The world’s most petroleum-dependent country is building a city that will operate without revenue from it.
This post is part of a CityLab series on power—the political kind, the stuff inside batteries and gas tanks, and the transformative might of mass movements.
The entire world may be dependent on oil, but there’s one country with a particularly acute addiction. Saudi Arabia serves as the world’s largest oil exporter, and it’s also its twelfth-largest oil and gas consumer. With most of the kingdom’s economy based on oil, Saudi leaders have understood for years that things must change. Though the country’s oil likely won’t run out for decades, fluctuating oil prices in the meantime make it difficult to count on revenue. The IMF even warned that if prices remain low as they have for the past two years, the kingdom could run out of cash by 2020.
Last April, Deputy Crown Prince Mohammed Bin Salman announced Vision 2030, a 15-year master plan of policy changes tailored to ensure that the country remains prosperous without oil. Saudi Arabia aims to reduce fossil fuels’ contribution to its economy from 85 percent to less than 50 percent. Interventions include developing other types of industries, such as manufacturing, tourism, and “downstream” chemicals—those made from refining crude oil, which are then used in such essentials as plastics.
King Abdullah Economic City (KAEC) is a project that fits this bill. It’s a planned metropolis in western Saudi Arabia, on the coast of the Red Sea just north of Jeddah and Mecca. When completed, it will be about the size of Washington, D.C., and house two million residents. Its development has so far been slow; though the project launched in 2005, only around a quarter of the city has been developed or is under development, according to the city’s CEO, Fahd Al Rasheed. It currently houses approximately 7,000 residents. Despite such issues, Al Rasheed recently told Business Insider that the “master plan remains on track” for completion in 2035.
Al Rasheed bills KAEC as a non-oil economy. “The city is privately funded and receives no direct oil revenue to fund its development,” he says. And KAEC’s industries already include such non-oil ventures as pharmaceuticals, refrigeration, shipping, and even chocolate. More than 100 national and international firms have set up shop there.
Part of KAEC’s mission is to employ Saudi youth. An incredible 50 percent of Saudi citizens are under age 25, and around 25 percent of this demographic are unemployed. In Saudi Arabia, as in most of the wealthy countries of the Persian Gulf, foreign workers perform a great deal of the labor, particularly in the private sector. These jobs, from construction to retail to managerial posts in firms, generally pay less and require more work than public sector employment.
“This has to change,” says Jean-François Seznec, a Johns Hopkins University professor who specializes in the economics of the Persian Gulf. “It’s not an easy thing to do, but everyone knows it has to happen.”
To attract young Saudis to private sector jobs in the new city, KAEC is building elegant housing, though less swanky developments geared for those with fewer means are also on offer. Green spaces, medical facilities, and schools and universities are abundant. “You can’t force people to move,” says Seznec. “They’re making it nice so that more Saudis will want to come.”
While KAEC’s economy may not be dependent on oil, the city is powered by it. Al Rasheed notes that KAEC is not a “sustainable energy showcase,” like the United Arab Emirates’ planned settlement, Masdar City, which was designed to be energy efficient and serves as an incubator for technology that promotes fuel efficiency and renewable energy.*
“However, energy conservation is a prime concern for us,” Al Rasheed says, noting that Saudis have a “near constant need” for air conditioning. As such, the city will feature a solar air conditioning and refrigeration system that will reduce up to 40 percent of the current annual energy consumption. Other green elements include solar-powered street lights and CCTV systems.
Seznec says KAEC may very well flourish. The city already benefits from a large port that’s been operating since 2014, and its location on the high-speed rail line that will in 2018 begin to link Saudi Arabia’s two holy sites, Mecca and Medina, make it attractive for business as well as religious tourism.
“But to be successful, the city will have to have a lot more companies investing there,” he says. “It’s hard to predict.”
*UPDATE: The description of Masdar City has been amended to better reflect its design and function.