CERAWeek Exclusive: A Conversation with Amin Nasser of Saudi Aramco

On the 80^th anniversary of Saudi Aramco discovering oil, Dr. Daniel Yergin spoke with the CEO of Saudi Aramco, Amin Nasser about what lies ahead for the industry. Here’s an excerpt from their discussion:

Dan Yergin: Thank you, Amin, and thank you for your discussion both of the complexity of transition and pointing out among vehicles of the future, there are five horses in that horse race, that's still undecided. I think I would not be doing my job if I didn't ask you what's the state of the IPO?

Amin Nasser: I think the IPO, as highlighted many times before, is progressing very well. We became a joint stock company effective January 2018 or end of 2017. All the work streams are progressing very well. The questions being asked is when and where, in terms of where we are going to be listing in addition to the DOW and when. This is shareholder decision and it's up to the shareholder to decide.

Dan Yergin: Right. No company takes a longer view than Saudi Aramco and one of things that you've put a lot of emphasis on is research and development. And how many labs do you have around the world?

Amin Nasser: Currently, we have three major labs in the Kingdom and eight international labs and three in Europe and Asia and the United States, so they are in different parts of the world, in different innovation hubs to attract more talents in different countries.

Dan Yergin: So why has Saudi Aramco put such an emphasis, distinctively on R and D?

Amin Nasser: I think technology is a major enabler. If you look at our performance today as a company, it is mainly related to high technology utilization and breakthrough technology that we are utilizing. So I think for our industry, if you look at our focus area when it comes to technology, the main focus area is recovery and discovery which has basically increased our recovery and increased our discovery.

That's why as a Kingdom we have more than 260 billion barrels today and 300 trillion standard cubic feet of gas, which is very significant.

We are the lowest cost reducers because of all of these technologies in the discovery domain and the recovery domain, so we are talking about modeling, seismic collection, and seismic interpretations, but there are a lot of new areas that our technology helps around the world and the Kingdom, helping us to achieve a lower carbon footprint. This is very important and significant going forward, so we're looking at new engines, better fuel formulations, and to reduce the carbon footprint. We are looking at carbon capture, utilization, sequestration, turning CO2 to useful products. A lot of things have to do with carbon management going forward.

Another focus area is, in terms of, what can we do to diversify our income as Saudi Arabia. Technology is a major enabler. Today, we can convert 45 percent of our crude, commercially, to petrochemical but we need new technologies to convert more of our crude to petrochemicals and that can only happen if you reduce your capital costs. So, now that we are doing the demonstration project here in the US with CBI and Chevron about converting 70 percent of the barrel to petrochemical and reduces the capital cost of 30 percent. That will reduce the price of petrochemicals in the future and allow it to penetrate new sectors like constructions, auto, and pipelines and all other sectors.

The third also important focus area of our technology is in order for us to increase the input or the feed of our products through petrochemical, we need to find uses for that petrochemical feedstock. Today, the petrochemical growth is about two and a half to three percent and would like to grow that even further. And this is where we are looking at non-metallic applications by our technology centers to see how we can shift a lot of what is happening today to petrochemicals. If you look at a car today, almost 20 percent is composites, but how can you go to 40, 50 and 60 percent? And carbon, as you know, is much better in terms of materials: hard, more durable, lasts for longer period, slighter. So when I talk about electric vehicles, we will help them, alright? But it requires a lot of technologies.

Dan Yergin: So, you're putting an emphasis on it. Really developing new uses, new demands for hydrocarbons.

Amin Nasser: Exactly.

Dan Yergin: I mean, you're putting a lot of money, a lot of effort - eight research centers into R and N. How do you see the rest of the industries?

Amin Nasser: I think that there's definitely a lot of pressure on cost cutting that is ongoing right now because of the down turn, especially after the drop in prices in 2015. A lot of it is not only technologies that are impacted. Even discovery, the globe, the world consume almost 60 billion barrels of oil equivalent every year and to add 7 billion barrels? Basically you are not replacing what you are consuming and that is alarming. So, technology is a major enabler to increase our recovery, discord, add more resources, and as I said, it will optimize our costs so we will be able to compete with other resources, alternates, electric vehicles, if we are able to continuously cut our cost going forward. Technology is a main enabler for me.

Dan Yergin: Right. You spoke about carbon management and I know you've done some research looking on the carbon footprint of your oils compared to others and you might want to share this news.

Amin Nasser: Thank you. There is a latest study about the different type of crude that's supplying China and its nature. Different types of crude supplying China for almost more than a 100 fields, 20 countries.

Our crude has the lowest intensity and have the lowest intensity in terms of carbon footprint, not because of the quality of the reservoir only. Of course, the quality of the reservoir has something to do with it but it is the use of technology.

Because when you talk about drilling wells and using multi laterals and equalizers and capitalizing on the reservoir, pressure to push the crude to the surface you are requiring much less energy to burn to bring that crude to surface.

There's a lot of energy emission today to produce a barrel for crude, because of all the bumping that is required and all the gas injections and all of these things - electrics submersibles burns on all of that.

That would require a lot of energy. So, this study made a comparison of our barrel of crude coming from Saudi Arabia to the barrel of crude coming from other countries and it showed that it had significantly lower energy intensity compared to other crudes, mainly because, as I said, the lower intensity, lower energy required to bring the barrel all the way from the well to the refinery gates.

Dan Yergin: So, Saudi Arabia is certainly no longer the 22nd largest producer in the world, but we do read that Saudi Arabia is looking at international gas strategies, Saudi Aramco and perhaps even acquiring assets in the United States. Is there any veracity to that?

Amin Nasser: I think gas is a very significant growth area, it is very important as clean air. It's very important if you look at the Kingdom compared to 2015, over the next ten years, we are looking at doubling our gas production in the Kingdom. Our utility sector today is 50 percent on gas, over the ten years we are making sure that we will shift it to 70 percent on gas.

So if you look at the world today, 350 billion SCF of gas production. By 2040, you're looking at more than 500 billion standard cubic feet per day for gas. Very significant growth in gas, that's an important market and we are trying to capture some of the growth area in different parts of the world. The US is also one of it. So we have a team that is looking at opportunities globally in gas production, international gas production.

Dan Yergin: You should know, Amin partly began his career midland Texas. So he has deep roots in American shale.

Thank you very much for being with us, we really appreciate it, and thank being at CERAWeek 2018. Thank you Amin!

Explore additional CERAWeek sessions and see the full session of Welcome and Special Address with Amin Nasser CERAWeek.com.

This is an excerpt from CERAWeek 2018 and has been professionally transcribed as accurately as possible. Please note, some words and phrases may have been unintentionally excluded.

IHS Markit Energy Expert
Posted 8 March 2018

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.