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With its investment prospects rocked by the killing of dissident journalist Jamal Khashoggi. Saudi Arabia turned this week to its most trusted business ally – the oil industry.
Saudi officials said agreements totalling over US$55bil were struck in the energy. transportation and petrochemicals sectors during a three-day conference in Riyadh that ended Thursday. The mostly non-binding pacts were striking for their focus on oil at a conference that is Crown Prince Mohammed Salman’s main showcase for his efforts to diversify the kingdom’s oil-dependent economy into technology. entertainment and arms production.
Most Western executives in those sectors cancelled their appearances this year at the conference. known as the Future Investment Initiative. in the wake of the killing of Khashoggi on Oct 2 inside the Saudi consulate in Istanbul. Saudi prosecutors said on Thursday the killing appeared to be premeditated. contradicting a prior statement that said he died after a brawl. Saudi Arabia initially said Khashoggi had left the consulate.
The uproar didn’t faze oil-industry executives. The chief executives of Total SA. Baker Hughes. Schlumberger Ltd and Trafigura Group Pte Ltd all attended. Total CEO Patrick Pouyanne was given a prominent speaking role at a panel with the Saudi oil minister. Khalid al-Falih. and offered a robust defense of engaging with the Saudis.
“We see what partnership means when you have difficult times.“ Pouyanne told the audience.
Pouyanne’s company has a lot at stake in Saudi Arabia’s oil industry. among the world’s largest. This year. Total and Saudi Arabian Oil Co. known as Aramco. signed a US$5bil deal to build a large petrochemicals complex in the kingdom. The company also agreed this week to a role in Saudi Arabia’s fuel-station market.
Khalid told a Saudi television station that the kingdom planned to buy 30% of a Russian liquefied-natural gas project in the Arctic. a deal that. if completed. would allow the kingdom to burn that fuel to produce electricity and export some of the crude oil it has been using.
Earlier this week. Aramco said it had signed 15 agreements potentially worth US$34bil if they are all seen through. including with Total. Halliburton. Schlumberger and Baker Hughes.
“The United States will remain a key part of the Saudi economy because the interests that tie us are bigger than what is being weakened by the failed boycotting campaign of the conference.“ Khalid said. He added that companies that skipped the conference had called him to apologise.
The emphasis on energy this week was a departure for the conference. Last year. Prince Mohammed unveiled plans to build a US$500bil city populated by robots called Neom and spun a vision of Saudi Arabia as a technology and investment hub in the Middle East.
Those plans are part of a larger initiative known as Vision 2030. which aims to ease the kingdom’s dependence on oil revenue and which economists say is now endangered because of a series of disruptive Saudi moves that have spooked investors.
Those moves include not only Khashoggi’s killing but also Saudi Arabia’s severing of ties with Qatar and Canada and a crackdown on alleged corruption that included the detentions of hundreds of business people.
Instead of showcasing Saudi Arabia’s future. this year’s conference demonstrated how tied it remained to the oil industry. said Robin Mills. chief executive of Dubai-based Qamar Energy and former Middle East executive for Royal Dutch Shell PLC.
Oil companies are “not put off by negative PR because they are not consumer facing companies.“ Mills said.
Vision 2030 now looks far harder to pull off as Western firms shun the kingdom and governments seek punitive penalties. Khashoggi’s death is likely to force the kingdom to pay higher borrowing costs. stunt foreign investment in sectors outside the oil industry. and further complicate the path to a long-delayed public listing for Aramco. said economists and analysts.
“It does quite serious harm to Vision 2030 plans.“ Jason Tuvey. an economist at London-based Capital Economics said of Khashoggi’s death. “Especially given how much emphasis MBS has put on attracting foreign investment as a driver of diversification.“ he added. using a nickname for crown prince.
