His Excellency Ali Ibrahim Al-Naimi, Minister of Petroleum and Mineral Resources and Chairman of the Board of Directors of Saudi Aramco, on Oct. 16 led board members on a tour of some of the Company’s mega projects.
HE Naimi and Saudi Aramco Board members including Khalid A. Al-Falih, president and CEO, visited Karan Gas field, the company’s first offshore non-associated gas project, and inspected its production platforms in Arabian Gulf waters.
Karan, which has helped to boost the Kingdom’s gas production by 18 percent, was completed ahead of schedule and below budget, reaching its full production capacity of 1.8 billion cubic feet per day (bcfd) during the peak summer consumption period. HE Naimi and the board members also toured the gas production facility at Khursaniyah.
After the visit to Karan, the Company’s board members proceeded to the Wasit Gas Project to review and check on its progress. At Wasit, Company officials confirmed that the project is proceeding as scheduled with inauguration set for mid-2014.
With an estimated production capacity of 2.5 bcfd, the Wasit Gas Project will increase the Kingdom’s gas production capacity by 21 percent, and with Karan, both these projects will raise the Kingdom’s gas output by approximately 40 percent.
These gas projects will help meet the Kingdom’s rising demand for energy; support the Saudi economy’s power, water and industrial sectors; and provide mining projects in Ras Al-Khair City with the gas and sulfur needed to produce aluminum, phosphate fertilizers and related manufactured goods.
During the tour with the Board members, HE Naimi launched the Manifa Field’s reservoir water injection operations in preparation for first phase production of Arabian Heavy crude oil at an initial capacity of 500,000 barrels per day (bpd) in the first half of 2013, and which will gradually increase to 900,000 barrels per day by 2014.
The crude oil from Manifa will feed in-Kingdom refineries that are currently under construction, namely SATORP in Jubail, the joint venture with France’s Total, and YASREF in Yanbu’, the joint venture with Sinopec of China, and the upcoming Jazan refinery, which has received Board approval for financing, and the project’s contracts are expected to be awarded in the coming weeks.
Through such projects, Saudi Aramco will help enhance its growing role in the energy sector in-Kingdom and overseas, and serve as an enabler of opportunities in the Kingdom’s economy and in the diversification of investments in the downstream sectors, particularly in refining and petrochemicals.
Karan produces 1.8 bcfd of gas, increases Kingdom’s gas production by 18 percent.
Wasit Gas Project on-schedule for mid-2014 start.
Karan and Wasit to increase Kingdom’s gas production by almost 40 percent.
HE Naimi launches Manifa reservoir water injection operations in preparation for first phase production in first half of 2013.
“The Energy Story in Colors” – Saudi Aramco’s 30th Children’s Art Contest – was launched Sept. 1 and has allowed children in various cities throughout the Kingdom to participate.
Organized for children ages 6 to 12, the goal of this year’s program is to raise awareness among children, their families and teachers about the importance of energy conservation.
At al-Rashid Mall in al-Khobar, children participated in interactive presentations on energy conservation and received certificates afterward. Many children created artwork at weeklong workshops in early October, and those works will be evaluated by artists, with the top 20 winners to be announced Nov. 3.
Sufia Rashad, 7, drew a computer plugged to power, but through the drawing she sought to find a solution to make the computer operate on alternative energy sources. Sufia said that she learned a great deal about energy from the educational films and now understands why her father always asks her to close the water faucet or turn off the computer to conserve water and energy.
Monirah Al-Qahtani, administrator of Saudi Aramco’s Corporate Brand Management Division, said the booth received about 350 children in only two days. “No doubt we believe school and family play a pivotal role in the child’s education process,” she said. “However, we must have other educational factors to raise the awareness of children. We tried through the energy theme to help children contribute in finding a solution to the problem, rather than becoming a part of it.”
The exhibit and the workshop will not be for mall visitors only. The Corporate Social Responsibility team has also organized different visits at other venues.
In Central Province, the Children’s Art Contest was launched in Ghirnatah Mall and was attended by Saudi Aramco’s Riyadh management and a huge number of shoppers.
