Saudi Arabia’s energy strategy focuses on maximising economic returns from its existing hydrocarbons reserves, while simultaneously increasing domestic renewable energy capacity. This involves investing in research, development and innovation to create clean energy solutions and minimise the environmental impact of fossil fuels.
The Kingdom’s approach is influenced by projections of a future decline in demand for hydrocarbons, driven by global initiatives to combat climate change. In June 2024 the International Energy Agency (IEA) indicated that peak oil demand might be reached before 2030, attributing this to the transition towards greener fuels and a slowdown in global economic growth. The IEA also reported that international oil demand, including biofuels, averaged slightly more than 102m barrels per day (bpd) in 2023, with the expectation being that it will stabilise around 106m bpd by 2030.
Saudi Arabia’s government has been mindful of peak oil demand for some time and as a result has been at the forefront of transformative development in the energy sector, positioning itself as a global leader in both renewable and traditional energy markets. The Kingdom launched its National Renewable Energy Programme (NREP) and Circular Carbon Economy (CCE) National Programme in 2017 and 2021, respectively, both of which support Vision 2030. This strategy aims to reduce long-term dependence on hydrocarbons, and foster a more diverse and sustainable economy. Under these programmes, the Kingdom has been actively diversifying its energy portfolio to reduce its reliance on oil revenue and embrace sustainable energy solutions.
Structure & Oversight
Saudi Arabia’s energy industry is a multi-tiered ecosystem that is pivotal to the national economy and – because the Kingdom is the world’s second-largest holder of oil reserves – important for global energy markets. The Ministry of Energy oversees all aspects of the sector’s development, and formulates policies concerning oil, gas, renewables and other subsidiary industry segments. Prince Abdulaziz bin Salman Al Saud has served as the minister of energy since September 2019, and he is the first member of the royal family to serve in the position. Within the ministry, the Renewable Energy Project Development Office drives the NREP, with the overarching aim being to diversify the energy mix and promote sustainable practices.
Saudi Arabia is a key player in global oil markets via the Organisation of the Petroleum Exporting Countries (OPEC), a group the Kingdom was instrumental in founding in September 1960. It is also involved in a range of other international energy-related organisations, including the World Energy Council, the EU-GCC Clean Energy Network II and the Middle East Green Initiative (MGI), among others.
Key Players
Aramco, the government-owned oil company headquartered in Dhahran, is the cornerstone of the industry and is charged with managing the Kingdom’s vast oil and gas resources. Aramco’s operations span exploring, producing, refining, distributing and international marketing of petroleum products. In 2023 the company reported its second-highest ever net income of $121.3bn, down from its highest-ever net income of $161.1bn in 2022. In June 2024 Aramco listed 0.6% of its shares on the Saudi Stock Exchange (Tadawul), raising $12bn in a matter of hours in what was the first listing of shares since the company’s initial public offering of 1.5% in 2019. The remainder of the organisation’s shares are held jointly by the government and by the Public Investment Fund (PIF), the Kingdom’s sovereign wealth fund.
In January 2024 the government announced that Aramco would pause its ongoing oil expansion plan and lower its maximum sustained oil production target to 12m bpd, 1m bpd below the 13m bpd production target announced in 2020 (see analysis). The change was a result of the country’s ongoing energy transition, Prince Abdulaziz told international media in February 2024. Saudi Arabia’s broader diversification efforts have ramped up in recent years, requiring Aramco to invest in other non-oil segments of the energy market, including renewables. Aramco still holds the single largest spare oil capacity in the world, with an estimated 3m bpd as of February 2024.
Alongside Aramco, the Saudi Electricity Company (SEC) plays a crucial role in power generation and distribution, managing the national grid and ensuring that the Kingdom’s electricity demands are met. Moreover, various regulatory bodies, including the Saudi Electricity Regulatory Authority, ensure compliance with broader industry standards and promote efficient energy use. This multi-tiered structure facilitates coordination across the sector, supporting Saudi Arabia’s strategic goals of energy diversification, economic sustainability and leadership in global energy markets.
Several other public entities and publicly owned organisations play a major role in the Kingdom’s energy and utilities sectors. The PIF holds major stakes in ACWA Power, which is involved in energy diversification and water security projects in 12 countries, typically working alongside local governments. The PIF is also a major stakeholder in the National Water Company (NWC), which provides water and wastewater services across the Kingdom. In July 2024 the NWC announced that it had begun work on 25 water development projects in the Asir Province in the country’s south, with the aim of shoring up the water delivery system, protecting the environment and ensuring long-term water security. In conjunction with service providers such as the NWC, the Ministry of Environment, Water and Agriculture (MEWA) is responsible for sustainable environmental management, and ensuring water and food security in the Kingdom.
