When Saudi 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.
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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 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.
The results 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 dependence 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.
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