Beijing’s energy deals with Middle East likely to surge

Energy-related trade between China and the Middle East is likely to increase significantly and reshape the sector globally in the wake of the Saudi-Iran peace deal brokered by Beijing last year, according to Swiss bank UBS.

By 2030, trade between the two would have risen by US$423 billion annually, with renewables and petrochemicals accounting for US$77 billion and US$325 billion, respectively, said Ken Liu, head of China and Hong Kong renewables, utilities and energy research at UBS Investment Bank.

“We believe the Beijing accord of March 2023 has significant economic and market implications that investors may have overlooked,” he said in an analysis yesterday.

“We see energy representing a more trade-focused collaboration than seen to date, with likely more immediate monetisation potential and thus a quicker potential impact on share prices.”

In March last year, Iran, Saudi Arabia and China issued a joint statement announcing an agreement to restore diplomatic ties between the two Middle Eastern countries after years of hostility. The deal was brokered by China after four days of undisclosed negotiations among top officials from the two countries in Beijing.

In the six months immediately after the deal was signed, Saudi Arabia invested US$16 billion in the Chinese energy sector, according to data compiled by UBS.

Liu estimated energy-related trade between China and the Middle East could expand by 10 to 11 per cent by 2030.

For renewables, the additional trade is expected to come from China’s increasing green energy penetration in the Middle East, as the region accelerates its energy transition, according to Liu.

The Middle East has been increasingly importing renewable energy modules from China, the world’s largest wind turbine and solar panel maker.

Last year, China exported 14.5 gigawatts (GW) of solar modules to the region, compared with 11.4GW the year before, according to data from InfoLink Consulting.