India Saudi Energy Ties Grow Amid Oil Pivot
Sunny prospects
Although Saudi Arabia is the world’s largest exporter of crude oil, the Kingdom has been actively working to reduce its reliance on oil revenues and transition toward a more diversified and sustainable economy.
As part of its Vision 2030 strategic framework, Saudi Arabia aims to increase the contribution of non-oil exports to GDP from 16% to 50% over the next decade. Domestically, the Saudis have also been looking to adjust their own power generation to renewable sources, with the government aiming to achieve net zero emissions by 2060.
To support this transition, Crown Prince Mohammed Bin Salman instituted cuts into energy subsidies, driving diesel prices up by 44 percent last year. These changes are now pushing Saudi Arabian businesses towards investing in solar power options to save costs in the long run.
These efforts have been accelerated by a perfect storm of additional factors: the proliferation of cheap Chinese-made photovoltaic modules, a push from multinational groups owning businesses in Saudi Arabia but still seeking to meet their sustainability goals, and a wave of greenfield foreign direct investment into Saudi Arabia from China worth $21.6 billion, of which a third is dedicated to clean technologies such as batteries, solar, and wind.
However, according to the Financial Times, Saudi companies building solar power systems have noted that the demand for solar power is much higher among commercial clients than industrial ones, who are less affected by Riyadh’s economic reforms.
Modi Meets Salman
While Saudi Arabia is diversifying its economy, it is not abandoning its massive fossil fuel industry. Mohammed Bin Salman is currently meeting with Indian Prime Minister Modi who is in Saudi Arabia for a two-day visit, seeking to expand economic and energy ties.
New Delhi and Riyadh have significantly increased their relationship over the last decade; with both countries steadily increasing their strategic relevance in a fragmenting global order.
The two nations are now reportedly exploring joint ventures in refineries and the petrochemical industry- and are looking at the feasibility of increasing electricity grid interconnectivity.
New Delhi still imports the majority of its crude from Russia, but the stability of this relationship has been under pressure with the United States imposing sanctions on 143 Russian oil tankers earlier this year.
You can learn more about Saudi Arabia’s energy diversification plans and India’s strategy amidst the current geopolitical volatility here: