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Resilience – measured in strength, portfolio diversity, adaptability and innovativeness – is essential for the oil and natural gas industry to continue to play a lead energy role in the future, says Khalid Al-Falih, Saudi Aramco president and CEO. At this week’s IHS CERAWeek conference, Al-Falih talked about past and future:
“Our industry’s story is indeed one of resilience against multiple shockwaves thanks to dynamic individuals and companies, but regrettably with some casualties along the way and hard-learned lessons to stiffen the spines of the survivors. So I believe that if we are to position our industry for the future we surely need to build greater resilience.”
Key foundations for industry resilience, according to Al-Falih:
- Market stability – Required for economic growth and the health of the industry, it is ensured by meeting energy demand. “No single player can shoulder the burden, as ensuring stability is a collective responsibility,” he said.
- Managing risk – By anticipating volatility, fortifying physical and virtual defenses and diversifying portfolios.
- Being connected to societal expectations – Safeguarding industry workers, the communities where they work and the environment.
- Creating transformative, innovative technology.
- Attracting the next generation of industry leaders and workers.
The head of a company that manages crude oil and condensate reserves of nearly 260 billion barrels, Al-Falih can command a room – even one holding a couple thousand people attending IHS CERA’s epic conference. He said today there’s a new energy model – shaped by factors including moderated global demand, new resources unlocked by technological breakthroughs and the recent economic downturn. Industry must recognize a new paradigm while building on past successes:
“Our business is already technology intensive, but we must aim even higher. … For example, could our investments in R&D at least be doubled? Could we aim for 70 percent recovery of conventional resources? And could we look to double or even triple recovery from unconventional resources? As a result, we would almost quadruple the reserves of global liquids from our combined conventional and unconventional resources. On the consumption side, should we aim to convert crude oil directly into chemicals bypassing the refining process? Why not team-up with the auto industry to quadruple fuel efficiency and capture the carbon along the way? Should we then convert that carbon into valuable products rather than venting it into the atmosphere? These are certainly bold targets, but I know we can meet them if we widen the circle and bring our collective strength to bear.”
Certainly, industry has shown collective strength in the past, responding to predictions of energy scarcity with visionary exploration and development plans carried forward by technological innovation – most notably the combination of hydraulic fracturing and horizontal drilling that launched the shale revolution, deep water drilling, enhanced oil recovery and more.
Others have roles to play. Government must increase access to resources and provide common-sense oversight. Meanwhile, partnerships must be formed with communities, based on the benefits of available, reliable, energy-rich oil and natural gas, good communication and good-neighbor practices. Yet, industry has to keep moving forward – to create jobs, lift the economy and develop energy to support modern standards of living. “Even if you’re on the right track,” Al-Falih said, quoting Will Rogers, “you’ll get run over if you just sit there.”
