Holistic View Called Best for Energy
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Author: Saudi Aramco News
Released 6 December 2007
HYDERABAD, India, December 05, 2007 -- In an address to the Third World Oil and Gas Assembly, titled “Oil and Gas for Sustaining Growth in the New Leading Economies,” Saudi Aramco president and CEO Abdallah S. Jum‘ah delved into the “complexities of the contemporary energy landscape” facing emerging economic powerhouses such as India and China.
Taking a holistic view of the future of energy is the only valid approach, said Jum‘ah. He began by putting into perspective the argument that high oil prices are the result of increasing demand by developing countries. “Consider that India’s present oil consumption is less than one barrel per capita per year, compared to a global average of roughly five barrels and a U.S. average of 25 barrels per capita per annum,” he said. “So while India exhibits tremendous potential for growth in future oil demand, that demand is not yet with us today.”
"More efficient end-use applications can help better manage oil demand growth without compromising economic expansion, and thus greatly enhance energy security.” - Abdallah S. Jum’ah.
Jum‘ah said complex interactions of many factors are shaping oil markets. Among them are structural shifts, supply-and-demand fundamentals and the health of the global economy.
He also cited “the stretched capacity in the global refining sector; the increasing amount of speculative money that has found its way into energy markets; local, regional and global political developments; and changes in national energy policies and tax and tariff regimes.
“In the oil market, perceptions are everything: A real shortage of oil is not what always drives the market; it is the fear that there may be an interruption that causes price spikes.”
Security of supply is a multifaceted challenge for producers and consumers that can be broken down into two categories, Jum‘ah said. “Political concerns include an impractical desire to achieve independence from oil or to shun resources located in certain regions, as well as unrealistic goals involving alternative fuels, which must still overcome considerable technical and economic hurdles before they make a significant — and necessary — contribution to the global energy mix.
“Of greater concern, though, are factors which actually do affect supply levels, including the size and location of resources, demand trends and patterns of trade, price levels and market volatility, the development of the next generation of technological tools, and the energy and environmental policy frameworks of both producing and consuming nations.”
Jum‘ah expressed confidence that if markets are allowed to lead energy prices, and if political distortions are minimized and stakeholders can work together, then global resources can meet the needs of consumers and producers alike. “We must recognize that trade in oil and gas can in fact serve as a unifying factor that bolsters security by creating greater interdependence among producers and consumers,” he said.
When it comes to security of energy supply, Jum‘ah observed, “There are steps that consuming countries can take unilaterally, particularly in terms of demand-side management and conservation, for which there is still great potential in many countries. More efficient end-use applications can help better manage oil demand growth without compromising economic expansion, and thus can greatly enhance energy security.”
Saudi Aramco’s mega-projects are helping meet growing demand, particularly in new leading economies and other developing nations, Jum‘ah said. “As part of that program, we will shortly be commissioning our Khursaniyah crude oil increment, with a capacity of 500,000 barrels per day of Arabian Light.”
Though he agreed that a wide range of energy sources, including alternatives, are needed to meet growing global demand, he urged the need to be realistic about their immediate contribution. “Most alternatives compete in the area of power generation, where globally oil accounts for only about 7 percent of the market,” he said. “By contrast, oil dominates in transportation, where alternatives like solar, nuclear, geothermal or wind are not operable.”
Studies show that the emerging transportation technologies of hybrids, electric vehicles, biofuels and hydrogen-based technologies “will not displace oil in a major way over the foreseeable future,” he said.
Practicing good environmental stewardship while providing energy will continue to be an imperative for the industry, he said.
He urged a comprehensive analysis of the issues at stake, pragmatic and effective policies and a cooperative approach among stakeholders to meet responsibilities not only to the natural environment, but also the future generations that will inherit and inhabit the planet.
Jum‘ah concluded by acknowledging both the central role that petroleum plays in countries and communities around the globe, and the growing importance of India to the global economy.
In the end, he said, “What is needed are comprehensive energy strategies; a sustained commitment to cooperative and collaborative energy relationships at both the national and commercial levels; and a pragmatic, objectives-driven approach to the environmental issues that affect us all.”