Recently, the People's Bank of China and the Central Bank of Saudi Arabia signed a bilateral local currency swap agreement. The People's Bank of China pointed out that the establishment of a bilateral local currency swap arrangement between China and Saudi Arabia will help strengthen financial cooperation between the two countries, expand the use of local currencies between China and Saudi Arabia, and promote trade and investment facilitation between the two sides.

Trade between China and Saudi Arabia has always been close. However, in the context of the global response to the climate crisis, Saudi Arabia, a traditional fossil fuel power, is facing greater pressure and challenges in energy transformation. On the one hand, Saudi Arabia is one of the world's largest oil reserves and producers, and the oil and gas industry is its economic lifeline. On the other hand, in order to fulfill its climate commitments, Saudi Arabia must vigorously develop the green energy industry and seek economic development in addition to traditional fossil energy.

Today, the establishment of a bilateral local currency swap arrangement between China and Saudi Arabia not only affirms the history of trade cooperation between the two countries in the field of traditional fossil energy, but also demonstrates that the two sides will have more room for independent cooperation in other energy fields such as renewable energy in the future. The energy transformation provides new development possibilities.

2030 vision outlines a new situation

In order to promote energy transformation, in 2016, Saudi Arabia issued the first programmatic document "2030 Vision" for energy transformation ".

Zhu Hong, a senior analyst at the Climate Change and Energy Transition Project of the Energy Research Institute of Peking University, introduced to a reporter from China Energy News that the "2030 Vision" aims to promote the sustainable and diversified development of the Saudi economy and reduce dependence on the oil and gas industry. For the field of non-traditional fossil energy, "2030 vision" promises to establish a renewable energy market, and clearly puts forward the initial goal of "9.5 GW of installed capacity of renewable energy power generation by 2023.

Zhu Hong believes that Saudi Arabia has a profound historical background and opportunity to start systemic reform. "On the one hand, it is out of its own demands for sustainable economic and social development at the long-term strategic level; on the other hand, it is out of the external drive brought about by the sharp fluctuations in oil prices in the short-term international market and the process of global fossil energy removal in the medium and long term."

For a long time, oil has been dominant in Saudi Arabia's energy structure, and oil exports have even become the backbone of Saudi Arabia's economy. But as more and more countries have proposed carbon-neutral goals, the Saudi government has gradually realized the unsustainability of over-reliance on oil.

Zhu Hong pointed out: "At present, the risks of single economic structure are prominent. At the same time, the scale of renewable energy is replaced, and oil prices are facing long-term downward pressure. Since the sharp fluctuation of international oil prices in 2014, Saudi Arabia's finance has been seriously impacted, and it is more urgent to increase economic diversification and energy structure diversification."

Under the guidance of the "2030 Vision", the Saudi government has successively issued a series of documents such as the King Salman Renewable Energy Act, the National Renewable Energy Plan, and the National Environmental Protection Strategy, hoping to promote the development of the Saudi renewable energy market and increase Renewable energy market share, promote the balanced development of the energy structure, and fulfill the obligation of action to address climate change.

At the same time, the Saudi government has also raised its initial target, planning to reach 58.7 gigawatts of renewable energy installed capacity by 2030, including 40 gigawatts of photovoltaic power installed capacity, 2.7 gigawatts of solar thermal power generation and 16 gigawatts of wind power.

Scenery nuclear or into the transformation of relying on

Saudi Arabia is famous for its rich traditional fossil energy resources, but in fact oil and gas are not the only energy resources Saudi Arabia has. Saudi Rizhao, wind and other renewable energy resources endowment is also unique. Take solar energy as an example. Saudi Arabia is dry and rainless. More than half of the land area is desert, with an average light time of 8.9 hours/day and an average sunshine amount of 2200 kW hours/square meter. According to data from Shell's Global Energy Resources Database, Saudi Arabia ranks 6th in the global list of solar potential development.

Zhu Hong said that the utilization potential of solar energy resources in Saudi Arabia is higher than the average level of high potential regions in the global development of solar energy industry. It has the resource base for the development of solar energy industry. In addition, the construction cost of solar power generation projects is low, and sufficient lighting conditions improve the utilization efficiency of power generation equipment. Therefore, Saudi Arabia has inherent advantages in developing solar power generation.

▲ Damad Jadar wind power project with an installed capacity of 400 MW.

