Investing in the Future: Al-Falih Visits Far East

21 December 2009 | 0 comments | Saudi Aramco News | by

DHAHRAN, December 16, 2009 — After a financial crisis that shook the world, the oil and gas industry is forging ahead with vigor, Saudi Aramco president and CEO Khalid A. Al-Falih emphasized during a recent visit to company markets in the Far East.

Al-Falih Visits Far East Khalid A. Al-Falih receives a gift from the president of Korea’s Seoul National University.

However, with an uncertain energy environment and the growing concerns of climate change, he noted that many challenges lie ahead.

“While oil and gas were impacted by the crisis, our industry fared better than many other economic sectors,” he said in a speech at the Republic of Korea’s Seoul National University and in another at the World Oil and Gas Assembly in Bangalore, India.

“The performance of oil and gas speaks to petroleum’s fundamental nature and its importance as an essential commodity to virtually every aspect of modern life.”

Al-Falih’s trip to the East included major stops in Korea, Japan and India, where the company has important business activities that are key to enhancing its global portfolio of interests.

In Korea, Al-Falih met with Saudi Aramco-sponsored students as well as employees working there on company projects. He also talked to contractors, vendors and customers.

Speaking to employees, he lauded their dedication and skill in providing customers and partners with world-class products and services delivered on reliable timetables.

“You are Saudi Aramco’s ambassadors to the world,” Al-Falih told employees. “Your performance enhances the company’s reputation worldwide and underscores its long-proven record of achievement and professionalism.”

In India, the president visited the software company Infosys. Also in Okinawa, Japan, he attended a customer retreat, where he met with Japanese and Taiwanese partners and customers.

His visit to Asia marks a new reality for the oil industry, where, due to population growth and economic development, the economic center of gravity is shifting toward the East.

“The developing economics of the world … are at the heart of the International Energy Agency’s forecast that world primary-energy demand will increase,” Al-Falih said. “The forecast estimates demand will grow by 40 percent by 2030 — roughly 1.5 percent per year. And (the IEA forecast estimates that) oil will remain the single largest fuel in the energy mix.”

Al-Falih Visits Far East Al-Falih poses for a group photo with Saudi Aramco-sponsored students and employees working in Korea during his visit there.

The company’s maximum sustainable production capacity is now at 12 million barrels per day — a figure that will ensure reliability of supply to meet this forecast increase in demand.

Even though oil and gas will be around for some time, the energy environment has changed and companies need to be prepared, Al-Falih said. As the world’s energy demands increase and suppliers work to meet them, unconventional sources of oil, such as natural gas liquids, heavy oils and oils located in difficult environments, will need to be tapped, he said.

“With supplies of conventional oil maturing in many basins, the contributions of niche nonconventional oil sources are expected to continue rising,” Al-Falih said. “There is no shortage of oil potential … but the complexity of bringing oil online increases significantly as we tap into more difficult conventional and nonconventional oil resources.”

This — along with the fluctuating oil price — means that developing energy projects will take more time and more money. Now, he said, is the time to step away from speculation and toward investment.

“Capital prefers certainty. A vague global energy future would discourage essential investments across the energy value chain,” he said.

There is also a need to invest responsibly by taking the environmental impact into consideration. “Societal expectations on climate change are real,” he said, “and the industry is expected to take a leadership role.”

One way of doing that is to make fuel more energy efficient by enhancing oil recovery through carbon capture and sequestration and improving the efficiency of engines.

Alternative energy is also an important part of the solution. The company is working to further develop solar technology in the Kingdom through a partnership with Japanese company Showa Shell and the King Abdullah University of Science and Technology’s Solar and Alternative Energy Science and Engineering Research Center.

In the meantime, “the prudent course is to sustain global economic development — and with it social advancement — by making the best use of proven sources of energy,” he said.

As alternative energies develop, so will the petroleum market.

“Ultimately, as renewables begin to displace petroleum over time, there will be attractive uses for our hydrocarbons other than burning,” Al-Falih said. “Saudi Aramco is moving its hydrocarbon products deeper and deeper downstream into petrochemicals and the many valuable products derived from them.”

One giant step in this new direction is last month’s inauguration of PetroRabigh — the Kingdom’s first integrated crude petrochemical refinery — the largest complex of its kind in the world — which will manufacture plastics for consumer and industrial goods.

This is just another of the changes in the industry. “Our resilient and enduring industry boasts an admirable track record of overcoming challenges … so that they are not so much obstacles as windows to improvement and growth,” said Al-Falih.

The key is to collaborate. “Our increasingly interdependent and interconnected world underscores the value of joining forces for shared goals and mutual benefit,” he said. “As partners, let us work together to balance environmental conservation with the … economic growth powered by affordable energy.”

(Article by Sara T. Al-Bassam)

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