“Saudi Aramco’s annual children’s drawing contest is one of the Kingdom’s oldest art contests,” said Khalid Al-Rumaih, manager of Saudi Aramco’s Affairs in Riyadh.
Saudi Aramco asked the Ministry of Education to encourage students to participate in the contest, either through art classes at school or by visiting the contest venue in Ghirnatah Mall.
Professional artists volunteered their time as instructors and judges for the children’s submitted artworks.
In Jiddah, the Children’s Art Contest was opened on Oct. 4 at al-Arab Mall.
More than 500 children and their families attended, along with Abdullah Al-Tazi and Saudi Aramco Affairs Western Province manager Nabil Baashan.
“In this year, the company celebrates the 30th Saudi Aramco Children’s Art Contest in an innovative fashion by choosing an educational subject through which the company strives to unleash children’s imagination and potential,” Baashan said.
In Jiddah, the workshop ended on Oct. 11.
Abdullah Al-Tazi lauded Saudi Aramco’s efforts in promoting the culture of energy conservation, as well as the company’s constructive cooperation with artists to help children express their thoughts through drawings.
Former Employee Implicated in Case Had Services Terminated in 2009.
Company Reiterates Zero-Tolerance Policy Against Unethical Business Practices.
Review of Compliance Processes and Internal Investigation Being Pursued.
As Saudi Aramco proceeds with its ongoing investigation of the Tyco fraud case the Company would like to clarify a number of matters that have been misreported in the press and become the subject of speculation or rumor. This statement is a follow-up to Saudi Aramco’s press release in Arabic on September 28, 2012.
The U.S. Department of Justice (DOJ) investigation and subsequent settlement with Tyco involved state owned companies and in some cases government officials in at least 18 countries. The U.S. DOJ investigation determined that among others, bribes were paid by Tyco Valves & Controls Middle East Inc. to employees of four different state owned customers located in three Gulf countries between 2003 and 2006. The total amount of bribes paid to employees of these four companies was reported by the DOJ to total $488,479 (less than SR 2 million). The $26 million fine assessed against Tyco was a penalty for the global pattern of corruption in which it was engaged for over 10 years, and $2.1 million of the total fine related to Tyco’s crimes in the Arabian Gulf.
Saudi Aramco was not aware that Tyco was the subject of an investigation in the U.S. until the U.S. DOJ issued its press release on September 24, 2012, announcing that Tyco International Ltd. and its affiliate, Tyco Valves & Control, Middle East Inc. had been charged with violations of the U.S. Foreign Corrupt Practices Act and entered guilty pleas. As soon as Saudi Aramco became aware of the case against Tyco and the reported involvement of a Saudi Aramco employee, all further business with all Tyco affiliates was suspended. In addition, Saudi Aramco launched a special internal investigation to determine whether there were any further illicit business practices involving Tyco or any of its affiliates or its agents.
Saudi Aramco has determined the business done with Tyco related companies during the last 12 years to add up to about $31 million plus another $11 million worth of Tyco products purchased for Company projects through contractors on turnkey contracts. The vast majority of these purchases were made on the basis of competitive bidding where multiple suppliers competed with Tyco.
The ongoing Saudi Aramco investigation has confirmed that a prior internal investigation conducted in 2009 into unethical business practices involving a Company employee revealed that a technical specialist employee violated the Company’s Conflict of Interest and Business Ethics policies by receiving bribes and kickbacks from various companies, including Spanish company Belgicast, which has now been determined to be affiliated with Tyco International Ltd. As a result, this individual was terminated by Saudi Aramco “for cause” in 2009 immediately following discovery of his illicit actions resulting in a loss of all benefits. The former employee was further placed on a list with whom Saudi Aramco will conduct no business nor with any company that employs him.
The Tyco affiliated company, as well as 17 other companies also implicated in this bribery scheme, were suspended from business by Saudi Aramco and continue to be suspended to this day. Following the 2009 investigation, Saudi Aramco undertook a thorough review of its systems and processes for technical evaluation and approval of contractors and vendors and modified them to include additional controls and processes to guard against similar problems. In addition, the criteria for suspending contractors and vendors from business with the Company as a result of unethical or illegal business activities were revised and strengthened.
