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Clashing Visions of the Future of Oil & Gas

CERAWeek Day Two Brings Perspectives From Saudi Arabia, Abu Dhabi and the US

CERAWeek Day Two brought out the “big guns,” most notably Amin Nasser, president and CEO of Saudi Aramco,  Sultan Ahmed Al Jabar, CEO of ADNOC, and Ryan Zinke, U.S. secretary of the interior. You really couldn’t have juxtaposed more divergent views of energy and its future than those represented by Jabar and Zinke, and all three of them were interesting, clear and articulate in laying out how some of the most important drivers of energy investment and policy are thinking. 

 

Saudi Aramco: Technology as a Major Enabler  

Nasser was up first, and between Daniel Yergin and Nasser, it was pretty much a mutual admiration society. Yergin started out showing a facsimile of the telegram sent from Arabia to the U.S. in 1938 announcing the discovery of oil in Saudi. Nasser quickly followed up (after thanking Yergin for the reminder on the 80th anniversary of the discovery of oil in the Arabian peninsula), clearly and pointedly reminding the audience (and Yergin) that it was a partnership between an American geologist and an Arabian Bedouin that led to the discovery of oil in Saudi Arabia — partners who were mutually dependent on each other.   

 

Nasser’s first theme was that the fundamentals of oil are strong, and that demand growth is there this year, and is driven by growing demand in emerging Asian markets. Nasser, in fact, emphasized that demand will continue to grow, fueled by a projected additional 2 billion people in the world in the next 20 years, coupled with a three-fold growth in the world’s economy.

 

The biggest challenge, he emphasized, is the energy industry’s readiness to fulfill the increasing demand. Will the industry be able to satisfy 20MGD additional demand, which ARAMCO calculates as a need for $20 trillion in investment? Then he got really serious in his messages to the world of oil.

 

Oil Misunderstood

Nasser raised the issue, which he said Saudi Aramco is very much concerned with, that oil energy is mis-portrayed as the “bad guy” in the environment, as the climate change villain. Emissions, he pointed out, not oil itself, are the villain — and Saudi Aramco is putting its money where its voice is, investing heavily in R&D in areas like extremely high-efficiency internal combustion engines and carbon capture, to change the perception and reality of hydrocarbons as fuels.

 

Focus on New Uses for Chemicals

Nasser (as his colleagues had done articulately at MEPEC last fall) spoke convincingly about Saudi Aramco’s clear vision and where they are putting R&D resources. Aramco has set up 11 R&D centers, including three in the U.S., and they are focusing on a number of areas:

 

  • Driving up the efficiency of cars

  • Research into low-carbon products

  • Looking at the refining conversion processes, to drive up to 70 percent conversion of crude to petrochemicals. He stated they are doing that partly through a partnership with CBI.

  • Inventing new classes of chemicals for new uses in areas such as construction, automobiles, pipelines and others. Their goal is to make a car that is 50 percent plastic composites (up from 20 percent currently).

Nasser talked about technology as “the main enabler” for more efficiency. He talked about use of technology in discovery, recovery and efficiency in conversion. (See AspenTech solutions for upstream to learn more.)

 

Arabian Oil: the Lowest-Carbon-Footprint Oil

Interestingly, Nasser also spoke of Arabian Oil as the “lowest-carbon-footprint” oil, and pointed toward making it lower. This tied together with later remarks made by Suncor CEO Mark Little. Suncor is engineering its heavy oil to be lower in carbon, by separating out about 15 percent of the heaviest oils before selling it, and replacing the heaviest asphaltines back into the reservoir.  

 

But what Saudi Aramco envisions is much more innovative and important. They are looking at every aspect of how oil is produced in their reservoirs, and looking at ways of “engineering out” the energy needed for production. From electric motors to pressure used to drilling methods, Saudi Aramco is looking to make the entire process more efficient, lower in energy consumption and therefore lower in carbon — all combined with the already light-oil characteristics of Arabian crude.

 

Nasser wrapped up by pointing out that Aramco is also looking at doubling the natural gas production in the Kingdom. All in all, it was a powerful and interesting set of messages from the largest oil exporter in the world.

 

Zinke’s All-American Vision

Next up was Ryan Zinke, former U.S. Navy Seal and the current U.S. secretary of the interior.

 

I am not sure what to make of Zinke’s message, delivered in front of an audience of about 50 percent non-Americans, that the U.S. is moving to “energy dominance.” Zinke defined U.S. energy dominance as:

  • Producing all the energy the U.S. needs  and more (he defined the role of the Department of the Interior to be a partner of the energy industry, “not a preventer,”) and for the U.S. to become an exporter.

  • Producing energy economically, without regulatory impedance.

  • Being environmentally responsible, but “not in the wrong way.” (He talked about incentives as opposed to regulations.)

  • Reducing regulatory uncertainty for industry.

