Saudi Arabia sees oil revenues soaring by 80 percent over the next six years, according to unnamed sources that spoke to Bloomberg. The information is not public yet but plans are for the Kingdom to increase its output to a level that, combined with an assumption of higher oil prices, will allow Riyadh to book its first budget surplus since 2013.
The plan, devised to get Saudi Arabia out of the budget deficit that the 2014 crisis plunged it into, envisages an increase of oil sales revenues to US$214 billion (801.4 billion riyals) in 2023, from US$117.32 billion (440 billion riyal) in 2017, provided crude oil rises to US$75 a barrel.
This plan sees non-oil revenues rising by a lot less: 32 percent, to US$90 billion (337 billion riyals). The news comes amid much-publicized plans by Riyadh to wean itself off crude and stimulate greater economic growth through diversification into non-oil industries, such as tourism.
Last week, King Salman announced Saudi Arabia’s budget for 2018, which would be the highest on record, with spending set at US$261 billion. Riyadh also eyes cutting the share of oil revenues in the total to less than 50 percent. That would be a huge reduction given that oil accounted for more than 90 percent of revenues just three years ago. To date, oil revenues are about two-thirds of the total.Related: Goldman: Oil Markets To Balance Sooner Than Expected
In order to be able to take full advantage of higher prices—if they materialize—Saudi Arabia plans to up crude oil production to 11.3 million bpd six years from now. This year, the daily average will stand at 10 million barrels, with the country bound by its participation in the OPEC-wide production cut and regularly going above and beyond its pledge to compensate for laggards such as Iraq.
This plan suggests that despite some suggestions to the contrary, OPEC’s number-one producer has no intention of making the production cut permanent, which greatly increases the significance of the exit strategy that OPEC officials are already working on. The exit would have to be very gradual indeed, and will have to be combined with lower production elsewhere if prices of US$75 a barrel are to become a reality as per the Saudi six-year plan.
By Irina Slav for Oilprice.com