In its informative August 14, 2024 Briefing Insight entitled “Only a quarter of Saudi Arabia’s $1 trillion capex plan will go into oil” Goldman Sachs’ analyst team examines the Kingdom’s projected capital expense spending to 2030.
Labeling the current period a “capex super-cycle,” Goldman Sachs Research concludes that Saudi Arabia will invest $1 trillion across six strategic sectors by 2030 with the oil industry likely to receive a smaller portion of this than initially forecast.
Faisal AlAzmeh, head of CEEMEA equity research which covers natural resources, chemicals, and infrastructure in the Middle East, comments on a number of key conclusions from his team’s report which include:
▪ Roughly 73% of the investment funds will go to non-oil sectors compared to an earlier forecast of 66%.
▪ Clean energy is expected to get $235 billion in funding, up from a previous forecast of $148 billion, with the increase driven mainly by renewables as Saudi Arabia more than doubles its 2030 capacity target.
▪ Capex in the oil sector is likely to shrink by $40 billion between 2024 and 2028.
▪ Renewable energy progress has picked up with around 11 GW of solar photovoltaic capacity in the execution pipeline, in addition to 16.7GW in solar / wind capacity in planning stages as of June 2024. The Saudi government has raised its solar energy target for 2030 from 58.7 GW to 100-130 GW.
▪ Saudi Arabia is focusing on other non-oil sectors such as mining with more than 30 mining exploration licenses awarded this year and the establishment of a $182 mineral exploration incentive program.
▪ Saudi Arabia also is seeking to become a leading logistics hub and international travel destination with the government expected to invest around $100 billion in aviation, and another $100 billion or so in electric vehicles, logistics, and other sub-sectors.
According to the Briefing Insight, “Goldman Sachs Research estimates that the country’s budget deficit will widen to 4.3% of GDP this year, up from 2% last year. Around 2.6 percentage points of the deficit is the result of increased spending, with the rest driven by lower oil revenues. It’s uncertain how a higher deficit will affect the pace of planned investments. “But we think the Capex Super-Cycle will likely remain an important theme in Saudi Arabia for the foreseeable future,” our analysts write.”
To read the full Briefing, click here.
