INSIGHT: Asia seals major oil, petchem deals during Saudi king’s state visits

Asia has sealed major oil & gas and petrochemical investment deals with Saudi Arabia during the rare state visit of Saudi King Salman bin Abdul Aziz Al-Saud, and these should translate to mutual benefits between the energy-hungry region and the deficit-laden world’s biggest crude exporter.

Saudi Arabia has an urgent need to diversify its economy following the sharp deterioration of its oil revenue from mid-2014 caused by the crude price slump, and Asia presents just the right opportunity for downstream investments.

King Salman – with a delegation of 1,500 according to media reports – paid visits to China and Japan, the world’s second and third biggest economies, respectively, as well as Indonesia and Malaysia, the two biggest economies in southeast Asia.

The rare visit to Asia by the reigning Saudi monarch – which kicked off in Malaysia on 26 February and ended in China on 18 March – according to media reports, was meant to strengthen ties with the countries, which are among the major importers of Saudi Arabian crude.

Salman ascended to the Saudi throne more than two years ago after the death of his predecessor Abdullah bin Abdul Aziz al-Saud on 23 January 2015. It was the year when Saudi Arabia’s budget deficit surged to a record Saudi riyal (SR) 366bn ($97.6bn).

Saudi Arabia is heavily reliant on oil revenues, which have declined steadily over the past five years, with a marked 64% fall recorded from 2014 to a projected SR329bn at the end of 2016, according to the Saudi Arabia 2017 budget document released by its Department of Finance.

Oil’s share of Saudi Arabia’s government revenues had shrunk to 62.3% in end-2016, down from 87.9% in 2014. The country has had to borrow money to fund its expenses, causing it to incur hefty budget deficits.