Investing Today for Stability Tomorrow: The Need for Oil Industry Reliability
Khalid A. Al-Falih, President & CEO, Saudi Aramco
Today, the petroleum industry finds itself buffeted by the aftershocks of the global financial crisis. Over the last year, both energy demand and crude oil prices have dropped sharply, as markets around the wor ld absorb the impact of the worst economic downturn in generations.
And yet in the years and decades to come, global demand for energy - including petroleum - will increase markedly as a result of steady population growth and rising standards of living in the developing world, even as consumption in the OECD nations flattens. If we couple that fact with the essential role that petroleum plays in modern life, then the importance of the oil industry's ability to serve as a reliable, responsible and dependable supplier of energy becomes clearer.
Therefore, decisions made today on whether, when, where and how to invest all along the value chain will be critical tomorrow - not just for petroleum companies and institutions, but for economies and societies the world over. Of course, timely investments depend in large part on an enabling environment characterized by a level playing field among energy sources, decreased price volatility, and reduced uncertainty surrounding energy policies - which is why the wider energy landscape is so important.
At Saudi Aramco, we've consistently maintained a long-term view of our business, and thus have stayed the course in making suitable investments in the upstream, midstream, refining and petrochemical segments. In terms of exploration and production, we view timely investments as critical to achieving three key objectives: offsetting the natural decline of our producing fields, growing production capacity to meet incremental calls on our production, and maintaining the spare capacity which helps to underpin global market stability and dampen volatility. This year, in fact, we reached our stated goal of 12 million barrels per day of sustainable crude oil production capacity by commissioning Khurais, the largest crude increment in the history of the industry - despite the short-term downturn in demand.
In the midstream segment, we continue to expand the gas-processing facilities, which help to meet domestic energy demand and power Saudi Arabia's economic development and diversification. Downstream, we're developing three world-scale refining projects, each with 400,000 barrels a day of capacity: export-oriented joint-venture refineries in Jubail and Yanbu', and a major expansion of our flagship Ras Tanura refinery. We're also partnering with leading international chemicals concerns to integrate petrochemicals with domestic refining assets, both at PetroRabigh on the Kingdom's Red Sea coast and with the Ras Tanura Integrated Project, on the country's eastern shores.
However, investments don't always centre on infrastructure: equally important are the resources the company devotes to the development and deployment of cutting-edge technology, and to the professional development of our employees. As the rate of technological change and the pace of business both continue to accelerate, we recognize that highly skilled and highly motivated people will become an even more important factor in Saudi Aramco's continued success - and we invest accordingly. At the same time, we are also committed to reducing the environmental footprint of both our operations and our products, and in recent years have allocated more than a billion dollars to an environmental master plan designed to do just that.
Clearly, if our industry is to fulfill its future role as a reliable provider of energy for economic and social development, we must make wise and timely investments in infrastructure, technology, and human resource development, while also working to minimize the environmental impact of petroleum production and use. At the same time, governments around the world need to promote sensible energy policies which create an environment conducive to those essential investments. Similarly, institutions such as the International Energy Forum can enhance the exchange of ideas and information among all concerned parties, helping them to make better-informed choices, while meeting its mission of promoting the producer-consumer dialogue.
Failure among any of these entities to act wisely now may curtail necessary investments, which could in turn jeopardize the availability of adequate and affordable future petroleum supplies. The stakes are indeed high, as the ultimate cost of lagging investments and stretched production, refining and transportation capacities will be borne not just by the industry, but also by consumers around the world and the economies and societies in which they live - a fact that energy decision-makers need to consider as they craft their investment plans, resource development strategies, and policy frameworks.