Gulf Industry Goes Digital

A new transformation is happening across the energy sector of the Gulf region, and it is powered by the internet. The focus on digital industrial applications, spearheaded by General Electric (GE), is seeing a greater emphasis on the region, drawing on the power of the Internet of Things.

It is, as the adage goes, the best of times and worst of times for the Middle East region. Almost 3 years after the rigorous fallout of the global financial crisis, the regional economies are bracing for another setback – and this time, it is internal.Saudi GE Technology and Innovation Center 2

The economic and financial volatility, triggered by OPEC’s decision not to cut production, has seen oil price plunge to lows of US $28 a barrel, the lowest since 2003. The decrease has been a whopping US $75 a barrel, which has adversely impacted the budgetary estimates of all leading economies.

In fact, Saudi Arabia, the bulwark economy of the region and also the decisive force in managing oil prices, has seen its budget deficit against GDP increasing to a whopping 15%. While the kingdom has not scaled back on development plans, it has cut fuel subsidy, a trend that permeates through the GCC nations.

Only the UAE has been an exception in that it has reduced fuel prices, passing on the international cost efficiencies to the customer, as it has deregulated retail petrol prices. The flexible pricing policy is linked to global prices.

Saudi Arabia is looking at an enhanced role for the private sector in areas including healthcare as well as fostering more public-private partnerships. In fact, there are discussions on potentially listing a few businesses of oil giant Saudi Aramco, though no details have been finalized. 

Energy deficit

The policy of the OPEC nations, led by Saudi Arabia and UAE, among others, to hold on to current production levels aims to stem the threat that has emerged from the US, which is fast reaching self-sufficiency in energy through its focus on shale-gas exploration and processing.

However, for the shale-gas industry to survive, it is important that oil prices remain at a decent threshold of at least US $60 to 70 a barrel. With the OPEC’s decision, this has been seriously impacted. Shale-gas producers in the US are finding it difficult to grapple with the new situation with the result that there are few new explorations.

Market analysts say that the strategy of OPEC will yield positive results in favour of them and oil prices will start recovering if not in 2016 but definitely by 2017. However, the challenge for the GCC nations vis-à-vis the energy scene is also internal.

(Read the article in February Issue of Safety Messenger Magazine 2016)

Author: SubEditor

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