MOSCOW (MRC) -- Saudi Arabia, the world's largest crude exporter, has taken steps to revive economic growth hurt by the COVID-19 pandemic and oil price crash, including making an unprecedented transfer of government funds to the sovereign wealth fund, reported S&P Global.
The country's economy has been severely hit this year. Saudi Arabia's budget for 2020, announced in December, assumed an oil price of USD60/b, and the country's fiscal breakeven price is USD80/b, according to the International Monetary Fund. That compares with a front-month Brent crude price of USD37.84 at the end of May.
The government made two exceptional payments to the country's Public Investment Fund, its sovereign wealth fund, totaling USD40 billion in March and April. They were made due to a noticeable decline in foreign exchange reserves, according to a statement by Minister of Finance Mohammad bin Abdullah al-Jadaan.
Although it was not disclosed how the PIF would deploy the capital, the returns of investments would be made available to support public finances when needed, Jadaan said.
The PIF, which is chaired by Saudi crown prince and de facto leader Mohammed bin Salman, has already deployed at least USD8 billion on investments this year, according to filings with the US Securities and Exchange Commission. They include stakes in Facebook, Boeing and oil and gas majors Shell, BP and Total.
The transfer of public funds to the PIF comes as Saudi Arabia is implementing certain austerity measures, including tripling the value added tax to 15% and scrapping a cost of living allowance for public sector workers.
Additionally, the kingdom has embarked on gradually reopening its economy, including lifting a night-time curfew and allowing gatherings of 50 people that were imposed to keep the virus from spreading.
The Saudi government still has measures in place to contain infections, according to a series of statements on the state-backed news service SPA. They include enforcing Riyals 1000 fines to people not wearing masks in public, temperature checks before entering shopping malls and the disinfection of carts and shopping baskets after each use.
The Saudi government last week announced that it intends to resume operations of all domestic flights and airports over a two-week period, beginning May 31. Preparations have been completed at King Abdulaziz International Airport in Riyadh. They include checking on airport visitors with thermal cameras, installing sterilizing devices for stairs, electric walkways with ultraviolet technology and floor stickers and waiting seats to urge social distancing while at the airport. Additionally, aircraft will be sterilized after each flight.
As of May 31, Saudi Arabia reported 83,384 confirmed cases of COVID-19, including 1,618 in the last 24 hours, and 480 deaths.
As MRC wrote earlier, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.
Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
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