SWOT Analysis of Saudi Arabian Oil Industry

Introduction:
Saudi Arabia is the second largest oil producer in the world after United States of
America (USA) and stand at world number one in terms oil exporting countries.
But in recent years due to declining oil prices and slowness in world oil demand
has put pressure on Saudi Arabia’s economy. Saudi Arabia’s economy is heavily
depended upon export of oil product. Oil is the main source of revenue for Saudi
Arabian economy (Rapier, 2018). Taking the entire thing into consideration it will
be appropriate to conduct a SWOT analysis.
SWOT Analysis
SWOT analysis for the Saudi Arabian oil industry.
Strengths:
 Saudi Arabia has very large and abundant proven oil reserves base.
Besides, it is world second largest oil producer.
 Saudi Arabia has very strong and developed oil and gas infrastructure,
which is beneficial in extracting and producing oil in most sophisticated
manner.
 Saudi Arabia has very good and developed service sector, which help it in
marketing and distribution of oil products. Due to well established service
sector customer get good and quality service by the oil industry and help
in sustain it oil demand and supply ("Saudi Arabia / Economic Studies - Coface",
2019).
 It has very stable and sustainable operating structure and environment,
which help it in producing oil in consistence manner for it export as well as
domestic consumption (Khandelwal, 2019).
 Biggest economic superpower in Middle East countries, which help it in
gaining world’s attraction.
Weaknesses:
 Saudi Arabia’s oil industry is heavily dependent upon subsidy, which
hampers it growth in country and promote unnecessary usage of oil
product. Presence of subsidy for it consumer put lot of pressure to
exchequer and could destabilize economy of country.
 Oil and gas industry is very high Capital Expenditure industry, which
requires a lot of initial capital expenditure, which is why, smaller player
not able to stand before the larger player, which reduces the scope for
competition in the industry. So, in a sense it is very restrictive kind of
industry.
 Oil and Gas sector is very challenging and sensitive sector. It is also highly
volatile sector. Any geo-political news can put its demand at peak level.
Also, its supply and demand is very highly fluctuable in nature. Engineers

and other skilled employees face lot of challenges while working to extract
oil reserves (Khandelwal, 2019).
Opportunities:
 Saudi Arabia is already seconds biggest oil producer in the world and it
has many unexplored area to explored and gain further momentum in
coming years. Both type of opportunity exist in coming years, like
onshore, offshore as well as conventional areas ("Saudi Arabia / Economic
Studies - Coface", 2019).
 In recent years, Saudi Aramco has also been moving to establish itself as a
player in the unconventional sector. The company is continuing
exploration efforts in northern Arabia, South Ghawar and the Jafurah basin.
It has completed a number of wells in each of the three areas and has
achieved production at a pilot project in northern Arabia. It also reports
drilling cost reduction for all three, due to a mix of fit-for-purpose
technologies and improvements in well design and execution. So, Saudi
Arabia has continued expansion of refining and petrochemicals capacity.
Saudi Arabia’s domestic oil demand is on rise plus it is already world’s
largest oil exporting country, which puts it on alert mode to keep
searching for more financially viable drilling avenues. Above all give great
opportunity for Saudi Arabia to look for more oil producing wells.
 Recent reforms in energy pricing in Saudi Arabia has given new boost to
this sector. Otherwise, due to heavy subsidy for domestic consumer has
put this sector in very vulnerable situation. Earlier, subsidy in energy
pricing has helped much to this sector. From an overall societal
perspective, reforms in oil prices has helped Saudi Arabia, increase in
government saving due to cut in unnecessary subsidy, it will help improve
quality of air in the region and improve overall environment of the region
and finally, cutting excess electricity and oil usages means more revenue
generation for the Saudi Arab government, which will further boost
economic condition for Saudi (WALD, 2018).
Threats:
 Whole Middle East is highly sensitive zone, dues to its highly concentrated
oil reserves in the region and centrally located geography. Middle East gulf
countries always remain in news due to various negative aspects like
growing terrorism and ISIS (Islamic state terrorists) activities, Iran and US,
Saudi Arabia tension and many other reasons. So this whole reason is
always remain very tense and remain in news most of the time, which
effects economy of the reason in a big way.
 Fossil fuels are non-sustainable oil reserves and it is also one of the most
polluting elements of the environment, which put lot of pressure on it
usages. In longer period of time due to growing demand of reducing
carbon emission, can put even more pressure on its production and