Allianz: Saudi oil reserves are sufficient for 70 years

Allianz Trading confirmed that Saudi Arabia has the second largest proven oil reserves in the world (> 15% of global resources) and has relatively low extraction costs, and at current production rates, its oil will last for more than 70 years – the longest reserve / production ratio among major The three producers (the United States, Russia and the Kingdom of Saudi Arabia), indicating that oil production represents 30% of the gross domestic product and 70% of exports.

On the strengths of the Kingdom of Saudi Arabia, “Allianz” indicated that the Kingdom is a long-term oil producer with a reserve capacity to increase production when needed, great negotiating power and large financial reserves, and it is almost unaffected by the international crises in recent years with no serious consequences. It controls inflation and the exchange rate, and is viewed as a financial partner, lender, and last resort by a growing number of countries in the region with which it has managed to normalize relations.

The report indicated the need for environmental sustainability to become an engine for long-term growth and efficiency gains, adding that renewable energy generation is booming in the Kingdom, but the nominal capacity is still lower than the United Arab Emirates, as water stress is still high and estimates for rates of Waste recycling is still very low

According to the report, in the short term, oil prices continue to dominate the picture and enable side investment to achieve the long-term goals envisaged within the framework of the Vision 2030 plan, and that the decisions taken in early April 2023 by the Organization of the Petroleum Exporting Countries (OPEC) and (OPEC) +) It contributes to maintaining the price of crude oil above $80 per barrel, which is a comfortable level to meet in the financial and trade balance of most OPEC+ countries.

The price effect may largely offset the change in volume and Saudi Arabia is likely to run budget and current account surpluses this year, indicating that the double surpluses are usually accompanied by an accumulation of reserves and hard currency assets under the sovereign wealth fund in addition to mega projects such as NEOM. , an area that will contain many cities, resorts, and other developments such as The Line with an area of 170 square kilometers, which is expected to accommodate 9 million people, and skyscrapers, with a height of 500 meters and 200 meters.

According to the report, the fiscal balance returned to the positive side in 2022 and it is expected that there will be a surplus of 3% in 2022-2023, indicating that while the public debt is still relatively low compared to its peers (24.8% of GDP in 2022), its trajectory has caused some concerns after the sharp and prolonged drop in oil prices in 2014-2016. The debt/GDP ratio is likely to remain at around 25% in 2023, thanks to a recovery in oil revenues and despite an expected increase in interest rates.

The report indicated that the annual current account balance of the Kingdom of Saudi Arabia also turned into a large deficit in 2015-2016, after 15 years of very high surpluses, and recorded another deficit in 2020 due to the drop in oil prices associated with the epidemic. As expected, the current account surplus widened in 2022, reaching 16% of GDP, and is likely to remain in double digits in 2023.

Foreign exchange reserves held at the central bank declined over the years from a peak of $746 billion in August 2014 to $450 billion in mid-2020, and have been relatively stable around that level since then. Despite the decrease, it is still sufficient to cover the short-term maturities comfortably.

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