In addition to its internal reviews, the Company contacted Tyco through their lawyers to request additional information regarding individuals and agents involved in misconduct. Tyco has responded and provided information which Saudi Aramco is now using to supplement its own thorough investigation. The information from Tyco identified a single Saudi Aramco employee who was the recipient of bribes from a Tyco affiliate. This individual is the same person identified by Saudi Aramco in its 2009 investigation and terminated without benefits by the Company.
Saudi Aramco wishes to clarify reports that a Saudi Aramco “official” accepted bribery payments. The term “official” as used in the Tyco court case is used to refer to any employee of a state owned company regardless of their position. The individual who Saudi Aramco has confirmed to have accepted bribes in the previous case involving a Tyco company was a technical specialist and not an “official” in a management position.
Despite the low ranking level of the Company employee involved, Saudi Aramco has taken this incident most seriously, initiating a second investigation to supplement the one conducted in 2009 and undertaking an in-depth review of its Conflict of Interest reporting, fraud awareness and legal compliance processes and procedures. The confirmation by Tyco of the identity of the one company employee terminated in 2009 will not in any way diminish the company’s commitment to vigorously pursue the current investigation to identify and deal with any other employee or intermediary party who may have been involved in the Tyco matter.
“Saudi Aramco condemns unethical business practices and takes allegations of impropriety very seriously. I want to assure our stakeholders that we have a zero-tolerance policy towards unethical business practices. Saudi Aramco is continuing its own investigation of this case and we are committed to taking firm actions against illegal business practices,” said Khalid A. Al-Falih, president and CEO, Saudi Aramco.
He added: “Sadly, the improper actions of just one individual can tarnish the reputation of the Company, which the rest of our employees work so diligently to maintain.”
Saudi Aramco is committed to the highest ethical and legal standards in the conduct of its business and requires that our employees conduct all our business ethically and in compliance with applicable laws.
Because Saudi Aramco takes matters involving unethical behavior by its employees so seriously, and is committed to ensuring that employees and suppliers conduct Saudi Aramco’s business to the highest ethical standards and in compliance with relevant laws, Saudi Aramco has well established the following policies: an Conflict of Interest and Business Ethics Policy; a Code of Supplier Conduct; as well as other compliance policies and procedures to prevent, detect and punish misconduct by Saudi Aramco employees and suppliers.
For example, Saudi Aramco’s robust Conflict of Interest and Business Ethics Policy is mandatory and is agreed to in writing by each of its employees. The Company has equally high expectations of ethical and lawful conduct from each of its suppliers and business partners and the Company’s Supplier Code of Conduct applies to every contractor, subcontractor, and vendor who must accept it in writing.
Before the Company will resume business dealings with a company that has been suspended for unethical or criminal activities, that company must undergo a thorough review of their corporate structure and governance processes; hold fraud awareness and ethics workshops for their employees; and allow for an independent audit of their business, controls and financial practices by an approved independent specialized firm.
Saudi Aramco also stresses that it has a competitive bidding process in place for procurement of materials and supplies. It has an internal auditing function that ensures the Company meets its operational and financial goals, and reports to the Company’s Board of Directors.
As part of its application of international best practices in corporate governance, Saudi Aramco is audited by an external auditor, at the direction of Saudi Arabia’s Supreme Council for Petroleum and Minerals Affairs. Internal communication and reporting channels have been established to allow employees and third parties to report business ethics violations and a General Auditor Hotline is available to provide a secure and confidential venue for employees and outsiders to report suspected fraud, unethical conduct and irregularities. The General Auditor can be contacted at telephone +966 3 874-3333 or e-mail: firstname.lastname@example.org
These policies, internal systems, processes, and reporting channels that have helped the Company and its employees maintain their firm commitment to the highest ethical and legal standards throughout the Company’s businesses will continue to be applied and reinforced.