At the same time, Saudi Arabia also has sufficient wind energy resources. According to the research institute King Abdullah Nuclear and Renewable Energy City of Saudi Arabia, the annual average wind speed in the area of wind energy concentration in Saudi Arabia is 6 m/s to 8 m/s, ranking 13th in the global list of developing onshore wind energy potential.

In addition, Saudi Arabia is also considering nuclear energy as part of its energy structure diversification plan, hoping to develop a nuclear power industry. According to the British "Guardian" report, the current known investigation results show that three major deposits have been proven in central and northwestern Saudi Arabia, and the uranium reserves may exceed 90000 tons, which can fully meet its needs for the development of nuclear power.

However, Saudi Arabia's abundant non-fossil energy has not been well developed. According to bp statistics, in 2021, Saudi Arabia's renewable energy generation accounted for only 0.23 percent, lagging behind the set target. To this end, the Saudi government has vigorously promoted the development of the new energy industry and planned 10 renewable energy projects in the 2023 budget.

"Renewable energy is one of the priority areas we choose to invest in," said Mohammed Albalehd, head of energy and utilities at the Saudi Public Investment Fund (PIF). "We hope to unleash momentum in promising industries and encourage the private sector to do more to help achieve the goal of economic diversification."

PIF is the world's largest sovereign fund. In May of this year, PIF signed an agreement with a utility developer with a total amount of US $3.3 billion. The two parties will cooperate to develop and operate three photovoltaic power generation projects in Saudi Arabia, which are expected to meet the daily electricity consumption of about 750000 households after they are put into production.

Attaching Importance to Cooperation Opportunities with China

Under the goal of getting rid of oil and gas dependence, Saudi Arabia hopes to accelerate the energy transition process and seek international cooperation.

In December 2022, Saudi Arabia and China issued a joint statement. In terms of energy, the two sides agreed to jointly explore investment opportunities in the petrochemical field, develop promising projects in the field of petroleum-to-petrochemical technology, strengthen cooperation in the fields and projects of renewable energy sources such as electricity, photovoltaic, wind energy and related projects, innovative utilization of hydrocarbons, energy efficiency, localization of energy products and related industrial chains, and strengthen cooperation in the field of peaceful use of nuclear energy, as well as cooperation in the development of modern technologies such as artificial intelligence and energy industry innovation.

Zhu Hong pointed out that the cooperation between China and Saudi Arabia in the field of oil and gas energy continues to deepen, and there are more points of convergence in renewable energy and industry. "On the one hand, Saudi Arabia is rich in oil resources and China has a broad market. Saudi Arabia is currently China's stable oil supplier and oil and gas investment partner in the Middle East. On the other hand, China is a big developing country in the global energy industry, with leading technology and equipment, and rich experience. With the further docking of Saudi Arabia's Vision 2030 and China's Belt and Road Initiative, Chinese renewable energy companies have a great opportunity to participate in the Saudi market and promote their energy transformation."

This is indeed the case. In June this year, at the 10th Entrepreneur Conference of the China-Arab Cooperation Forum, the Saudi Ministry of Investment and Chinese Express, a Chinese travel technology company, signed an agreement worth 5.6 billion US dollars. The two sides will establish a joint venture engaged in automobile research and development, manufacturing and sales.

Recently, the reporter also visited the Saudi Red Sea public infrastructure project and the "Future New City" exhibition center that Chinese companies participated in the construction. Both projects are key development areas along the Red Sea coast under Saudi Vision 2030.

At the site of the Red Sea public infrastructure project, in two photovoltaic power stations with a circumference of 2 kilometers each, solar photovoltaic panels are neatly arranged and endless, and energy storage equipment is also stepping up installation and commissioning. According to the on-site staff, the main equipment of the photovoltaic power station is purchased from China. After completion, it will work with other photovoltaic power stations to provide green energy supply for the Red Sea project and help achieve the goal of "green Saudi Arabia.

At the "Future New Town" exhibition center, the commentator told reporters that 100 percent of the project's power supply will be green energy, achieving zero carbon emissions.

The industry generally believes that seeking energy cooperation with China is an important way for Saudi Arabia to rely on traditional energy advantages to accelerate new energy development and economic diversification, and will build a solid energy foundation for Saudi Arabia's long-term sustainable development. It is expected that in the future, the energy cooperation between China and Saudi Arabia will cover infrastructure, raw material procurement, technical solutions, and even overall project planning. The two sides complement and promote each other in the fields of capital, market, technology, and equipment, and will continue to promote the energy cooperation between the two sides. Step up.