Navigating the many frontiers that are emerging in a challenging — and dynamic — oil and gas industry will require “a new roadmap,” Saudi Aramco president and CEO Amin Nasser told the 23rd World Energy Congress (WEC) in Istanbul yesterday.
Speaking to energy ministers and leaders from business, finance and academia, Nasser called on the energy industry to “embrace” the new frontiers to deliver “a secure, equitable, and sustainable energy future.”
Nasser noted that approximately 80% of the world’s primary energy demand today of 280 million barrels per day (bpd) equivalent is supplied by fossil fuels. By 2040, it is anticipated that 75% of that demand will still be met by fossil fuels, and demand in absolute terms still grows, including oil.
But he cautioned the energy industry that despite the fact that the role of oil and gas in the global energy mix seems likely to remain significant for decades to come, this is not a time for complacency as adequate supplies of oil and gas will need to be made available, while making them as clean as possible.
“Business as usual cannot be our future model,” said Nasser, who outlined “a real and holistic Energy 2.0” business strategy for the current transitional period in a keynote address to the congress.
In detailing the first of three key components of the proposed business model, Nasser called on the energy industry to continue making adequate and timely investments in the supply of oil and gas.
“I am concerned that these longer-term investments might not be made, thanks to the combined effect of price uncertainty, and environmental, regulatory, and social pressures,” he said, adding that Saudi Aramco, with a plan to invest more than $300 billion over the next decade in materials and services, is maintaining a long-term focus on investments.
Secondly, Nasser said the current economic environment has shown that financial capacity is an “essential component” of greater resiliency. The methodology of achieving that financial capacity involves “dramatically altering our underlying cost structure,” he explained.
“Greater efficiency and cost competitiveness — without compromising on safety or the environment — is mission critical for everyone, and it needs bold ideas,” stated Nasser.
Transforming the exploration and production business over next decade, instead of making incremental improvements, will need to happen to reduce upstream costs overall, he said. Integration and strengthening portfolio resilience, particularly on the downstream side, can also boost financial capacity, added Nasser.
He noted that Saudi Aramco has grown its global refining capacity to more than 5 million bpd, and plans to raise it to 8-10 million bpd by 2030. Furthermore, the company’s share of chemicals production capacity, across its global operations, is expected to grow from 12 million metric tons per year to 34 over the same period.
The third component of “Energy 2.0” revolves around making sufficient investment in innovation and technology to make the use of oil ultra clean.
Saudi Aramco, Nasser explained, is leveraging global talent and expertise through 11 research centers and technology offices, spread across three continents, with a goal of becoming a world leader in cutting-edge technology, chemicals, and clean fuels technologies that boost efficiency, reduce cost, and minimize emissions.
The company, he added, is also making use of strategic alliances and venture capital, including Saudi Aramco Energy Ventures, which invests in high-end startup companies that are working on “some of the world’s most difficult, but exciting” energy challenges. Technological advances, he said, will help the company raise its aggregate recovery factor of major producing reservoirs to 70%.
“We are (already) making real progress,” he said.
Taking a long-term view
Looking at the long-term future of energy, with fossil fuels still expected to supply about 75% of total primary energy demand in 2040, Nasser highlighted three critical aspects that should be kept in focus.
Technology investments, he said, will be required to overcome the existing and economic hurdles facing alternative sources of energy, in general, and renewables in particular, leading to groundbreaking enhancements.
Second, Nasser said a prudent deployment of alternatives where they gradually, but steadily, assume a greater share of the energy burden, without causing disruption and economic hardship.
A third factor, he said, will be the industry’s response to the growing fragmentation, nationalism, trade protection, and rising tide of anti-globalization sentiment around the world.
“In light of all these uncertain headwinds and their potential economic impact, retaining the insurance of proven energy sources, until the contours and substance of the alternative energy future are assured, is surely the smart play.”
Nasser concluded his remarks by urging the energy industry as a whole to “embrace the new frontiers” that are emerging in today’s challenging environment and join Saudi Aramco in not only pursuing them, but “constantly redefining them, and the opportunities” that they bring.
“This is the toughest journey our industry has ever undertaken, and it will take time,” said Nasser. “But with the pioneering qualities for which our industry is famous, I truly believe we can make that bold, yet smart, move and deliver the secure, equitable, and sustainable energy future the world needs.”
Co-hosted by the President of Turkey, HE Recep Tayyip Erdogan, and the World Energy Council, the WEC is a premier international, multi-energy forum dedicated to the global energy platform.
Photo caption: Amin Nasser joins CNN’s John Defterios for a brief question-and-answer session following a keynote address at the World Energy Congress on Tuesday. Nasser called on energy industry leaders to embrace new frontiers to deliver “a secure, equitable, and sustainable energy future.”