Unfortunately, this case was not the only one of its kind Saudi Aramco has uncovered over the past several years. In the past, Saudi Aramco’s internal audit processes have identified violations of the Company’s business ethics policies by a number of individuals, each of whom was terminated from employment with Saudi Aramco. During the same period, many companies — local and international — were suspended or terminated from doing business with the Company for fraudulent practices.
Al-Falih expressed his determination to pursue this matter with the utmost vigor. He said: “Although the official Tyco court documents indicate that the alleged violations involving a Saudi Aramco employee occurred in 2003 and 2004, and are limited in scope, amount, personnel, and contract value, Saudi Aramco is conducting an extensive review to confirm that no other irregularities or misconduct involving Tyco companies occurred in the past.
“Although significant time has passed since the alleged violations reportedly occurred, we are reexamining our compliance processes and procedures to avoid a repeat of such violations in the Company. We are also examining our business partnerships and relationships to ensure that we identify firms and do business only with companies of the highest ethical standards.”
He concluded by stating that: “fighting fraud and corruption is a collective responsibility for us all. We depend on all our business partners to abide by the highest ethical standards, as we are committed to do, and to report to us any cases of unethical or criminal actions directed against the Company or involving any Saudi Aramco employee of whom they become aware.”
For IRA account holders in retirement, it is generally recommended to defer distribution of funds from the account to continue tax-advantaged growth until the Required Minimum Distribution (RMD) begins at age 70 ½. But “generally” does not apply to your unique financial circumstances and may not always be the most tax-efficient strategy. There are 5 key circumstances when taking money from the IRA prior to the requirement at age 70 ½ could be more beneficial, again depending on your unique financial situation.
5) Circumstances Change
An important part of planning for IRA distributions is the fact that circumstances do change. And those changes could be from one year to the next or even one month to the next. It’s for this reason that we wait until the end of the tax year before taking the distribution or converting the funds to a Roth IRA.
The change in circumstances could be things out of your control. For those still working there is always the chance of an unexpected bonus or some type of wages being paid out at the end of a tax year. For retirees it could be as simple as an existing investment creating taxable income. It could be a simple tax law change that creates a new opportunity for IRA distribution planning. For all of these reasons we prefer to wait until year-end before finalizing any distributions or Roth conversions.
Once an IRA distribution is complete, there is likely no way to undo the distribution. There is only a small window of opportunity for a 60 day rollover of the funds if your income changes significantly. For the Roth IRA conversions there is a little more flexibility, in that you have until your tax filing deadline to re-characterize the conversion to a Roth. While the re-characterization gives you the opportunity to undo the conversion, it’s still a good idea to wait until late in the year to see how your income and deductions unfold.
Let’s look at an example of how a re-characterization could work to your benefit:
John, age 61, is retired. He plans to start some consulting work next year, but anticipates his current year income will only consist of investment dividends and interest. He assumes his current year income and deductions will keep him in the 15% marginal bracket. He even has room for another $20,000 of income that would keep him in the 15% tax bracket. He decides to convert $20,000 of his IRA to a Roth IRA. In the final quarter of the tax year, John discovers the business he plans to consult for needs his immediate help and have offered incentives for him to begin work the final two months of the year. Due to the additional income, the conversion will actually bump John into the 25% tax bracket. Fortunately, John can minimize the tax impact by re-characterizing part or all of the Roth conversion prior to his tax filing deadline. The re-characterization will essentially unwind the conversion and move the funds back to his Traditional IRA.
This is just one example of many that could impact taxable income in a given year. And it’s why we wait to make a final determination on converting money to a Roth IRA. Of course, there are specific rules on re-characterizations that need to be followed. And the re-characterization does provide for planning opportunities as well. As circumstances change throughout retirement, the IRA distribution plan may change along with it. Any plan must have the flexibility for adapting to the ever changing retirement landscape.
As with all IRA distribution strategies discussed in this series, there are many factors to consider, and there is never one single approach that will work for everybody. Personalized tax and wealth planning are crucial to ensuring your personal financial success. At Reilly Financial Advisors, our Discipline to the Power of 3 approach and integrated tax planning is key to helping our clients define and achieve their individual financial goals. Contact Reilly Financial Advisors at 800-682-3237 or email@example.com to learn more about a retirement strategy for you.
