Oil will retain leading role, says Saudi Aramco Official

Dubai, December 11, SPA -- Presenting his views on the future of
petroleum supply and demand in the “The Global Energy and Materials
Forum” organized here recently by management consulting firm McKinsey
& Company, Saudi Aramco Executive Vice President of Operations Khalid
A.

Al-Falih said that oil will “retain its leading role among the
world’s energy sources … [as] there is consensus that fossil fuels
will still be supplying some 80 percent of the world’s total energy
requirements.”


In remarks before an audience of energy and management executives
and experts, Al-Falih said that the recent decline in oil prices is
due to a “confluence of factors,” including lower demand, a surplus
of supplies, and a prevailing negative sentiment about the global
economy.



Addressing the focus on alternative energy sources, Al-Falih said
that “the world will need energy from different sources, yet, fossil
fuels will continue to furnish the lion’s share of global energy
demand for the next few decades.”

Al-Falih noted that development of alternatives will face serious
economic and technical impediments in addition to customer acceptance
and the impact on food supplies and prices.


“Calls to move away from fossil fuels … do not represent a practical
or effective strategy, " he said.


On the challenge often voiced about long-term energy reserves,
Al-Falih explained that “out of a total liquid fuels resource
endowment of 15 trillion barrels in place, the world has consumed
only about 1 trillion or seven percent of the total resource base.”


The challenge, Al-Falih further explained, is converting these
resources into supplies while tackling a complex economic,
environmental, policy, and technological environment.


Elaborating on this issue, Al-Falih said that “the conversion
question requires an ‘enabling environment’ conducive to attracting
the necessary investments … with a stable price for oil.” “Extreme
volatility hinders the development of not only conventional and
non-conventional liquid resources, but also alternative fuel
sources,” he said.



Al-Falih spoke of the investment requirements facing the global
petroleum industry, saying that conventional upstream investments
will continue due to projected future demand growth.


He added that “projects that require a high price environment … are
likely to be deferred or reexamined.” Likewise, downstream
investments will “come under greater scrutiny” due to the challenging
position of this sector. In this situation, Al-Falih said, “we could
see a new round of underinvestment, … of overstretched capacities and
high prices — repeating a vicious cycle, damaging the interests of
both producers and consumers.”


Presenting the outlook for Saudi Aramco’s investment project
portfolio in view of the global economic crisis, Al-Falih said that
“despite the substantial market volatility and changing economic
dynamics in the short-term, our long-term direction continues to be
driven by three key strategies: a focused but flexible investment
program, the further development of the Saudi economy, … and
operational excellence.”


Al-Falih emphasized that Saudi Aramco maintains a long term
perspective when dealing with investments, while it also consider the
short-term requirements of agility and flexibility. “We build for a
generation or more,” Al-Falih said.


“we also recognize that we have to operate efficiently in today’s
environment, and strive to optimize our investments in light of both
market conditions and the need to maintain reliable operations,
without taking our eyes off from our long-term objectives.”


Al-Falih also addressed the important requirement to leverage the
hydrocarbon activities towards the continued development and
diversification of the Saudi economy through in-Kingdom procurement
of goods and services, knowledge-sharing activities with Saudi
institutions and companies, and creating investment opportunities,
especially for the downstream petrochemical sector.


As part of its “commitment to excellence,” Al-Falih said that Saudi
Aramco focuses on innovation as demonstrated by its I-Field concept
development and extreme reservoir contact wells, as well as on
research and development in areas such as desulphurization, carbon
management and clean fuel formulations. But, Al-Falih added, “the
most important enabler of our success is our human resources.”
“People remain the greatest competitive advantage that we enjoy as a
business,” he said.


Summing up his remarks, Al-Falih assured his audience that “Saudi
Aramco possesses the financial, industrial, technological and human
resources needed to meet our commitments and maintain our reputation
for operational excellence and reliability… and to add value to the
Kingdom’s economy.”