Various other public and publicly owned entities are responsible for regulating and developing the water and power sectors. The Saudi Power Procurement Company (SPPC) – which was a subsidiary of SEC until the government nationalised it in 2022 – is tasked with purchasing electrical power on wholesale markets and developing regional electricity markets. The Saudi Water Authority (SWA) is the Kingdom’s regulatory authority for water. This institution was previously known as the Saline Water Conversion Corporation until it was rebranded in March 2024. The SWA is tasked with managing the Kingdom’s desalination network, which provides some 60% of the country’s potable water.
Policy Frameworks
Saudi Arabia’s overarching development roadmap is Vision 2030, which aims to diversify the economy and reduce its dependence on oil revenue (see Economy chapter). Central to this framework is the Kingdom’s plan to shift towards a more sustainable energy mix, including significant investment in renewable energy – particularly solar and wind — as well as projects in green hydrogen and carbon capture. The government has set a target to generate 50% of the country’s energy from renewables by 2030, reducing carbon emissions and fostering economic growth through innovation, with the long-term aim of achieving net-zero greenhouse gas emissions by 2060.
Under the broad umbrella of Vision 2030, the government oversees various policy and regulatory initiatives focused on advancing its energy and utility aims. For instance, the CCE National Programme and corresponding international initiative is a key component of the Kingdom’s broader strategy to address climate change while maintaining economic growth. The CCE framework, which was endorsed by the G20 during Saudi Arabia’s presidency in 2020, is based on the 4R concept: reduce, reuse, recycle and remove carbon emissions. The initiative aims to transform carbon from a waste product into a valuable resource, integrating it back into the economy through the use of innovative technologies.
Carbon Capture
Key elements of the CCE include the advancement of carbon capture, utilisation and storage (CCUS) technologies, which allow for the safe removal and reuse of carbon emissions. The Kingdom aims to capture some 44m tonnes of carbon per year by 2035. Additionally, the development of green and blue hydrogen, which produce minimal or no carbon emissions, is central to the CCE strategy. Saudi Arabia has made significant investment in these technologies in recent years, positioning itself as a leader in the global transition to sustainable energy practices.
The CCE initiative has made several advancements since its inception, in conjunction with other energy-related developments. For instance, in January 2024 the Saudi Power Procurement Company (SPCC) put out bids for four new power plant projects, with a total collective capacity of 7200 MW. Bidders are expected to incorporate carbon capture technologies into their proposals to build the plants, which reflects the Kingdom’s CCE targets.
Another major component of the CCE programme is the CCE Index, which was launched in 2021 by the Riyadh-based King Abdullah Petroleum Studies and Research Center (KAPSARC), an advisory organisation specialising in energy economics, climate and sustainability. KAPSARC has updated the index in 2021 and 2023, ranking 64 countries both on their current performance in various CCE activities and on future readiness based on key enabling factors, and then scoring each country on a scale of 0-100. Saudi Arabia ranked 20th in 2023 with a score of 41.3, ahead of the MENA average score of 33.2 and the global average of 38.6. Of the other GCC countries, the UAE placed 16th with a score of 47.4, Qatar came in 21st with a score of 40.4, Bahrain ranked 37th with a score of 34.9, Oman placed 40th with a score of 34.4 and Kuwait ranked 49th with a score of 27.7.
Green Initiative
The CCE National Programme works in conjunction with the Saudi Green Initiative (SGI), which itself is the model for the Kingdom’s regional MGI, both of which launched in 2021. These programmes are designed to combat climate change and enhance environmental sustainability, specifically by reducing carbon emissions, increasing vegetation cover and combating desertification. In addition to the target to generate 50% of the country’s energy from renewable sources by 2030, other key targets of the SGI include planting 10bn trees over 74m ha of land and to formally protect 30% of the Kingdom’s terrestrial and marine environment.
Alongside the SGI, the MGI extends this vision to the broader Middle East, aiming to plant an additional 40bn trees across the region and to significantly reduce carbon emissions through collaborative efforts among neighbouring countries. These initiatives are designed to promote sustainable development, improve air quality and create a greener, more resilient environment.
Central to the country’s renewable energy target is the Saudi Energy Efficiency Programme (SEEP), under the Saudi Energy Efficiency Centre. Launched in 2012, SEEP is charged with reducing energy consumption across the Kingdom by implementing stringent regulations, public awareness campaigns and the adoption of advanced technologies. Industrial activity accounts for around 46% of total CO₂ emissions in Saudi Arabia, while electricity generation for the national grid is responsible for 28% and the transport industry for another 19%, according to a 2023 report by the US-based management consultancy organisation Arthur D Little. Under the Kingdom’s sustainable initiatives, the government aims to reduce industrial pollution by 65% by 2050.
