Saudi Aramco’s ambitious downstream expansion came into focus at the 15th International Oil Summit in Paris where president and CEO Khalid A. Al-Falih addressed a packed audience alongside Christophe de Margerie, CEO of French energy major Total.
Leaders from across the global oil industry, as well as the world’s media, listened as Al-Falih underlined Saudi Aramco’s credentials beyond upstream.
“We are in the process of building a world-leading downstream business that is both vertically integrated across the value chain and horizontally integrated across suitable geographies. Our goal is to add greater value to our hydrocarbon supplies, while building a more robust and resilient portfolio that can better withstand market turbulence,” he said. “We’re doing that through what I would call ‘new platforms’ for downstream business success, which I strongly believe represents the new model and way forward for this sector of our industry.”
Al-Falih told his audience that these “new platforms” require four key factors to ensure success.
The first, he said, is simply “large scale,” referring to the massive plants and their mega-capacity that enables them to “capture operational efficiencies and economies of scale.”
The second factor involves integrating refining, chemicals and lubes for value addition and portfolio diversification. Al-Falih said that this could be best achieved in a facility that has a certain critical mass of processing capacity. But as these mega-facilities are tied to reliable supplies of oil, he told those listening that having the right kind of reliable crude slate was essential.
The third key ingredient, according to the CEO, was building these facilities close to major markets.
“Matching world-scale plants and infrastructure with strong future demand for their output is vital for downstream success, and we will continue to see most of these new platforms being built in high-growth markets such as China, India, developing Asia and the Middle East,” he said.
Al-Falih underlined technology as the fourth key factor for the success of “new platforms,” as it would allow plants such as the SATORP complex to produce cleaner products that meet increasingly high environmental standards, all while maximizing profitability. Technology, in addition to innovation, was a constant theme throughout the summit, particularly as a driver for lowering costs, expressed not only by international oil companies (IOCs) and national oil companies (NOCs) but service companies, as well.
Al-Falih explained how Saudi Aramco was strengthening its R&D program with a technology agenda that incorporates both upstream and downstream. He made mention of the company’s research into advanced integrated fuel engine systems.
“We believe there are tremendous opportunities to be realized from the synergies that can be harnessed by combining advances in engines and fuels and by looking closely at their interface.”
He said that this research will satisfy several objectives, including radical improvements in mileage efficiency, substantial reduction in emissions and “the economic viability of engines and the fuels that power them.”
Hosted by the renowned energy institute Institut Français du Pétrole (French Petroleum Institute), the summit opened with remarks from Nordine Aït-Laoussine, former Energy Minister of Algeria, who moderated a morning session that included representatives from the International Energy Agency and International Energy Forum.
Satisfying energy demands was emphasized by speakers to be a joint challenge for both IOCs and NOCs, as was the effective management of supply costs. While moderating the IOC/NOC session, Aït-Laoussine mentioned how Saudi Aramco, under its current CEO, introduced the notion of the “INOC” — national oil companies who had evolved to include CSR, economic diversification and job creation as part of their remit.
All sessions featured perspectives on the macro view of the oil market, and Al-Falih, before delivering on the main theme of his speech, downstream, gave his thoughts.
“Despite the challenges we may face, the petroleum industry has weathered the effects of the global economic downturn better than most, and I believe we are in a long stretch of an expansion phase. In fact, if anything, the industry risks being stretched by the stretch. For example, oil demand is expected to continue growing,” Al-Falih said. “Most of this growth stems from the combination of a larger global population, higher living standards and rising urbanization, especially in the developing world where billions of new consumers will be demanding the comforts and conveniences that energy can provide.”
Al-Falih added that there was enough oil to meet growing demands, given the large global resources of both conventional and unconventional supply.
DeMargerie, who spoke immediately after Al-Falih, said that technology would be the key to unlocking the potential of unconventional resources, which would “extend the oil and gas horizon.” Total’s chief also said the industry would have to move as one if it wanted to realize its efficiency and profitability targets.
