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Fri 16 Apr 2010 04:00 AM

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Houston, we have a problem

Khalid Al-Falih warns conference not to overplay the role renewables will play in our immediate future.

Houston, we have a problem
Khalid Al-Falih, president and CEO of Saudi Aramco.
Houston, we have a problem
Oil and gas will still play a vital role.
Houston, we have a problem
Saudi Aramco’s technology and research centre in Dahran, Saudi Arabia.
Houston, we have a problem
Aramco is looking to develop gas.
Houston, we have a problem
Renewables are playing an increasingly important role in meeting the world’s energy demands.

Khalid Al-Falih warns conference not to overplay the role renewables will play in our immediate future.

A strong world economy relies heavily on reliable and affordable energy supplies. Khalid Al-Falih, president and CEO of Saudi Aramco, focused on this point during his keynote address to world energy leaders gathered in Houston on March 9 for the Cambridge Energy Research Associates Annual Conference.

This year's conference, which drew some 2,200 delegates from more than 55 countries, focused on building a new energy future and encouraged leaders to share ideas on how to move from an era of economic challenges to a new phase of energy investment and growth.

"Energy is an essential input to almost every type of economic activity ... and underpins our contemporary way of life," Al-Falih emphasised.

He added that in looking to the future of energy, industry leaders need to focus on what he termed "the Triple-A Triangle," which comprises three major imperatives: adequacy, affordability and acceptability.

"When I say ‘adequacy, I mean that we need to ensure adequate and reliable supplies of energy to meet the growing needs of the global population. Even today, billions of our fellow human beings lack access to adequate supplies of energy from modern sources. The world's population will be expanding not only in numbers, but also in their demands for higher living standards and greater prosperity. ... We must be able to meet those expectations."

Regarding affordability, Al-Falih said that if energy becomes prohibitively expensive then: "We may jeopardise global economic stability and growth, and risk tipping the world into a have and have-not scenario. The way I see it, energy has always been an enabler of prosperity rather than a drag on development ... and will continue to play that positive role."

Al-Falih said the third side of the Triple A Triangle, acceptability, refers to environmental protection. "Our consumers will not feel secure unless they know that we are doing our utmost to provide energy in a manner that is environmentally responsible," he said. "Stewardship of the environment is not only a moral duty for energy providers but also a sound economic choice and good business."

Al-Falih encouraged listeners to pursue strategies and activities that incorporate these Triple-A imperatives.

He said that, first, industry leaders need to adopt a pragmatic, yet progressive, attitude toward energy issues. "We must understand that any path we choose to enhance global energy security will require hard work, massive investments and - most importantly - sufficient time to implement."

Secondly, leaders need to encourage wise and timely investments in petroleum, given the central and leading role it will continue to play in meeting energy demand.

Third, the energy sector must make concurrent investments in both conventional and alternative sources that allow real competition to flourish; and fourth, leaders must consider and address the issue of environmental protection and sustainability.

"In the end, we need to meet growing energy demand to permit economic growth and social development, and do so in a manner that protects our environment," he said.
Future Sources of Energy

During his keynote address, Al-Falih specifically addressed the issues and perceptions related to traditional versus alternative energy sources needed to meet future demand.

"Even with the great strides we have made as an industry, we find a great deal of uncertainty surrounding the future of energy in general and of petroleum in particular," he said. "There are assumptions the industry is going to somehow fundamentally transform the face of energy overnight. Such an assumption ignores the thorny issues of how - and how quickly - we are going to get from here to there ... how much it will cost and who will pay for it."

He added that even though there is great promise in a number of alternative energy sources, leaders need to stay focused on the fact that hydrocarbons will remain the dominant energy source for decades to come. He went on to say that the consensus view is that, 20 years from now - even with technological advances between now and then - fossil fuels will continue to satisfy about 80% of total energy consumption.

"I do want to clarify that the industry should continue to invest in the most promising renewable sources," he said.

"I do not believe in an ‘either-or' choice but rather a complementary approach. Given that global energy demand is set to double over the next 40 years, I strongly believe we will need contributions from all sources."

He added, however, that the industry should invest at the appropriate levels "in our tried-and-true energy sources - including oil."

Aramco focus

Al-Falih also touched on the steps that Saudi Aramco is taking to help meet current world demand and also ensure adequate energy supplies in the future. He said the company has been building capacity both in the upstream and downstream sectors, including integrated refining and petrochemical facilities both in Saudi Arabia and foreign countries.

He added at the conference that Saudi Aramco has not slowed down in making substantial investments in capital growth, which have increased the company's production capacity to an unprecedented 12 million barrels per day.

He also said that investments will roughly double the company's gas capacity over a 10-year period and that there will be an increase in capital investments made by the downstream joint ventures.

"The company is making equally substantial investments in developing its greatest resource - our people," Al-Falih added.

"These investments are a tangible reflection of our belief that oil will remain a major player on the world's energy scene for the foreseeable future. Our vision has always been focused on the longer term. Just as we have done for more than 75 years - we will build for today as well as for future generations."

Al-Falih concluded his keynote address by telling listeners, "If we commit ourselves to working collaboratively ... then I believe that our collective energy future will no longer be characterised by the uncertainty of its prospects but rather by its unlimited potential."

Following his address, Al-Falih touched on the following areas in response to questions submitted from the audience: Saudi Aramco has and will remain committed to investing in its capital expansion programs - even during a time of unstable world markets and rising costs - to help ensure global energy security.

Additionally, the company is making a considerable investment in developing in-Kingdom gas resources through new gas discoveries and processing facilities.