Friday January 25, 2008

The construction site called Saudi Arabia

goupstate.com :

Amid a forest of cranes, towers and beams rising from the desert, more than 38,000 workers from China, India, Turkey and beyond have been toiling for two years in unforgiving conditions - often in temperatures exceeding 100 degrees - to complete one of the world's largest petrochemical plants in record time. The project is Saudi Arabia's boldest bet yet that this oil-rich kingdom can transform itself into an industrial powerhouse. The plant is part of a $500 billion investment program to build new cities, create millions of jobs and diversify the economy away from petroleum exports over the next two decades.

The kingdom's lofty economic goals would have been unthinkable without the surge in energy prices that has filled the coffers of oil producers. Oil prices have quadrupled since 2002 and reached $100 a barrel in New York this month. Persian Gulf countries earned $1.5 trillion in oil revenue from 2002 to 2006, twice as much as in the previous five-year period, according to the Institute of International Finance. Despite all the recent headlines about Middle East investors bailing out troubled American banks like Citigroup, a growing share of today's petrodollars are staying at home to finance megaprojects like Petro Rabigh, analysts say. That money is financing the biggest economic boom in a generation, helping to build not only the high-rises of Dubai, where the world's tallest tower is going up, but also telecommunications networks, roads and universities throughout the Middle East.

One of the most noticeable illustrations of the industrialization push is a plan championed by King Abdullah, the 83-year-old Saudi monarch, to build six new cities throughout the country - including the King Abdullah Economic City on the western coast, near the city of Rabigh; the Knowledge Economic City, near Medina; and the Prince Abdulaziz bin Mousaed Economic City, in the north. The intent is to create industrial centers that double as housing and commercial hubs for the country's young and growing population. The Saudi Arabian General Investment Authority, a government agency, expects these cities to add $150 billion to the country's GDP by 2020, create one million new jobs and be home to as many as five million people. According to SABB, these cities together will have four times the geographical area of Hong Kong, three times the population of Dubai, and an economic output equal to Singapore's. Other plans include building four refineries, two petrochemical plants and a modern graduate-level university with an endowment of $10 billion.

- Not only will all these efforts "diversify the economy away from petroleum exports", they will also divert petroleum supplies from export to domestic consumption. This is a major point often overlooked by analysts - that of rapidly increasing domestic consumption in the Middle East countries. There will be a definite impact on crude oil exports, and hence crude oil prices, if the Arabs actually build to completion and start to operate so many refineries, petrochemical plants and entire industrial cities.

To their credit, the Arabs are going nuclear, which will reduce some of the impact in terms of fossil energy use. But nuclear power plants will take time to ramp up and they will not likely replace fossil usage in the short period of time that these industrial cities are expected to be completed. And, of course, the feedstock for the petrochemical plants and refineries will remain crude oil and natural gas.

So, the next time someone tells you about possible reduced demand for oil due to the US economy slowing down, point them to this story.

See also :

1. Arab oil money
2. Gulf Arab states want nuclear power
3. Arabs urged to develop nuclear energy

(2008-01-25 00:53:06 SGT) [Energy] Permalink Comments [1]

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