Saudi Aramco has long focused on domestic oil and gas exploration and development, and foreign investment and foreign investment are extremely limited. After more than 90 years of development, Saudi Aramco has established itself as a key player in the global upstream oil and gas sector. As the global need to achieve climate governance goals becomes more urgent, and in the face of the challenges of energy transition and energy security, Saudi Aramco continues to maintain its leadership in oil production, increase investment and investment, strengthen international partnerships, accelerate the development of the natural gas industry, strive to build a broader energy value chain, invest in key global business markets, and increase business diversification. At the same time, Saudi Aramco's emphasis on technological innovation, core strengths, exploration of key markets, and openness and win-win energy transition have provided useful lessons for traditional national oil companies.
Recently, Saudi Aramco announced the acquisition of a 40% stake in Pakistan's natural gas and oil***. The deal is Aramco's new downstream business, following its first investment in the South American downstream retail market on September 15. These initiatives demonstrate Aramco's determination to internationalize its downstream business, accelerate its energy transition, and diversify its strategic footprint.
Adhere to the core oil and gas business.
Make an impact in your areas of strength
Oil is the backbone of Saudi Arabia's economy, which is highly dependent on oil exports. According to the International Monetary Organization, Saudi Arabia's fiscal breakeven oil price in 2023 is 80$9 barrel. As a major force in the oil and gas sector, Saudi Aramco has a significant influence on the global oil and gas market.
On November 30, a number of OPEC+ members announced that they would implement additional voluntary production cuts totaling 2.2 million barrels per day from January 1 to the end of March 2024, and that they would gradually resume production depending on oil market conditions to support the stability and balance of the oil market. Saudi Arabia continues to lead the current round of production cuts with a share of 1 million barrels per day. Saudi Energy Minister Abdulaziz bin Salman promised in an interview with Bloomberg on the 5th of this month that Saudi Arabia would take measures to limit production according to the promised share.
In April this year, Saudi Arabia's energy ministry announced that it would work with some OPEC and non-OPEC countries under the framework of the OPEC+ "Declaration of Cooperation" to voluntarily cut production by 500,000 barrels per day from May to the end of the year. It stressed that the production cut is a precautionary measure to support the stability of the oil market.
As oil prices fell in the second quarter, Saudi Arabia began to cut production by 1 million barrels per day in July. Saudi Aramco President and CEO Amin Nasser said at this year's third-quarter results conference that it will continue to grow its upstream business, and the company aims to increase its maximum sustainable production capacity to 13 million barrels per day by 2027.
Expansion of the natural gas industry
Meet energy security and emissions reduction needs
Natural gas is an indispensable enabler of the global energy transition.
In 2020, Saudi Aramco began looking for opportunities to invest in and develop joint ventures in domestic and foreign gas and LNG projects. One is to reduce the dependence on power generation and condensate power generation, and release more for exports;Second, it believes that expanding the natural gas and LNG business is a powerful measure to reduce the global carbon footprint.
Saudi Aramco's natural gas development strategy is to increase natural gas production by more than 50% from 2021 levels by 2030 and become one of the world's top natural gas producers.
On September 28, Saudi Aramco acquired a minority stake in U.S.-based Midocean Energy for $500 million, which is acquiring interests in four LNG projects in Australia. It is reported that this investment is Aramco's first international investment in the LNG sector and is an important step in Saudi Aramco's strategy to become a leading global LNG company.
On November 14, Saudi Aramco announced that it had produced the first batch of unconventional tight gas at the South Ghawar field in Saudi Arabia. Nasir al-Naimi, President of Saudi Aramco Upstream, said: "This move marks a substantial development in the company's natural gas growth strategy and will play an active role in helping Saudi Arabia achieve its carbon reduction targets and support the growth of the chemical industry. "Al-Naimi has repeatedly highlighted the important role that natural gas and LNG play in meeting the world's growing demand for safe, accessible and more sustainable energy.
Extend the downstream industrial chain
Actively develop the energy route
Saudi Aramco's oil production is well above its combined refining capacity. Aramco's downstream strategy aims to increase the conversion rate of petrochemicals, expand petrochemical capacity to 4 million barrels per day by 2030, and expand into key markets such as China.
