of KSA output • Safaniya is the worlds largest offshore field • Production capacity approx 1,2m bbl/d Major oil fields in KSA

  11. Downstream focus • Refineries • Petrochemicals • Biggest diversification projects in KSA

  12. Gas • Pre/Post Master Gas System (MGS) • Production in 2010: • 1.8 BOE/d (10 bcf/d) or 100b m3 per year • 10th largest producers of natural gas • Norway 5th and Qatar is 11th • Gas production on the rise • Karan field 0.45 bcf/d now – 1.8 bcf/d in 2013 • Wasit Non-associated gas 2.5 bcf/d 2013 • Shaybah NGL Associated gas 2.5 bcf/d 2013 • Unconventional gas • Sold cheaply domestically • 0,75 USD/mbtu in KSA • 0,77 USD/mbtu in Oman • New fields need 2-5 USD – ARAMCO

  13. Section 3Economic Diversification and Industrialization Part I • Please see section 0 for the purpose, outline and disclaimer for this presentation. 13

  14. Economic Diversification and Industrialization • Economic security and social stability • Jobs and economic diversification • Regulatory developments • SAGIA - year 2000 • 10 x10 Program • Ease of Doing Business • Industrial growth • Cheap energy and feedstocks • Petrochemicals is the biggest • Mining • Aluminium • Fertilizer • Other • Tourism • Financial Services • How • Transport Infrastructure – sector 6 • Industrial/Economic cities – this section • Power generation – section 5 • natural gas exploration

  15. Industrial and Economic cities • Jubail and Janbu • First industrial cities in the mid 70s • Strong communication links • Successful industrial cities • Many projects have followed • Example Ras Al-Khair (Also called Ras Al-Zour, RasAzzour or “Mineral City”)

  16. The Economic cities • 6 planed, four under development Map of the Economic Cities planed in KSA

  17. Section 4Economic Diversification and Industrialization Part II • Please see section 0 for the purpose, outline and disclaimer for this presentation. 17 17

  18. Petrochemicals in KSA • 100b SAR exports in 2011 est • Up 7 % YOY and set to increase • JV • Saudi Aramco Total Refining and Petrochemical Company – Jubail - finished in 2013 – 14b USD • Sadara Chemical Co – Dow Chemical and Aramco – Yanbo – finished in 2016 – 20b USD • Saudi Basic Industries Company (SABIC) • 70 % Gov 30 % private, public • Four areas • Chemicals • Plastics • Fertilizers • Metals • Growing globally - JV with Sinopec Ethylene derivatives in Tianjin

  19. Mining • KSA is rich in Minerals • Saudi Arabian Mining Company (Maaden ) • Started in 97, went public in 07 • Five existing gold mines + five advanced exp • Mahd Ad Dahab • Al-Sukhaybarat • Bulghah • Al-Hajar • Al- Amar • Ras-al Zawr “Mineral city” • Ma’aden Phosphate Company • JV Maaden (70 %) and SABIC (30 %) • Al Jalamid->Ras Al Khair • Saudi Arabian Mining Company Bauxite and Alumina Company, • Al Ba'itha -> Ras Al Khair • Alumina • Aluminum JV Alco (25 %) Maaden (75 %) • Iron

  20. Section 5Domestic Energy Usage and Power Production • Please see section 0 for the purpose, outline and disclaimer for this presentation. 20

  21. Energy Production and Consumption • Biggest challenge facing KSA and the GCC • 30 % of production consumed domestically • 2010: 2,4 or 3,2 bpd (just oil or gas also)

  22. How is this possible?

  23. Energy consumption break down

  24. Alternatives for power production

  25. Section 6Construction and Transportation Infrastructure • Please see section 0 for the purpose, outline and disclaimer for this presentation. 25

  26. Housing and Transport Infrastructure • Housing • Dubai most famous • Now KSA and Qatat. • Transport Infrastructure • Rail • Road • Ports • Airports

  27. Railroads Railroads in KSA • Orange – functioning line • Green North South line • Dark Blue Saudi Land bridge • Red Haramain line

  28. Roads • As of 2000 • total: 152,044 km • paved: 45,461 km • unpaved: 106,583 km King Fahd causeway (above)

  29. Ports • Red Sea • Jeddah Islamic Port • Port of Jizan • King Fahad industrial Port at Yanbu • TheGulf • King Abdulaziz Port at Dammam • King Fahad Port at Jubail • Jubail Commercial Port • Ras al-Khair

  30. Airports • Strong growth in GCC airlines • Domestic demand and international success • Large expansion of airports planed • UAE home to the largest airlines and Dubai airport is the largest in the region.

  31. Mecca Construction • 100b SAR on housing and infrastructure.

  32. Section 7Education and Labour Market • Please see section 0 for the purpose, outline and disclaimer for this presentation. 32 32

  33. Education • Spends 40b USD or 30 % of the budget on education. • Traditionally education has not been very good. • Focus on religion • Wrong skill set for a modern economy • Moving in the correct direction • Many new universities -> now 24 in total • The state pays for higher education • Including foreign studies • Still problems • Around 70 % still study humanities • Religion still makes up a large part of education and is mandatory for all university degrees.

  34. Labour system in KSA and GCC • Expats – 90 % of private sector • Unemployment 11 % in KSA, official • 25 % ?? • Saudification? • Nitaqat – most ambitious yet • Three colour categories • Different percentages for different sectors. • All GCC countries have similar programs.

  35. Section 8Banking/Finance and Healthcare • Please see section 0 for the purpose, outline and disclaimer for this presentation. 35 35 35

  36. Banking and finance • Relatively well developed banking and finance system • Banking in the GCC • Profitability • Strong underlying economic growth. • Finance – only for the big

  37. Largest Banks in the GCC

  38. Islamic finance • ‘Riba’ is forbidden -> Usury -> interest • Islamic bank loans • Profit and loss sharing • Joint venture (Musharakah) • Profit sharing (Mudharabah) • Safekeeping (wadiah) • Cost plus (Murabahah) • Leasing (ljar) • Islamic bonds (Sukuks) • Total Aramco JV – $1b – oversubscribed 3,5 • Strong growth, but also controversial • Iran, Saudi Arabia, Malaysia • London, HK, KL

  39. Health Sector in KSA • A mix of private and government • MOH oversees all (NHS) • 1950 health station, 220 Hospitals • Set for strong growth • 15 new hospitals and 750 health station next 5 years • The public health budget leapfrogged by 12 % in 2011. • Why • Growing population • Lifestyle diseases is big problem • Diabetes

  40. Section 9 • Summary and Challenges Going Forward for KSA and the other GCC Countries • Please see section 0 for the purpose, outline and disclaimer for this presentation. 40 40 40 40 40

  41. Large oil and gas exports • Current high -> budget surpluses • Diversification • Petrochemicals largest • Mining and tourism financial services maybe • Public expenditure • 13 % growth per year 2003-2010 in KSA • Arab spring • Population growth and energy challenge • They have a window of opportunity • Massive investments in infrastructure and industry. • 10-20 years depending on oil price

  42. Thank you!

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