In keeping with the rest of the summit, both CEOs ended with a Q&A session in which Al-Falih stated that Saudi Aramco would maintain a daily crude oil production capacity of 12 million barrels and reiterated its commitment to unconventionals through $3 billion worth of investments.
Ministerial representation also came in the form of HE Suhail Mohammed Al-Mazrouei, Energy Minister for the UAE, and HE Abdalla Salem El-Badri, Secretary General of OPEC, who said that challenges and uncertainties for the industry remained and new ones might be around the corner.
The critical need for skilled people is a key issue for Saudi Arabia and the industry in general, says Warren W. Wilder, Saudi Aramco executive director of Chemicals, in his presentation at the 2014 IHS World Petrochemical Conference.
Warren W. Wilder, Saudi Aramco executive director of Chemicals, served as a featured speaker on a panel discussing the global energy outlook. His presentation, “Mideast: Evolution of Growth Strategies toward Differentiation,” was part of the 2014 IHS World Petrochemical Conference with a theme that posed this question: “The Impact of the Next Capital Cycle on Global Chemical Markets: Can the New World Order in Energy and Chemicals be Sustained?”
In his remarks, Wilder pointed to Saudi Arabia’s culture and policies as enabling the Kingdom’s rapidly transforming chemicals industry. He noted that Saudi Aramco is facilitating the development of a robust chemicals industry by building conversion parks alongside domestic production facilities.
“Despite changes, certain fundamentals still apply: Saudi Aramco has an 80-plus year history of reliable crude oil supply and will continue to be a reliable supplier,” Wilder said as he described the rapid changes in the industry landscape.
One of the most important points highlighted by Wilder is the critical need for people: “One of the key issues for Saudi Arabia and the industry in general is skills. The greatest shortage we are facing is not capital or feedstock; it is skills,” he said, emphasizing the need for strong cooperation between public and private sectors, and describing the educational opportunities in Saudi Arabia with a robust curriculum in science, technology, engineering and math (referred to as STEM subjects), as well as statistics.
Another key enabler that will help in the future growth of the (chemicals) industry is the huge public investment in infrastructure through the Public Investment Fund (PIF), Wilder said. In addition to this fund, support can be found from local entrepreneurial, vocational and development organizations such as Wa’ed, Saudi Arabian General Investment Authority (SAGIA), KAUST, Dhahran Techno Valley, KFUPM and the Royal Commission for Jubail and Yanbu’ (RCJY).
Also crucial for success in chemicals is technology. Saudi Aramco is expanding its Research & Development (R&D) program with research centers around the world, including a trio of R&D centers opening in the U.S.
“The industry in Saudi Arabia is transforming from a commodity-based (chemicals) business toward far more value-added products and chemistry,” he said. “In addition to the anticipated increase in global capacity and growth, there is a shift to heavier feedstock and the creation of more value-added opportunities.”
Looking at the industry landscape, Wilder said that Saudi Arabia will continue to be the largest Gulf Cooperation Council (GCC) chemicals producer.
Wilder described the rapid transformation in the GCC and the changing landscape in the industry that are part of the impetus behind Saudi Aramco’s investment in a massive chemicals program, including Sadara, currently underway, and Petro Rabigh, with an expansion underway.
Saudi and Japanese businessmen gathered recently at the 18th Saudi-Japanese Business Council event in Tokyo that was supported by Aramco Asia-Japan (AAJ).
The Saudi Aramco Entrepreneurship Center Company Ltd. (Wa’ed), a wholly owned subsidiary of Saudi Aramco, delivered a presentation to the more than 200 businessmen present at the event. Einas Al Ashgar, Energy SME Development Group Leader of Wa’ed, delivered an overview presentation about the organization and its programs for supporting entrepreneurs and small- and medium-sized enterprises (SMEs) in Saudi Arabia — an area valued as a key contributing engine for job creation within Saudi Arabia.