Speaking at the 2023 MMNC Qingdao Summit, Aramco President Mohammed Al-Qahtani noted that as of October this year, Aramco and China have signed more than $8 billion in cooperation agreements. It has successively signed a cooperation framework agreement with Jiangsu Dongfang Shenghong Co., Ltd., acquired 10% of the equity of Rongsheng Petrochemical for 3.4 billion US dollars, and established a joint venture with North Industries Group and Panjin Xincheng Group in China to promote investment and cooperation in a number of downstream fields in China. These not only reflect Saudi Aramco's determination to strengthen its downstream industrial chain and strengthen the integrated development of upstream and downstream, but also demonstrate the importance and confidence that Saudi Aramco attaches to the Chinese market.
According to the data of the General Administration of Customs of China, Saudi Arabia has long been the largest country of China's imports, and about 1 4 of Saudi Arabia's exports are stably exported to China. In addition to the Chinese market, Aramco is moving forward with the acquisition of a Chilean downstream fuel and lubricants retailer. It will also be Aramco's first downstream retail investment in South America and will unlock the potential of Aramco's downstream products to take advantage of new international markets.
Implement a diversification strategy
Accumulate momentum and seek transformation and development
As a national oil company, Saudi Aramco has taken solid steps on the path of diversification and transformation with the triple responsibility of "climate governance goals, energy security and sustainable economic growth", adhering to the "risk hedging" mindset, and drawing a blueprint for sustainable development. Aramco's pragmatic, orderly and inclusive energy transition plan includes solutions such as natural gas, blue hydrogen, blue ammonia, solar energy, circular polymers and carbon credits.
Saudi Arabia released its Vision 2030 in 2016, which calls for diversifying its economy, developing renewable energy on a large scale, and achieving carbon neutrality by 2050. The ups and downs of international oil prices and the urgent need for sustainable development of the domestic economy have strengthened Saudi Aramco's commitment to diversification. Saudi Aramco for the first time this year.
In the second and third quarters, it was emphasized that the scale of investment in 2023 will be expanded, and the investment budget for 2023 will increase by nearly 50% year-on-year to remain between 48 billion and 52 billion US dollars. It is also the largest investment program in the company's history.
Since the beginning of this year, Saudi Aramco has partnered with Germany's Siemens Energy to develop a direct air capture (DAC) test unit in Saudi Arabia. The plant will capture 12 tonnes of CO2 per year and is expected to be completed by 2024. With this carbon-neutral innovation, Aramco is expected to advance a large-scale pilot plant with a CO2 capture capacity of 1,250 tonnesIn October, it successfully tested "in-situ mineralization" and innovated a CO2 sequestration solution that permanently converts CO2 into carbonate rocks.
Aramco has steadily added low-carbon energy to its portfolio, including by evaluating the development of geothermal energy in the western part of the country and exploring the conversion of steam from underground aquifers into electricityPartnered with Linde Engineering to develop breakthrough ammonia cracking technology. Aramco believes that low-carbon ammonia has a key role to play in bridging the gap between domestic renewable energy production capacity and total energy demand in some countries, with the aim of working together to build a commercially viable low-carbon hydrogen** chain.
Saudi Aramco values the development of materials technology and believes that more durable and sustainable materials are an integral part of the energy transition. The joint venture between Saudi Aramco and Baker Hughes has started production of reinforced thermoplastic pipes (RTP7) with an annual capacity of up to 1,000 kilometers. Compared to traditional steel pipes, the new pipes are more corrosion-resistant, lighter, more durable, and easier to install, reducing costs and carbon footprint throughout the life cycle.
This article was originally published in the 6th edition of China Petroleum News on December 19, 2023, with the original title "Saudi Aramco Draws a Blueprint for Sustainable Development".
Author: Li Ying, Research Institute of Petroleum Exploration and Development, PetroChina.
*: Saudi Aramco's Q3 earnings report.
Editor: Xia Yuqing.
Editor-in-charge: He Li.
Review: Ma Yingying.
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