NEWS FROM IHS CERAWeek: Saudi Aramco CEO celebrates industry renaissance, but urges resiliency against shocks
BY PRAMOD KULKARNI
HOUSTON – Saudi Aramco President and CEO Khalid Al-Falih welcomed the renaissance of the oil and gas industry through the “can do” spirit of the North American shale companies and individuals, but urged the industry to build resiliency from possible economic, environmental or political shocks. Al-Falih was the first keynote speaker at the IHS CERAWeek underway here.
Saudi Aramco CEO Khalid Al-Falih (right) at IHS CERAWeek in Houston with Daniel Yergin, IHS Vice Chairman. Photo by Gary Fong.
“The oil and gas industry across North America is flourishing, and helping to drive national and regional economies, thanks to many of the enterprising companies and individuals,” said Al-Falih. “You challenged pre-conceptions with your entrepreneurial spirit, and the ‘can do attitude’ which has always characterized this great nation. Once again, you’ve set the pace for the rest of us in the global petroleum industry.”
Al-Falih described four sweeping realities that are re-shaping the energy world: 1) growth in global energy demand, 2) dispelling of exaggerated concerns about scarcity and security of oil supplies, 3) global financial crisis has forced policy makers around the world to reexamine priorities, and 4) re-evaluation of the role of renewables and of some environmental initiatives.
“These four realities have profoundly altered the world energy landscape, which is inducing a more pragmatic debate about global energy policies and regulations,” Al-Falih explained, “It is now more certain that our industry will continue to play the major role in fueling the transport, power, and chemicals sectors for many decades to come, and importantly providing a sustained environment of growth and investment for our individual companies.”
While celebrating the industry renaissance, Al-Falih urged caution. “Let’s just make sure that we are– collectively and individually–robust enough to withstand the shocks and black swans that we know are inevitably out there. Now is the time to think about preparing ourselves for their certain arrival … If we are to position our industry for the future we surely need to build greater resilience.”
Elaborating on the resilency theme, Al-Falih said, “Despite our efforts to bring stability, we should all anticipate volatility and build prudent conservatism into our financial strategies. In very recent memory, we saw prices swing between $35 and $150 a barrel within a period of a few months. And on the other hand, as we know from painful experience, what happens to one company affects us all. It could be an industrial accident, a crisis of trust in corporations, or a security breach. As I know from last year’s malicious cyber-attack on Saudi Aramco, there are a lot of bad guys lurking out there!
In his conclusion, Al-Falih threw open several challenges for the oil and gas industry. “Our business is already technology intensive, but we must aim even higher. In other words, we have to devote even more resources to R&D and technology creation directly within our companies. For example, could our investments in R&D at least be doubled? Could we aim for 70% recovery of conventional resources? And could we look to double or even triple recovery from unconventional resources? As a result, we would almost quadruple the reserves of global liquids from our combined conventional and unconventional resources.”