OREANDA-NEWS. April 30, 2014. Saudi Aramco’s ambitious downstream expansion came into focus at the 15th International Oil Summit in Paris where president and CEO Khalid A. Al-Falih addressed a packed audience alongside Christophe de Margerie, CEO of French energy major Total.

Leaders from across the global oil industry, as well as the world’s media, listened as Al-Falih underlined Saudi Aramco’s credentials beyond upstream.

“We are in the process of building a world-leading downstream business that is both vertically integrated across the value chain and horizontally integrated across suitable geographies. Our goal is to add greater value to our hydrocarbon supplies, while building a more robust and resilient portfolio that can better withstand market turbulence,” he said.  “We’re doing that through what I would call ‘new platforms’ for downstream business success, which I strongly believe represents the new model and way forward for this sector of our industry.”

Al-Falih told his audience that these “new platforms” require four key factors to ensure success.

The first, he said, is simply “large scale,” referring to the massive plants and their mega-capacity that enables them to “capture operational efficiencies and economies of scale.”

The second factor involves integrating refining, chemicals and lubes for value addition and portfolio diversification. Al-Falih said that this could be best achieved in a facility that has a certain critical mass of processing capacity. But as these mega-facilities are tied to reliable supplies of oil, he told those listening that having the right kind of reliable crude slate was essential.

The third key ingredient, according to the CEO, was building these facilities close to major markets.

“Matching world-scale plants and infrastructure with strong future demand for their output is vital for downstream success, and we will continue to see most of these new platforms being built in high-growth markets such as China, India, developing Asia and the Middle East,” he said.

Al-Falih underlined technology as the fourth key factor for the success of “new platforms,” as it would allow plants such as the SATORP complex to produce cleaner products that meet increasingly high environmental standards, all while maximizing profitability. Technology, in addition to innovation, was a constant theme throughout the summit, particularly as a driver for lowering costs, expressed not only by international oil companies (IOCs) and national oil companies (NOCs) but service companies, as well.

Al-Falih explained how Saudi Aramco was strengthening its R&D program with a technology agenda that incorporates both upstream and downstream. He made mention of the company’s research into advanced integrated fuel engine systems.

“We believe there are tremendous opportunities to be realized from the synergies that can be harnessed by combining advances in engines and fuels and by looking closely at their interface.”
He said that this research will satisfy several objectives, including radical improvements in mileage efficiency, substantial reduction in emissions and “the economic viability of engines and the fuels that power them.”

Hosted by the renowned energy institute Institut Francais du Petrole (French Petroleum Institute), the summit opened with remarks from Nordine Ait-Laoussine, former Energy Minister of Algeria, who moderated a morning session that included representatives from the International Energy Agency and International Energy Forum.

Satisfying energy demands was emphasized by speakers to be a joint challenge for both IOCs and NOCs, as was the effective management of supply costs. While moderating the IOC/NOC session, Ait-Laoussine mentioned how Saudi Aramco, under its current CEO, introduced the notion of the “INOC” — national oil companies who had evolved to include CSR, economic diversification and job creation as part of their remit.

All sessions featured perspectives on the macro view of the oil market, and Al-Falih, before delivering on the main theme of his speech, downstream, gave his thoughts.

“Despite the challenges we may face, the petroleum industry has weathered the effects of the global economic downturn better than most, and I believe we are in a long stretch of an expansion phase. In fact, if anything, the industry risks being stretched by the stretch. For example, oil demand is expected to continue growing,” Al-Falih said. “Most of this growth stems from the combination of a larger global population, higher living standards and rising urbanization, especially in the developing world where billions of new consumers will be demanding the comforts and conveniences that energy can provide.”

Al-Falih added that there was enough oil to meet growing demands, given the large global resources of both conventional and unconventional supply.

DeMargerie, who spoke immediately after Al-Falih, said that technology would be the key to unlocking the potential of unconventional resources, which would “extend the oil and gas horizon.” Total’s chief also said the industry would have to move as one if it wanted to realize its efficiency and profitability targets.

In keeping with the rest of the summit, both CEOs ended with a Q&A session in which Al-Falih stated that Saudi Aramco would maintain a daily crude oil production capacity of 12 million barrels and reiterated its commitment to unconventionals through \\$3 billion worth of investments.

Ministerial representation also came in the form of HE Suhail Mohammed Al-Mazrouei, Energy Minister for the UAE, and HE Abdalla Salem El-Badri, Secretary General of OPEC, who said that challenges and uncertainties for the industry remained and new ones might be around the corner