Another key public entity involved in carrying out eco-friendly policies is Saudi Investment Recycling, which is owned by the PIF, and whose stated aim include removing and recycling upwards of 90% of solid waste from the Kingdom’s landfills by 2040. Lastly, the Ministry of Finance, in conjunction with the National Debt Management Centre, has drawn up and oversees the Green Finance Framework, a comprehensive roadmap to finance Saudi Arabia’s sustainable transition with a combination of public and private funding sources.
Performance & Energy Mix
In 2023 Saudi Arabia was the world’s third-largest producer of oil after the US and Russia, respectively. That year the Kingdom averaged around 9.6m bpd, down from 10.5m bpd in 2022, according to the Energy Institute’s “Statistical Review of World Energy 2024”. The 2023 figure was equal to 11.6% of total global oil production, representing roughly a third of OPEC’s total production of 29.9m bpd for the year.
Despite its January 2024 decision to reduce production capacity by 1m bpd, the Kingdom is expected to remain the world’s key swing producer of oil for the foreseeable future, increasing or decreasing production as needed to maintain price stability. Saudi Arabia is the world’s second-largest holder of proven oil reserves – with approximately 267bn barrels in 2023, representing around 21.5% of the world’s proven oil reserves. That year the Kingdom was also responsible for producing 123.5bn cu metres of natural gas, representing around 2.8% of the international total, with the world’s other largest producers being the US, Russia and Iran.
CO₂ emissions from Saudi Arabia’s energy sector stood at 620.4m tonnes in 2023, an increase of 1.8% from 609.4m tonnes in 2022, though down from a high of 634.5m tonnes in 2017. The Kingdom was the world’s eighth-largest CO₂ emitter in 2023 in terms of energy sector emissions, after China, the US, India, Russia, Japan, Indonesia and Iran. The Kingdom’s energy consumption has also been rising in recent years, reaching 11.6 exajoules (EJ) in 2023, up 2.7% from 11.3 EJ in 2022. The 2023 figure was equivalent to 1.9% of total global consumption, making Saudi Arabia the largest consumer of energy in the Middle East after Iran, and the 10th-largest globally. Nearly half of the Kingdom’s energy consumption is due to industrial activities, which the government is working to curtail in the coming years.
In 2023 Saudi Arabia generated 422.9 TWh of electricity, up 5.4% on 2022 and up more than 36% since 2013. Some 36% of the 2023 figure was generated by oil, while 62.7% came from natural gas. Notably, renewables accounted for 5.8 TWh of the Kingdom’s electricity generation in 2023, up 152.2% from the previous year’s contribution of 2.3 TWh. This jump suggests that the government’s energy transition programme is already yielding results, though there remains room for further improvement in the country’s efforts to boost energy contributions from renewable sources to 50% by 2030.
Hydrogen
Central to both Saudi Arabia’s renewables plan and the CCE National Programme is the Kingdom’s development of a hydrogen production initiative. In recent years, the government has worked to position itself as a global leader in the emerging hydrogen economy, in support of further diversifying the country’s energy mix and reducing carbon emissions. Saudi Arabia is focusing on both green and blue hydrogen production, leveraging its abundant natural resources and advanced infrastructure with the aim of eventually becoming a major hydrogen exporter as well.
The cornerstone of Saudi Arabia’s green hydrogen initiative is the $8.4bn green hydrogen plant at NEOM, the new city being built in the northwest of the country near the Gulf of Aqaba. Work on the green hydrogen plant, which is being developed by ACWA Power in conjunction with NEOM and Air Products Qudra, has seen significant development in recent years as the project moves closer to its operational phase, which is expected to commence before the close of 2026. The project’s first wind turbines, which were produced by Chinese multinational Envision Energy, were delivered in November 2023. Upon completion of the project there will be 250 total wind turbines at the wind farm. More recently, in July 2024 China’s JinkoSolar announced that it would partner with India’s Larsen & Toubro to supply 1 GW of solar modules for the initiative.
Fuelled by renewable power generation of up to 4 GW, the hydrogen plant is being designed to produce 600 tonnes of green hydrogen per day once the facility is fully operational. By 2030 the Kingdom aims to produce some 4m tonnes of green hydrogen per year, much of which is forecast to be used within Saudi Arabia to decarbonise various sectors, including transport and heavy industry.
Meanwhile, Aramco has taken the lead on developing Saudi Arabia’s large-scale blue hydrogen production capacity. Blue hydrogen is made from natural gas with carbon capture and storage technology to minimize emissions. In July 2024 Aramco acquired a 50% stake in the Blue Hydrogen Industrial Gases Company, a wholly owned subsidiary of Air Products Qudra. The deal is expected to shore up Aramco’s existing blue hydrogen production, which has been ongoing since 2020. Aramco plans to produce some 11m tonnes of blue ammonia by 2030, though the high cost of transporting it has presented a challenge for the company in terms of finding buyers.
