Saudi Aramco pledges continued investment to meet rising oil demand

Saudi Aramco, the biggest oil exporting company in the world, remains committed to meeting future energy demand and making new investments, as the firm strives to maintain its dominance in the global energy market.

“Saudi Aramco is committed to playing its part in meeting the world’s energy needs by continuing to invest wisely throughout the cycle and across the value chain,” said Saudi Arabia’s energy minister and Aramco chairman Khalid Al Falih, in a foreword to the company’s 2017 annual report.

Average oil production in 2017 was 10.2 million barrels per day (bpd), down from 10.7 million in 2016, Aramco said in its report. Crude oil reserves stood at 256.74 billion barrels and condensates at 4.1 billion. Natural gas production rose to 12.4 billion standard cubic feet a day, up from 12.03 billion standard cubic feet in 2016.

Over the coming years, “significant” investments will be made to expand Aramco’s capacity and diversify its operations, in particular to build a “world leading position in the downstream segment of the business”, the minister wrote in his foreword, without giving the details or size of the planned investments.

State-backed Aramco plans to double its petrochemicals production by 2030, to increase the value of each barrel of oil produced and diversify the kingdom’s economy, enabling it to take a larger bite of global energy markets beyond transportation, where most oil is consumed.

Aramco’s president and chief executive Amin Nasser said earlier this year the company aims to convert two to three million barrels of oil products per year into chemicals in the long term to transform Aramco from being “a world leader in energy to a world leader in energy and chemicals”.

In July, the company said it is in early talks to acquire an interest in Saudi Basic Industries Corporation, the Middle East’s biggest chemicals firm.

At the same time, new investments will be made in research and emerging technologies to help Aramco meet general oil demand, which is growing at a rate of 1 million to 1.5 million bpd each year, Mr Al Falih said in the report released late on Friday.

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“Because petroleum is expected to remain a major part of the world’s long term energy mix, Saudi Aramco is not only investing to strengthen its upstream oil position, but working diligently to lighten the carbon footprint of oil, [and] leveraging our excellence in research and innovation to address areas of strategic technological importance,” he said.

Such areas include advancing sustainable transport through the development of “ultra-clean” integrated fuel engine systems, as well as other solutions such as carbon capture and storage and increased use of cleaner natural gas.

The company expects to double the domestic production of gas while establishing a profitable international gas business. It discovered two new oil fields, Sakab and Zumul, and a gas reservoir in the Sahba field in 2017, the report said.

Saudi Aramco performed “exceptionally well” last year, aided by the global oil market recovery, the minister wrote. However, despite an improved market picture, the industry’s preparedness for the future remains in question as the sector has lost an estimate $1tn in planned investments since the start of the market downturn, he added. In light of rising demand for energy globally, as well as “steepening” natural declines across the world’s oil fields, continued investment is all the more crucial.

Aramco “continued to prepare itself for the listing of its shares, a landmark event the company and its board anticipate with excitement”, Mr Al Falih noted.

Saudi Aramco is planning to part privatise the company through an initial public offering of 5 per cent of its shares in the coming months – “most likely” in 2019, he said in May. It would be the world’s biggest ever listing, according to estimates.

“Our achievements in 2017 reflected Saudi Aramco’s steadfast commitment to helping ensure global energy demand will be met for years to come, pursuing technologies and initiatives to derive even greater value from oil through petrochemicals and advanced materials, and investing in R&D to continue reducing energy’s carbon footprint and improving the company’s operational efficiency,” Mr Nasser said in the report.

"Despite volatile conditions, Aramco will build on 2017’s successes “to reinforce our leading position in oil and gas exploration and production, further our downstream growth and maintain our focus on innovation.”