OREANDA-NEWS. March 19, 2013. There are predictions; and then reality unfolds. Not long ago, a number of forecasters painted doomsday scenarios that a scarcity of resources would threaten world energy security. 

However, that narrative is dissolving as a paradigm shift is now under way that is re-shaping the entire world of energy.

Saudi Aramco president and CEO Khalid A. Al-Falih delivered this message during his opening keynote address March 5 to world energy leaders gathered in Houston for one of the industry’s most prestigious events: the IHS Cambridge Energy Research Associates Annual Conference (CERAWeek). 

This year’s event drew more than 2,500 senior executives, officials and other delegates from more than 50 countries for interactive discussions and presentations on the energy future.

Sweeping new realities

Al-Falih said the energy industry has experienced “sweeping new realities” that have created a renaissance in the petroleum industry. He commended energy leaders for their role in ushering in this era of growth by remaining resilient in the face of regulatory and economic uncertainty.

He touched on four realities that are “altering the world energy landscape.”

First, growth in energy demand — oil in particular — has moderated. Al-Falih said that before the financial crisis of 2008, global energy and oil demand were anticipated to grow rapidly. “However, forecast growth has moderated,” he told listeners, “not only as a result of economic stagnation but also welcome and increasing gains in energy efficiency.” He added that this sustained moderate growth in demand levels will help balance the market, which is “very healthy for our industry.”

Second, exaggerated concerns about scarcity and security of oil supplies have been dispelled. “Today, the narrative centers on the abundance of oil and natural gas resources, primarily with the inclusion of unconventionals,” he said, adding that unconventional resources will be challenging to extract, requiring ever-advancing technologies and a positive regulatory environment.

Third, the global financial crisis has forced policymakers to re-examine priorities and make choices to stimulate national economies with more favorable market conditions. “Affordability matters to nations as well as consumers,” he said.

And fourth, due to this economic re-balancing and “age of austerity,” the role of renewables is being re-evaluated. Natural gas prices, in particular, have become more competitive, thus affecting the position of renewables in the energy mix. Al-Falih added, however, that he believes renewable fuel sources will have an important role to play in the long-term as they become more affordable and that Saudi Aramco will continue to invest in their development.

Build greater resilience for a strong future

Al-Falih said the healthy picture created by these four sweeping realities should not make the industry complacent. He quoted the “old cowboy philosopher” Will Rogers: “’Even if you’re on the right track, you’ll get run over if you just sit there.’”
 
To position the industry for the future, Al-Falih told industry leaders, “We need to surely build greater resilience … to withstand the shocks and black swans that are inevitably out there.” He went on to cite five imperatives to achieve this objective.

First, the industry has a “collective responsibility” to do what it can to create market stability for long-term global growth and prosperity. He touched on Saudi Aramco’s efforts in this regard to respond to natural disasters, world events and fluctuations in customer demand over the past year.

Second, leaders must learn from the lessons of the past and better manage risks. He addressed the need for prudent financial strategies, business portfolio diversification and solid defenses against unforeseen incidents such as industrial accidents or security breaches.

Third, the industry must stay closely connected to societal expectations, and in particular, safety and environmental protection.

Fourth, the industry must continue to create “truly transformative, game-changing technologies.”
And fifth, it must capture the hopes and dreams of new generations by showing them the “abundant high-tech and exciting opportunities our industry has to offer.”

In conclusion, Al-Falih said that, if the industry does all these things, “We will achieve the desired resilience and propel the global economy” and position the industry to “safely and reliably provide the world with the essential energy it needs, far into the future.”

After his address, Al-Falih touched on several areas in response to questions submitted from the audience:

Saudi Aramco is undergoing a major transformation to prepare for the future by diversifying its business portfolio, growing petrochemicals and pursuing unconventional gas. 

Offshore well development is ramping up considerably, with crude output from the Manifa field expected to significantly boost the company’s overall production capacity. 

Solar energy development is a priority, as the company continues to support research and fund programs for power projects throughout the Kingdom.