Nuclear Project
Saudi Arabia is developing its nuclear power capacity under the auspices of the King Abdullah City for Atomic and Renewable Energy. In February 2022 the government announced the establishment of the Saudi Nuclear Energy Holding Company, which is charged with the development of nuclear power in the Kingdom. The organisation is currently working to develop Saudi Arabia’s first power plants, namely two 1.4 GW nuclear reactors, with the aim of boosting capacity to 17 GW by 2040.
Solar & Wind
Investment in solar and wind power projects has ramped up considerably in recent years, with notable initiatives such as the Sakaka Solar Power Plant, the Dumat Al Jandal wind farm, and the Jazlah water desalination project – which relies largely on solar power – setting benchmarks in renewable energy production and design.
In June 2024 the SPCC signed a power purchase agreement with a consortium consisting of ACWA Power; the Water and Electricity Holding Company, a wholly owned subsidiary of the PIF; and Saudi Aramco Power Company, a wholly owned subsidiary of Aramco. Under the arrangement, three new solar projects with a total capacity of 5.5 GW will be developed as part of the NREP. These developments include the Haden solar photovoltaic (PV) project, the Al Muwayh solar PV project – each with a capacity of 2 GW – and the Al Khushaybi solar PV project with a capacity of 1.5 GW.
Water
As one of the world’s most arid countries, water sustainability has long been a key concern for Saudi Arabia. To meet the demands of a rising population the government has invested significant resources into shoring up the Kingdom’s water system. The country’s primary water supply is a national network of 40 desalination plants – 33 of which are directly operated by the government, while the remainder are privately operated.
The desalination network produces some 11m cu metres of water per day, or just over 73% of the Kingdom’s total water production, with the public plants accounting for 7.5m cu metres daily and the private plants covering the remainder. The remaining 27% of the Kingdom’s water supply comes from surface groundwater, which is treated in a network of 139 purification plants. Additionally, Saudi Arabia maintains strategic stores of 25m cu metres of water.
In March 2023 MEWA announced that it had allocated $80bn to implement hundreds of new water projects in the coming years, with the aim of providing universal access to safe and affordable drinking water as part of the Kingdom’s National Water Strategy 2030. The plan supports non-drinking water use as well. In recent years agriculture has accounted for upwards of 80% of water demand.
In September 2023 Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud announced the creation of a Global Water Organisation to be headquartered in Riyadh. The entity will serve in an advisory capacity at a global scale and is expected to play a role in the government’s international development funding, which includes more than $6bn in water and sanitation projects across four continents.
Another key development is the Saudi Regional Cloud Seeding Programme that launched in 2022. This initiative, which aims to reduce desertification and increase moisture across the country, has been actively seeding the skies above the GCC since its inception. By the end of 2023 the programme had carried out a total of 451 flights across six regions of the country. These efforts resulted in 15 minutes of rain with a total estimated rainfall of 4bn cu metres.
Waste Management
Under the CCE framework, waste management has taken on increased significance as Saudi Arabia makes an effort to turn municipal and industrial waste into feedstock for other economic activities. The Kingdom generates around 130m tonnes of waste per year, less than 1% of which has historically been recycled. Much of the rest ends up in landfills, with high demand for landfill space, estimated at 28m cu metres per year, according to data from the German-Saudi Arabian Liaison Office for Economic Affairs.
To begin to address these issues, in 2019 the government launched the National Centre for Waste Management (MWAN), which serves as the country’s waste regulator and handles long-term planning for managing Saudi Arabia’s waste. MWAN has put in place ambitious goals – by 2040 Saudi Arabia plans to divert 90% of its waste streams away from landfills. The entity aims to recycle some 40% of waste, while targeting an additional 31% to be composted and 16% to be converted to energy, in line with CCE aims. To achieve these goals, MWAN aims to curtail waste generation per capita by approximately 3%.
Outlook
Though historically reliant on its vast oil and gas reserves, Saudi Arabia is now charting a bold path towards a more diversified and sustainable energy future. The government’s proactive approach to expanding renewable energy capacities, particularly in solar and wind power, demonstrates a commitment to reducing carbon emissions and embracing global energy transition trends.
Saudi Arabia’s leadership in OPEC and its significant oil reserves ensure its continued influence in global energy markets, even as its plans in the renewable industry and in sustainability position the Kingdom as a future leader in the new international energy economy. The development of the CCE and a focus on hydrogen, sustainable waste management and emerging technologies across numerous subsectors – with the cloud-seeding programme as an example – reflect this forward-looking strategy.
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