Speaking at this year’s Offshore Northern Seas (ONS) Conference and Exhibition, Khalid A. Al-Falih, Saudi Aramco president and CEO, addressed the challenges facing the industry and gave insights into Saudi Aramco’s strategy for turning these into opportunities. ONS is one of the key industry exhibitions and conferences for the offshore oil and gas industry. The biennial event attracts more than 1,000 exhibitors and more than 50,000 visitors and provides a platform for the presentation of the political, economic and technological issues involving the international oil and gas industry, as well as showcasing the latest innovations within the industry.
In his speech, Al-Falih outlined some of the chief challenges that major producers such as Saudi Aramco face, including rising project costs, critical manpower shortages, global economic weakness and political turmoil in many oil producing regions, including Africa, the Middle East and the former Soviet Union. These challenges must be faced with “prudent caution,” Al-Falih said, focusing on long-term strategies for meeting the growing global need for energy and enhancing “our industry’s resilience to the kinds of shocks, surprises and difficulties” the industry currently faces.
The industry’s greatest challenge, Al-Falih said, is meeting its primary purpose of supplying energy to the world, where global energy demand is set to grow by more than a third from the current level. To do that, “our industry will need to add close to 40 million barrels per day of new capacity in the next two decades,” Al-Falih said. “To put that figure into perspective, that’s equivalent to approximately 30 Norways or 15 times America’s current unconventional oil production.”
Saudi Aramco’s strategy for meeting that growing demand is to invest $40 billion a year over the next decade to keep steady the company’s maximum sustained oil production capacity at its current 12 million barrels a day level, in addition to doubling its current gas production levels. Much of this capital will go into offshore projects, Al-Falih said, both in large-scale projects similar to its Manifa project in the Arabian Gulf, and more recent offshore exploration in the Red Sea and Midyan fields.
“Each company, naturally, will choose its own course, given its unique capabilities and objectives,” Al-Falih said. “At Saudi Aramco, we have realized the major shifts in our landscape and have undertaken a transformative and comprehensive change process that leverages innovation and technology, talent, agility and resilience, and our business investments and portfolio expansion, in addition to strengthening our proactive role in the broader development of the Kingdom of Saudi Arabia.
“We are convinced that innovation and cutting-edge technology are the key strategic enablers of our current success and future competitiveness, which is why we are tripling our R&D manpower and increasing our R&D funding five-fold,” Al-Falih said. By setting a company goal of becoming leaders in technological innovation in a dozen domains, Saudi Aramco is on target for increasing its oil recovery to 70 percent, allowing it to add more than 100 billion barrels of oil resources to its already large portfolio. Al-Falih also pointed to major advancements in drilling, which is vital to realizing Saudi Arabia’s significant unconventional gas potential.
The CEO also emphasized that the company continues to diversify across the value chain and increase its global footprint. “Even as other companies are retrenching, we will be investing to build a vertically and horizontally integrated, top-tier refining, marketing, petrochemicals, lubes and power business — with much of that expansion coming in the form of joint ventures with other leading global firms at home and abroad,” Al-Falih said.