By Amin H. Nasser, Saudi Aramco President and CEO
Distinguished guests, ladies and gentlemen, good morning.
Let me first thank Malcolm Brinded for that kind introduction and his efforts in building a closer relationship between Saudi Aramco and the Energy Institute.
This impressive organization is a valuable platform to bring the industry closer together to define and shape our shared future.
Before I look ahead to that future, let me briefly look back.
Our industry should be proud of the pivotal and sustained contribution to the global economy and people’s lives, around the world, day after day for over a century.
Two billion more people today have access to ample, affordable, and reliable sources of energy than even just a generation ago. It has lifted them out of poverty, enabling them to enjoy the essentials of modern life that people in developed countries take for granted.
The scale required to achieve this is equally staggering and inspiring.
Last year alone, oil and liquids demand hit 100 million barrels per day for the first time in history.
And once again this inspirational industry rose to meet that demand – affordably and reliably.
Despite this historic success, there is a worrying and growing belief among policy makers and regulators, investment houses, NGOs, and many others that we are an industry with little or no future.
A recent survey revealed that the energy sector faces greater reputational challenges than any other.
The full extent was brought home to me when I was in Davos last month.
One senior financial figure I spoke to confidently predicted the end of our industry in about five years!
Another was slightly less pessimistic – but he speculated that most vehicles on the road would be electric in five to 10 years, when today they account for less than half a percent!
In other words, important stakeholders believe that the entire world will soon run on anything… but oil!
These views are not based on logic and facts, and are formed mostly in response to pressure and hype.
But they are sincerely held.
And our stakeholders are clearly tuning out.
They are not hearing us when we say that passenger vehicles are only 20% of the world’s oil demand.
Or that the remaining 80% is used by sectors like planes, ships, trucks, petrochemicals, and lubes for which there is no alternative yet and where demand for oil is expected to increase substantially.
They do not recognize a world where alternatives such as solar and wind, although growing rapidly (including in Saudi Arabia), still account for just 2% of primary energy demand today.
The intermittent nature of renewables does not seem to be a concern either, or the ongoing need for proven and reliable electricity generation capacity as back-up, much of it fueled by gas.
There is very little thought given to the massive global energy infrastructure that would need to be transformed in every corner of the world, costing trillions of dollars, bearing in mind under-developed countries that cannot afford expensive technologies.
And people gloss over the reality that today, in many countries, more electric vehicles means more coal-powered vehicles.
In fact, in some of the world’s most populated countries, up to three-quarters of electricity is generated by coal!
In other words, my encounters in Davos showed me that fewer and fewer of our stakeholders accept logic and facts, least of all from us.
We are therefore facing what I would call a crisis of perception…
With multiple stakeholders…
And because it threatens our industry’s very relevance, it puts our ability to supply ample, reliable, and affordable energy to billions around the world at risk, which in turn risks their energy security.
Only recently, we saw what a supply deficit of a couple of million barrels per day can do to the oil market.
Imagine what 20 million barrels fewer per day would do – which would be the shortfall in five years if investments stopped today.
And the impact would be even more profound for economies, societies, and people if demand continues to grow over the next five years, as we expect.
Ironically, higher oil prices would cause much less pain to us than most.
But they would only reinforce the perception that many have of our industry as profiteering, and it would certainly not be in anyone’s long-term interests.
So how do we deal with this perception crisis?
I see five areas that demand our urgent, collective effort.
First, we need to articulate a future for our industry that shows we clearly understand society’s expectations and share their concerns.
Very simply put, society demands ample, affordable, reliable, and cleaner energy.
Our industry is already delivering tangible solutions at scale that are way ahead of the alternatives in these first three areas.
For Saudi Aramco, recent scientific studies have also shown that our oil has among the lowest carbon intensities of any in the world.
So we have a pivotal and leading contribution to reducing emissions.
The Oil and Gas Climate Initiative is another collective industry stride in the right direction, as are the efforts that companies including Saudi Aramco are making – for example, our work on ultra clean engine-fuel systems of the future and CCUS.
But these efforts are nowhere near enough to bridge the expectation gap.
And time is not on our side
Second, we need to show society that we truly embrace our social responsibilities.
There are safety and environmental issues – real and perceived – that could derail our entire industry.
So we must intensify our existing focus on the Environmental, Social, and Governance aspects of our business to be relevant to society’s expectations today.
For all of us, that means creating employment in local communities where we do business, localizing goods and services, and encouraging workforce diversity.
And at all levels of operation, it means being ahead of other industries when it comes to business ethics, codes of conduct, compliance, and internal controls, backed by effective oversight and accountability.
