Saudi Aramco—transition, transition, transition
Saudi Arabia increases emphasis on expanding non-oil sources of energy
Saudi Aramco is deeply embedded in the kingdom's DNA. It's almost impossible to think of Saudi Arabia without it. So it seemed something akin to heresy for a Saudi columnist to urge young Saudis to "prepare for the post-Aramco era of new-energy companies". A post-Aramco Saudi Arabia? Perish the thought.
While the writer may not have meant literally that a time would come when Aramco would cease to exist, he was making the point that the company's traditional role—and the energy scene in the kingdom and the world at large—is in a period of transition. Oil is no longer the guaranteed life-long gold standard that it used to be.
Saudi Aramco itself is well aware of the need for change. Chief executive Amin Nasser told Petroleum Economist in December that "there's a transformation that's happening in the industry", driven by climate change policies, energy policy regulations and technological advancement. Mohammed al-Qahtani, Aramco's head of upstream, told an audience earlier this year that "we recognise the transition at hand will be a generational phenomenon. And while it's reasonable to expect oil and gas will play a vital role for many years to come… our industry must transform".
In the short term, one of the big changes is a greater emphasis on natural gas. The development of gas resources in the kingdom and abroad (for importing into the kingdom as liquefied natural gas) will account for much of the $300bn allocated for upstream projects over the coming decade. In Nasser's words, "gas is important and we're giving it a lot of attention. It constitutes nearly 50% of our energy mix today and we're looking to take it to 70% in the next decade. Compared to 2015 we're looking to double our gas output to about 23bn cubic feet a day."
As for LNG options, a number of possibilities are being examined. Earlier, Aramco and Shell signed a preliminary deal to cooperate on natural gas. "It is a discussion that began some time ago, Shell's chief executive Ben Van Beurden told Reuters, "and now we have signed a memorandum of understanding to work on gas projects from upstream to downstream across the world and in Saudi Arabia. Concrete projects will be announced in due course."
A place for the dreamers
The need to find new sources of energy is a central theme of Vision 2030, as the kingdom seeks to move away from oil dependence. A major focus will be on solar power. Nasser says Saudi Arabia intends to transform itself into "nothing less than a solar powerhouse. The kingdom has already launched a phased programme to build an initial renewables capacity of 9.5 gigawatts by 2023, and Saudi Aramco will play an increasing role in achieving this critical goal."
The intended jewel in the crown of the new solar era is the planned mega-city of Neom, to be located in the far northwest of Saudi Arabia, close to Egypt and Jordan. The $500bn venture will eventually produce an urban area of more than 10,000 square miles (26,000 sq km) that will run entirely on renewables. Announcing the project, Crown Prince Mohammed bin Salman said: "this place is not for conventional people or conventional companies, this will be a place for the dreamers of the world".
The chances are that Saudi Aramco will be required to play a major role in the development of the mega-city. Should that be the case, a post-Aramco era is a long way off.