AAJ also organized the Saudi Aramco booth at the Saudi Arabian General Investment Authority (SAGIA) exhibition that was held in Tokyo and Osaka recently. The theme of the exhibition was “Invest Saudi,” where AAJ detailed the commodities currently available for localization and presented the incentives that investors would enjoy if they operate as local manufacturers.
Wa’ed also joined AAJ at the SAGIA exhibition in distributing brochures and responding to questions from visitors that numbered more than 700.
Other noteworthy participating organizations and companies included the Royal Commission for Jubail and Yanbu’, SABIC, Maaden, Petro Rabigh, SWCC, SIDF, National Clusters Program and the Saudi National Water Co.
Since its founding in 2009, the King Abdullah University of Science and Technology (KAUST) has set new standards in research and educational excellence. On April 2, scores of its alumni gathered for the first time in Dhahran to celebrate the success of the university and its graduates.
The dinner for the first KAUST Alumni Workshop was hosted by Amin H. Nasser, senior vice president of Upstream and co-chairman of the Saudi Aramco-KAUST Collaboration Oversight Board, at the Plaza Conference Center. This joint board oversees the various multidimensional collaborative engagements between the two entities at a strategic level.
About 160 KAUST alumni were in attendance, as well as Dr. Jean-Lou Chameau, KAUST president; Khalid A. Al-Falih, Saudi Aramco’s president and CEO; and other senior members of company management and academic leaders at KAUST.
Nasser told the gathering that the first official workshop was intended to achieve three “essential” goals:
To promote the bond among graduates and enlist them as partners in a shared future.
To celebrate the world-class education afforded by the premier research university, and its crucial work and role as a key talent source for the Kingdom and the world.
To demonstrate the strategic partnership between KAUST and Saudi Aramco at work.
The workshop themes provided alumni with actionable tactics and tips for enhancing their competencies in pursuing their own professional growth and development. Understanding the important ingredients of a corporate culture of excellence and Saudi Arabia’s ecosystem of research and development and innovation were discussed extensively as a part of the workshop themes.
“We strive to continue engaging you graduates in a conversation about honing key competencies — and for those of you who are also Aramcons, making the most of your careers at our company,” Nasser said. “We will continue working closely with KAUST’s efforts to align research and curricula with the energy industry’s evolving needs and help spur the Kingdom’s transition to a knowledge economy.
“We’ll also continue promoting a culture conducive to innovation, discovery and lifelong learning,” he added.
Since its foundation in 2009, KAUST has integrated research and education, leveraging the interconnectedness of science and engineering, and has worked to catalyze and propel the diversification of the Saudi economy through building a viable and internationally competitive and entrepreneurial innovation base and harnessing human talent to maximum potential.
Nasser said KAUST had started out as a dream.
“The entire hope of KAUST is to generate the breakthroughs that will serve humankind. Now it’s up to you engineers, scientists and researchers to deliver the dream in the field, in labs, in offices and classrooms across the nation and around the globe now and for generations to come,” Nasser said.
Chameau announced that KAUST’s first alumni chapter will be established in Dhahran, and he thanked Saudi Aramco for its continued support and said he looks forward to further collaboration between the two entities.
Saudi Aramco is supporting the charitable initiative Ertiqa in preserving technology, benefitting communities and enriching the education of the young minds of the Kingdom.
“The youth are important in spreading the message because they can influence society to recycle their electronics. We want to attract even more passionate volunteers,” says Abdulaziz A. Al-AbdulKarim, Information Technology executive director at Saudi Aramco and the company’s champion behind the national initiative.
“The donated computers and monitors we receive are refurbished, upgraded, loaded with educational programs and distributed to schools and families in need,” says Mohammed Mustafa, Ertiqa representative and technology officer.
The initiative extends beyond charitable work; Ertiqa joined forces with the Ministry of Education to integrate digital educational programs into children’s curricula through establishing a “Learn to Excel” IT Club in elementary schools to implement programs by the Massachusetts Institute of Technology (MIT) Media Lab. Programs such as Scratch and Code.org embody a graphical programming language that is more visual and interactive for children to learn programming and computational concepts.