Read Pay Less Taxes on Your IRA – Part 4 of 5.
Harry Philby prospered because of
his energy and linguistic skills.
When Ibn Saud scaled the walls of Riyadh in 1902, it began his celebrated passage to becoming King of Saudi Arabia.
This story briefly describes the years when he recovered his heritage and oil was on the horizon. It outlines his unlikely and complicated relationship with a British political officer named Harry Philby. Of course, historical judgements and observations are subjective despite the documents available from the first years of the 20th century, and we don’t know the personalities of those who produced the evidence.
Players in this action are long dead, so the narrative is weighted toward the views of a writer who has read many different reports of the same incidents. Other versions are not incorrect, but this is another perspective about key chapters in an improbable and unique relationship between Harry Philby and Abdul Aziz ibn Abdur Rahman ibn Faisal ibn Turki al Saud on his 30-year journey to reign as King.
It begins in 1902 with the epic tale of the capture of Riyadh by Abdul Aziz using the military skills honed during his years in exile in Kuwait. Ibn Saud and his party of warriors approached the walls of Riyadh during the last night of the ‘Id carrying palm trunks to scale the walls of the town and capture the fort. Legend tells us that Ibn Saud and eight of his men fought their way into the stronghold and threw open the gates for the rest of his invading warriors.
In the fierce hand-to-hand battle, the Amir Ajlan ibn Mohammed ar Rashid was killed and the remaining defenders surrendered. Ibn Saud was just 23 years of age, and his victory had just marked the beginning of the Third Saudi State.
Those events in Riyadh were a world away from the academic cloisters of Cambridge University and an unimagined relationship with an Englishman that would develop over the next three decades. Harry St. John Bridger Philby was a few years younger than Abdul Aziz and arrived as a student at Trinity College, Cambridge, in October 1904.
He knew nothing of events in Riyadh and never guessed he would be part of what led to the present Kingdom of Saudi Arabia. Philby was a gifted student and worked hard to win a brilliant first in modern languages. His predicted career was as an employee of the Raj, and with that in mind he developed a command of six Oriental languages: Arabic, Baluch, Hindi, Persian, Punjabi and Urdu.
When Philby was recruited into the
Indian Civil Service, he promised to abide by its code that, ‘an officer must be loyal to his service and to his country.
When Philby was recruited into the Indian Civil Service, he promised to abide by its code that, ‘an officer must be loyal to his service and to his country’. But Philby’s linguistic brilliance did not compensate for a deeply rebellious nature, for he already mistrusted the philosophy of the Edwardian establishment he was brought up in, misgivings that were a key factor in his eventual liaison with Abdul Aziz.
In December 1908, he sailed for India and arrived just six years after Abdul Aziz had claimed the city of Riyadh. Philby became one of 141 ‘Heaven Born’ Britons in Bombay who ruled 42 million Indians in The Punjab.
Soon, his politics were perceived as less than those expected of a Raj official, and he was labelled as a radical troublemaker with an irritable side. In his autobiography, he claimed to be “the first Socialist to join the Indian Civil Service”. With such an unaccommodating nature, a clash with the Raj philosophy of the ‘inevitability of gradualness’ when dealing with far-off cultures was to be expected.
In 1910, Philby made a decision to marry. That brought disapproval from his masters in the Raj who considered his bride, Dora Johnston, to be unsuitable. Nevertheless, he went ahead with his cousin as best man — Lt. Bernard Montgomery, later the 1st Viscount Montgomery of Alamein, whose military career led him to become commander in chief at the Normandy landings in 1944.
But Philby felt bitter that his marriage was censored and paranoid that he was victimised by Lt. Gov. Dane, his boss in the Raj. Victim or not, Philby prospered because of his energy and linguistic skills, despite the setbacks caused by his abrasive personality. An association with Ibn Saud took a step closer when he came to the attention of the Political Mission in Iraq. In 1915, he was recruited by its chief, Sir Percy Cox and arrived in Basra with the rank of major in the Political and Secret Department of the Indian Government.
