OLD habits die hard : Saudi Arabia struggles to end oil addiction:

WHEN Aramco was on the verge of a deal last year to buy a stake in an Indian oil refinery, its boss quickly boarded a company jet in Paris and flew to New Delhi.

Chief Executive Amin Naseer arrived unannounced early on April 11, 2018, finalised the agreement and signed it later that day. Negotiators had just finished hammering out the details.

His last-minute flight, after a business trip to France with Crown Prince Mohammed bin Salman, underlined the importance of the deal both to Saudi Arabia and its huge state oil firm.

The planned investment in the $44 billion [Pound 35 billion] refinery and petrochemical project on India's west coast is a prime example of how Aramco is trying to squeeze value out of each barrel of oil it produces by snapping up refining capacity, mainly in fast growing Asia.

But it also underlies the challenge Saudi Arabia faces in reducing its heavy economic reliance on oil. The result of its programme to diversify have been mixed, some projects are moving slowly and others are too ambitious, economic and energy analysts say.

Prince Mohammed's stated goal of being able to ''live without oil'' by as early as 2020 looks set to be missed.

''Saudi Arabia's oil addiction is as strong as ever......economically, of course, the Saudi economy runs on oil. OIL still dominates GDP, exports and government revenues,'' said Jim Krane, energy fellow at Rice University's Baker Institute.

''That said, Saudi Arabia is changing its relationship with oil. The dependency remains. But the kingdom is squeezing more value out of its oil,'' he said.

The slow progress means the Saudi economy is likely to remain hostage to oil prices for longer than planned. Any delay in implementing change also risks denting Prince Mohammed's image as a reformer.

Announcing his plans three years ago, the Crown Prince said Saudi Arabia must ends its ''oil addiction'' to ensure the world's biggest oil exporter and second largest producer cannot be ''at the mercy of commodity price volatility or external markets.''

He spoke after a fall in crude oil prices boosted Saudi fiscal deficit to about 15% of gross domestic product in 2015, slowing government spending and economic growth. [Agencies]


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