Saudi Arabia's cabinet approved a new economic plan Monday to diversify state revenue in the world's largest crude oil exporter away from oil by 2030.
It also set oil and gas production-capacity targets for the period.
The National Transformation Program elaborates on the Vision 2030 document released in April as the brainchild of Deputy Crown Prince Mohammed bin Salman, the son of the Saudi monarch, Salman bin Abdul Aziz.
The deputy crown prince has chaired the Council for Economic and Development Affairs since his father's accession to the throne.While the 2030 vision document used a relatively broad brush, the NTP provides more detail, outlining Saudi Arabia's economic diversification agenda, which includes increasing non-oil revenue, reducing the public sector wage bill, slashing subsidies, the establishment of a new sovereign wealth fund, and new taxes.
At the heart of the NTP is an initial public offering of Aramco shares, planned for 2018. Details are still being worked out, but in an interview last week, the new minister of energy, industry and mineral resources, Khalid al-Falih, was confident the move would "unleash" the company's full capabilities.
"The company will be able to go global in multiple ways. Today we have a lot of investments in downstream. As we prepare the IPO we see a lot of interest in us going into the international upstream and international gas," he said.
OIL AND GAS TARGETS
The kingdom plans to continue its policy of maintaining crude oil production capacity at 12.5 million b/d until 2020.
It pumped 10.18 million b/d in April, according to the latest Platts OPEC production survey, which would mean the kingdom has maintained about 2.3 million b/d of spare capacity.
Upstream projects such as the expansion of the Shaybah oil and gas field, which is due online within weeks, and Khurais by 2018 will help keep this spare capacity alive.
At the same time, the kingdom plans to increase gas production by nearly 50% to 17.8 Bcf/d, from around 12 Bcf/d currently.
The kingdom also hopes to boost its renewable energy sector, which will meet 4% of domestic power demand by the end of the decade.
There are currently no large-scale renewable projects in the country, which relies on burning gas and up to 900,000 b/d of crude oil and fuel oil for power and water desalination.
Gas currently accounts for 50% of the kingdom's energy mix, but it now plans to lift this to 70%, Falih said at a news conference in Jeddah to launch the NTP Tuesday.
This could come from local sources or, for the first time, from imports, he said, something Saudi Arabia has been considering since at least 2013.
The high demand growth for gas has been driven, in large part, by the kingdom's long-term fixed price, with gas for industrial and power use sold until late last year at $0.75/ MMBtu.
The pricing mechanism was finally changed in December in the 2016 budget, as part of a broader program to cut subsidies and reduce the budget deficit. Gas prices were increased to $1.25/MMBtu.
State-owned Saudi Aramco discovered two non-associated gas fields last year -- Edmee in the eastern province and Murooj in the kingdom's Rub al-Khali (Empty Quarter). It is targeting its first gas production from the Red Sea by the end of 2017, with 75 MMcf/d from the Midian field.
In May, Aramco's latest annual report put Saudi Arabia's oil reserves at 261.1 billion barrels in 2015, flat from the previous year. It said gas reserves rose last year to 297.6 trillion cubic feet from 294 trillion cubic feet in 2014.
Making further gas discoveries has proved challenging, however, Falih said.
"We have not found deepwater gas, but we may go back once we do more studies," he said.