By chance, Gertrude Bell, an influential aide, noticed his gift for languages and became his mentor. She made decisions about Philby’s political role that made it certain he would meet with Abdul Aziz, and Philby emerged as a key factor in her strategy. While the future King fought battle after battle to unify the tribes he would eventually rule, Philby immersed himself in the politics of the Middle East. Finally, the two men came together for the first time in December 1917, when Philby was sent as head of a mission to meet Ibn Saud on Arabian soil.
From the very first greetings, Philby was charmed by Ibn Saud, and as they started negotiating, an alliance formed that lasted for 36 years. Philby was entranced by the magnetic personality and charismatic presence of Ibn Saud, who in turn was intrigued by the irascible Englishman almost a foot shorter than himself. It also helped that Philby handed over £10,000 of the £30,000 fund given him in Iraq as a token of the esteem in which Ibn Saud was held by the British.
We can only guess whether Ibn Saud revealed his personal ambitions to Philby at this time or whether Philby gave them unconditional encouragement. But it is significant that after World War I, his financial support from the British increased, and he also received a huge tranche of surplus ammunition from them.
Ibn Saud, who, by 1932, became ruler
of what is now The Kingdom of Saudi Arabia, and remained as King until his death.
Ibn Saud unleashed his campaign against the Al Rashidi in 1920, and by 1922 had all but destroyed his enemy and doubled the size of the Saudi territory he controlled. By this time, Philby was head of the Secret Service for what is now The Hashemite Kingdom of Jordan, and at the end of 1922 he traveled to London for high-level diplomatic meetings that included Winston Churchill, King George, the Prince of Wales and Baron Rothschild. Finally, he rubbed shoulders with the very highest echelons of the British establishment, but where did his allegiance lie? Philby made his view known that the British interests would best be served by supporting the Saudi family in uniting the Arabian Peninsula under one government.
His support for Ibn Saud was so unambiguous that by 1924 Philby was forced to resign his Secret Service position when he was found to be in unauthorised correspondence with Ibn Saud – sending him secret information. In British terms, this was plainly espionage, but his Secret Service masters continued to pay him as their most valued means of communication to Ibn Saud. Unabashed, Philby continued to advise Ibn Saud on the extent of his ambitions to unify all of Arabia and the likely British reaction, and in 1925, the armies of Ibn Saud captured the holy city of Mecca from Sharif Hussein bin Ali and ended 700 years of Hashemite rule.
As a non-believer, Philby couldn’t attend the coronation of the new King of the Nejd and Hijaz but Ibn Saud allowed Philby to arrange his seating banquet in Jiddah. Their relationship was cemented over the following years, and there is little doubt that time and again Philby betrayed the political will of his British masters in deference to the interests of Abdul Aziz and provided unilateral backing for the King’s strategy in unifying the Arabian Peninsula. Philby supported the King’s conquest of the Hijaz and made sure his delicate relationship with the British remained amicable. Philby’s position as an informer to both parties was unique, and he used it to good effect on behalf of Ibn Saud.
By 1932 Ibn Saud became ruler of what is now The Kingdom of Saudi Arabia, and remained as King until his death. Philby stayed a loyal ally and benevolent shadow offering advice and support. In that same year, Standard Oil of California retained Philby as a paid adviser to facilitate their goal of obtaining the country’s oil concessions. As usual, he did this with the guile of a lifetime — appearing to act for one party providing it was with Ibn Saud’s best interests in mind, but then, of course, he was The King’s Man.
Editor’s Note: Mel Trotter lived in Dhahran in the ‘70’s and flew Royal, corporate, Tapline and exploration work. He was a pilot in the Aviation Department – believed to be the first English one where the others were all American at that time with Aramco. A writer and executive coach, he now lives in Wilmslow, Cheshire. Mel’s latest novel The Orphan Sniper is available in paperback at The Amazon Store and as an eBook on Kindle and compatible devices. He can be contacted through his website at www.humanriskfactors.com.
This article was first published in Aramco Overseas Company’s Alaela magazine. Permission to reprint granted by Mel Trotter.
Mel Trotter has written a novel called The Orphan Sniper. To learn more visit: