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World's Top Energy Provider Is Beginning To Look Beyond Oil
By Syed Rashid Husain
10/21/2011

The energy world is changing and so is Saudi Aramco, the world's leading energy supplier.

The global dependence on crude is undergoing a major metamorphosis. It is definitely going to change, if not evaporate, over the next few decades. While the global economy already is in tatters, being kept in an oxygen tent as the capitalistic model is under threat all around, crude intensity is changing fast and for good. More efficient machines - from cars to airplanes and refrigerators to industrial equipment - all are attempting to reduce energy consumption. This would have a major impact on the global energy demand.

In the meantime, new energy frontiers are cropping up on the global horizon. Shalegas, oil sands, emerging Arctic, biofuels, growing Iraqi output - all are impacting the global resource structure immensely. Global energy centers are in transition.Indeed behind this transition is a lurking political desire. For strategic, geopolitical reasons, the West simply wants to reduce its dependence, if not move away outright, from the Middle Eastern crude.

Hence despite all the talk of creeping Peak Oil point, most now agree that the resource side may not be a major growth constraint in the coming decades. This is a changing equation with major, strategic implications.

Sitting at the giant Ghawar Center of Saudi Aramco, witnessing the signing ceremony of the strategic joint venture, SADARA, between Saudi Aramco President & CEO Khalid A. Al-Falih and Andrew N. Liveris, the DOW Chemical Company Chairman & CEO, the mind kept venturing into the changing future of the energy world. And that carries implications for Saudi Arabia too.

The state energy enterprise seems preparing for the eventuality. Senior people within the global energy giant are already talking in terms of "Accelerated Transformation Program."

While witnessing the signing ceremony and then the speeches thereafter, one also recalled the grand old man of the energy world, Ahmed Zaki Yamani, underlining repeatedly before the energy fraternity to remember, "coal didn't end, coal era came to an end." Indeed in the remarks one can't fail noticing the interesting analogy to oil.

One also can't miss out the changing regional environment and its impact. There seems an ongoing intellectual movement all around - extract oil from beneath the surface, add value to it, over the next few days, and then push it out of its shores. The stress seems on moving away from exporting the crude without adding value to it. Indeed planners from Riyadh to Muscat are insisting today on re-exporting the value-added product in the form of one plastic or the other. The prevalent model is to change. This also meant moving away from exporting the commodity resins. The current thinking emphasizes moving a further step beyond now - away from just producing and exporting the resin. Indeed this strategy also invoked the possibility of attracting, in the process, foreign direct investment. Then it also goes hand in hand with the increasing stress throughout the region from Riyadh to Manama on generating employment for the unemployed, frustrated youth.

A major transition thus seems to have taken place in the overall thinking process over the last few years. Saudi Aramco is acknowledging the changing times - with a rather big bang - the close to $20 billion SADARA jv in Jubail.

SADARA is to be a game changer - from Al-Falih to Liveris everyone emphasized that day. This was a major strategic in more than one sense. Some decades down the line, Aramco may not be the same organization as it is today. Indeed Aramco and to that effect Saudi Arabia, would continue to be a major player on the global energy horizon; it would continue to impact the global energy balance, yet the very orientation, the overall direction of the country and the company are changing.

Al-Falih was blunt. "This joint venture signals an important new chapter in Saudi Aramco's storied history, as well as the logical next step in our company's evolution. From our earliest days, Saudi Aramco has grown and changed with the times, and being a commercially driven entity, seized opportunities while anticipating the world's energy needs and responding to national interests," Al-Falih said in his speech at the SADARA signing ceremony.

"As such, we have progressed from primarily an oil and gas producing company, to an integrated petroleum enterprise with a sizable refining portfolio and significant global footprint.

Our downstream business is expected to further expand over the coming decade to encompass one of the world's largest refining portfolios. This evolution is in line with our primary strategy of steadily adding greater value to our hydrocarbon supplies," he said.

"Now, entering high-value chemicals is naturally our next phase, as we move down the petroleum value chain. Investing at the scale of Sadara, and with such an advanced product slate, is also consistent with our intent to become the world's leading integrated energy company by the year 2020," the Saudi Aramco CEO underlined.

Source: Arab News, Saudi Arabia, October 16, 2011. Changes were made in keeping with the editorial policy of www.memrieconomicblog.org .

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