Khalid A. Al-Falih, President and CEO of Saudi Aramco, recently visited Beijing to attend the China Development Forum (CDF) 2014 and to meet key stakeholders.
Over the course of his three-day visit, Al-Falih reiterated several times the strategic importance of the Chinese market. According to Al-Falih, China, the world’s largest emerging economy and already the largest exporter, will be a key focus for Saudi Aramco in the decades to come. And Saudi Aramco, as China’s reliable oil supplier, “remains strongly committed to China’s energy security and the associated oil-related investments,” Al-Falih said.
Among key stakeholders were the business partners China Petrochemical Corporation (Sinopec Group) and China National Petroleum Corporation (CNPC), Chinese media and Aramco Asia employees in the Beijing office. Al-Falih was accompanied by Ahmed A. Al-Subaey, executive director of Marketing, Supply and Joint Venture Coordination.
At the CDF, Al-Falih addressed an audience of China’s policymakers and economists as well as executives from the top 500 international enterprises. In his speech he offered Saudi Aramco’s strong support to Premier Li Keqiang’s recent declaration of war on pollution, which the Chinese Premier called “nature’s red light warning against the model of inefficient and blind development”.
Al-Falih commented on China’s energy demand growth since 1970 and noted that China has achieved a phenomenal improvement in energy intensity over the years. Compared with 1970, Al-Falih said “China’s economy is 40 times larger today in real terms, while it consumes only 12 times as much energy as in 1970.”
The current picture, however, is not as positive in terms of the energy supply mix, Al-Falih noted.
“My friends, to turn nature’s red light to green, I believe there are three transformative paths that must be triangulated as China develops truly effective and sustainable low carbon development policies,” Al-Falih said as he went on to outline these paths.
First, China’s economy will need careful rebalancing toward greater emphasis on services and more advanced, less energy intensive industries. Achieving higher energy efficiency will be a key opportunity. Critical to this is the deregulation of the energy market and energy pricing, as market signals are the most effective means of attracting investment and encouraging consumers to be judicious in energy use.
Second, the energy mix of stationary applications will need suitable rebalancing, with a larger role for gas beyond the current six percent in China, which is about a quarter of the global average, and a determined switch to clean coal must be one of China’s highest priorities.
Third, given China’s expanding mobility needs, a steady and healthy rise in transportation energy is likely, and oil will continue to dominate the transportation sector because of multiple hurdles facing electric and fuel-cell alternatives. This means China’s oil demand growth is expected to remain fairly strong. This only reinforces the value to China of being able to access reliable supplies of oil from major producers such as Saudi Aramco.
“I firmly believe that sustainable economic development and low carbon development are not mutually exclusive,” Al-Falih said. “At Saudi Aramco, we are committed to supporting China’s efforts with both, and by doing so, help turn nature’s red light to green.”
Importantly, this year’s CDF, which featured the theme “China: To Comprehensively Deepen Reform,” provided an occasion for meeting and sharing views with key government officials at a crucial time in light of China’s ongoing comprehensive reform, especially in the energy sector. This included a meeting between Al-Falih and Chinese Premier Li Keqiang, along with a group of corporate executives. In addition, Chinese Vice Premier Zhang Gaoli and many ministers of China’s State Council spoke at the opening ceremony, highlighting China’s plans for comprehensive reform.
The many other sessions held during the forum also provided an excellent opportunity to gather valuable insight into the direction and priorities of China’s development from a diverse range of perspectives, which will help guide Saudi Aramco’s own development plans for China.
During his stay in Beijing, Al-Falih also had business meetings with Chinese business partners to further enhance the partnerships. In his meeting with Fu Chengyu, chairman of Sinopec Group, the two recounted the two companies’ cooperation both in the Kingdom and in China. Al-Falih and Fu Chengyu also explored areas where the two companies can further expand their cooperation. Al-Falih also had a business meeting with CNPC chairman Zhou Jiping, during which the two exchanged views on further expanding the two companies’ cooperation.
Al-Falih gave an interview to China Business News, one of China’s leading business media outlets. During the interview, Al-Falih further elaborated on Saudi Aramco’s commitment as China’s most reliable oil supplier. He said he believes that the ongoing free trade agreement talks between China and the Gulf Cooperation Council will bring the energy trade between China and Saudi Arabia to a new height. In addition to Saudi Aramco’s commitment as China’s most reliable oil supplier, the company is also looking forward to more oil-related investments in China, said Al-Falih.