In short, we must show our stakeholders that their values and ours align, wherever we operate, if we want to be treated as relevant.
Third, all of us here know that innovation and technology have been the key to our industry’s regular reinventions.
But millennials do not see us that way.
Nor are they motivated as much by money; they are driven by mission and meaning.
We need to inspire them with the incredible possibilities of Energy 4.0 – powering our industry to be Smarter, Greener, Faster, Safer, and above all still affordable, coupled with the technology-driven enablers we are contributing to address some of the world’s greatest challenges.
Technology has already enabled Saudi Aramco to produce oil and gas with one of the lowest upstream carbon footprints in the industry.
It has also enabled our Uthmaniyah Gas Plant to be recognized by the World Economic Forum as a Lighthouse factory – the only one from the global oil and gas industry.
And it is technology that will enable car manufacturers to reduce carbon emissions, utilizing a combination of highly efficient internal combustion engines and ultra clean fuels – with enormous potential still ahead.
It is technology that will capture the carbon, turn it into valuable products, and in the process move oil toward near-zero or break-even carbon emissions.
It is technology that will find new, high efficiency uses for oil such as blue hydrogen – vanquishing all the battery-related problems plaguing EVs.
Fourth, when it comes to attracting investment, facts and logic are more important than ever.
We should remind stakeholders that oil and gas is responsible for much of today’s economic growth, and indeed future growth.
We should also remind them that, despite being a much smaller proportion of the S&P500, energy pays twice the dividends of tech.
And we must push back on exaggerated theories like peak oil demand.
Another key element in changing perceptions is introducing the world to new, cleaner, and more beneficial ways of consuming oil that will help us to maximize the economic use of this incredibly valuable resource.
For example, if we crack crude-to-chemicals technology it could transform the role of oil as a highly competitive petrochemical feedstock.
We also see huge potential in producing advanced materials from oil for use in a range of high growth industries, and that includes the EV market!
Fifth, we need to change the way we connect.
As engineers, our natural inclination is to simply talk numbers or share data, but that will always be the least persuasive approach.
Emotional appeals to our audiences, using compelling stories, are far more powerful.
So let’s tell the story of our determination to reduce emissions and carbon intensity for future generations (and the progress we are making) and help people to see that we are actually on the same side.
Let’s tell it to our stakeholders in their own backyards.
And let’s tell the whole story.
For example, while lower emissions capture the headlines, we need to be better at explaining why efficiency gains are just as relevant.
A joint study by the International Transport Forum, IEA, and United Nations Environment Program concluded that the mileage efficiency of the global car fleet can be increased by 50% simply by incremental improvements to conventional engines, by weight reduction, and better aerodynamics.
Similarly, while the global economy is going to double in size by 2040, energy demand is expected to only grow by a quarter due to energy efficiency improvement.
That will mean a 40% improvement in the carbon intensity of global GDP.
We also need to get others to admit the full story.
For example, it will be increasingly difficult for governments to subsidize alternatives when the world moves to full-scale deployment, especially with demand for energy growing.
How will these plans remain viable with tax rates on diesel and gasoline already approaching 70% of the pump price in some markets, and the public reaction to this growing trend?
Most of all, we need to connect the future people want with the ways our industry can enable it, including the things that truly matter to our lives like the houses we live in, the journeys we take, and the phones we rely on.
And the truly inspirational things in life like lifting two billion more people out of poverty, with more to come.
Try doing that just with wind!
Ladies and Gentlemen, our industry faces a crisis of perception with multiple stakeholders.
Our traditional qualities of ample, reliable, and affordable supply are not enough to meet society’s expectations today.
We need action on multiple fronts if that Davos speculation is not to come true.
We need to further lighten the carbon footprint of our fuel products – and do so fast.
We need to be trusted globally and locally as a sustainable, ethical, and transparent industry that is genuinely willing to engage, listen, and change as needed.
We need to show millennials that we are as innovative as Apple, Google, or Samsung, and are determined to use cutting-edge technology to make the world a better place.
We need to help our stakeholders realize that all energy sources will be required for decades to come, and that a long-term investment in our industry is both wise and profitable to deliver on that demand growth.
And we need to speak in a way that puts real progress and people first, connecting our business with the essentials of modern life.
This radical new mission is the defining challenge for this industry.
It is up there with a manned mission to Mars and just as profound for the Earth.
So let’s apply all our resources – particularly the pioneering and resilient spirit that defines this great industry – to define and support this new mission.
And let’s amaze the world with our continued relevance to human progress in the 21st century and beyond.