Zinke’s main message was (and he repeated this multiple times) for the US Department of the Interior “to be a partner to the energy industry,” and he stated that “economic energy in the U.S. (and in other countries)” drives “economic growth for the world.”

 

Zinke’s message focused on points such as opening up all U.S. offshore oil tracts to oil development and reducing regulation and inspection. These messages were straightforward, but he also panned solar and wind power as “highly environmentally and carbon-footprint-heavy when looking at the whole picture.” He talked about some massive solar farm proposals on public land, which would “turn BLM lands into single-use land,” and wind power as “carbon unfriendly” — an argument which, frankly, he was unconvincing in making.  

 

It was an interesting mosaic of contrasting views of the energy future across the world.  

 

A little later on in the morning, when Shaikh Nawaf Al-Sabah of Kuwait’s KUFPEC was asked about peak oil, he stated, “We don’t lose any sleep over that in Kuwait.” He added, “The last drops of oil produced in the world will be produced by the Middle East producers: Saudi, Kuwait and UAE.” He further explained that peak oil, which is “many years in the future,” would only serve to “drive out the higher cost producers,” and that the U.S. short-cycle oil and gas would only last a decade or two before declining — setting up an interesting clash of visions for who controls the future of energy.

 

Abu Dhabi: the Progressive Player in the Game of Energy

It is clear that Abu Dhabi and Saudi Arabia, of the players who were on  stage yesterday, had the most complete, balanced — and in a way, contrarian — long-term views.

  

Abu Dhabi was represented in two presentations, and certainly comes across as the visionary, progressive, enlightened and most-thoughtful major global producer of oil and gas. Sultan Ahmed Al Jabar, CEO of ADNOC, in stark contrast to the tenor of Zinke’s pitch, came across as a leading thinker in the energy world.

 

One big point he wanted to make was Abu Dhabi’s transformation from heavily upstream-focused, towards a much stronger focus on downstream and petrochemicals. His goal: to double the UAE’s refining output and triple its petrochemical assets. He invited everyone to a “downstream investment forum” in Abu Dhabi in May, to participate in UAE’s transformation. UAE’s budget is an expenditure of $45-50 billion in downstream in the next period. 

 

But the most interesting part of Jabar’s presentation was his positioning Abu Dhabi and ADNOC in the role of environmental stewards. He was strong and sincere in his depiction of ADNOC as holding the responsibility for setting a baseline of sustainability for the UAE.    

 

He talked about having an advanced energy vision and embracing solar power as playing a leading role. He said that, at 3 cents per kilowatt hour, it only made sense to heavily invest in solar power to provide peak power shaving for the Abu Dhabi power grid. “Why wouldn’t we embrace that?” he told Daniel Yergin. Between Saudi Aramco’s heavy R&D spending in new technology related to reducing the carbon footprint of oil, and ADNOC’s strong commitment to renewable energy, the positioning of those two speakers before and after Zinke couldn’t have been more of a strong contrast.

 

But Abu Dhabi had more to say. Suhail Mohamed Al Mazrouei, UAE’s minister of oil, was a leading participant in a late-afternoon panel on the future of carbon capture, utilization and sequestration (CCUS). Al Mazrouei laid out the UAE’s strong commitments to and investments in carbon capture. They have already implemented a large-scale carbon capture project, in which they are injecting the captured CO2 for enhanced oil recovery, thereby giving the project a commercial purpose and role. 

 

He outlined their strong commitment to do more, on a larger scale, outlining opportunities in UAE for carbon capture around their gas-fired power generation plants and a large aluminum smelter. Al Mazrouei is bullish on the prospects for driving down the costs of carbon capture, which, by the way, was echoed by Occidental Petroleum’s Vicki Hollub, appearing on the same panel. 

 

Certainly, over the past few years, things have gone fairly quiet on the carbon capture front worldwide. But it certainly has emerged as a theme at CERAWeek across several key presenters.

 

To learn how Aspen Plus® uniquely helps design carbon capture facilities, read about it here.

 

The Enabling Forces of Digitalization

As those in attendance absorbed the messages around these major business trends and strategies, CERAWeek’s expanded Agora innovation showcase highlighted digitalization as a key driver of them. The opportunity presented by digital disruption loomed over and around the conference, and the Agora proved impossible for executives to ignore as they walk from session to session. 

 

Google Cloud’s Diane Greene drew a large crowd right after lunch, and several AI and machine learning panels — two of which included AspenTech’s CEO Antonio Pietri and Asset Performance Management General Manager John Hague as leading participants — challenged a highly engaged crowd of upstream executives. Pietri held the attention of the crowd in advising the implementation of digital technologies with strong attention to operational excellence goals, and with the need to align organizations to effective use of technologies, in the framework of organizational excellence.  

 

Read the recent AspenTech white paper on upstream digitalization for more information on this topic.

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