Oil will “retain its leading role among the world's energy sources ... (as) there is consensus that fossil fuels will still be supplying some 80 percent of the world's total energy requirements,” Saudi Aramco Executive Vice President of Operations Khalid A. Al-Falih said at the “The Global Energy and Materials Forum” held here recently. Presenting his views on the future of petroleum supply and demand, he said the recent decline in oil prices is due to a “confluence of factors,” including lower demand, a surplus of supplies, and a prevailing negative sentiment about the global economy. On alternative energy sources, Al-Falih said “the world will need energy from different sources, yet, fossil fuels will continue to furnish the lion's share of global energy demand for the next few decades.” He noted that development of alternatives will face serious economic and technical impediments in addition to customer acceptance and the impact on food supplies and prices. “Calls to move away from fossil fuels ... do not represent a practical or effective strategy,” he said. On concerns over long-term energy reserves, Al-Falih said “out of a total liquid fuels resource endowment of 15 trillion barrels in place, the world has consumed only about 1 trillion or seven percent of the total resource base.” The challenge, Al-Falih said, is converting these resources into supplies while tackling a complex economic, environmental, policy, and technological environment. “The conversion question requires an enabling environment conducive to attracting the necessary investments ... with a stable price for oil,” he noted, adding that “extreme volatility hinders the development of not only conventional and non-conventional liquid resources, but also alternative fuel sources.” Regarding the investment requirements facing the global petroleum industry, he said conventional upstream investments will continue due to projected future demand growth. He added that “projects that require a high price environment ... are likely to be deferred or reexamined.” Likewise, downstream investments will “come under greater scrutiny” due to the challenging position of this sector. In this situation, Al-Falih said, “we could see a new round of underinvestment ... of overstretched capacities and high prices repeating a vicious cycle, damaging the interests of both producers and consumers.” Against the backdrop of global economic crisis, Al-Falih said that “despite the substantial market volatility and changing economic dynamics in the short-term,” Aramco's “long-term direction continues to be driven by three key strategies: a focused but flexible investment program, the further development of the Saudi economy ... and operational excellence.” Al-Falih emphasized that Aramco maintains a long term perspective when dealing with investments, while it also considers the short-term requirements of agility and flexibility. “We build for a generation or more,” Al-Falih added. “We also recognize that we have to operate efficiently in today's environment, and strive to optimize our investments in light of both market conditions and the need to maintain reliable operations, without taking our eyes off from our long-term objectives.” Al-Falih also raised the continued development and diversification of the Saudi economy. He underscored the importance of leveraging the hydrocarbon activities through in-Kingdom procurement of goods and services, knowledge-sharing activities with Saudi institutions and companies, and creating investment opportunities, especially for the downstream petrochemical sector. As part of its “commitment to excellence,” Al-Falih said Aramco focuses on innovation as demonstrated by its I-Field concept development and extreme reservoir contact wells, as well as on research and development in areas such as desulphurization, carbon management and clean fuel formulations. However “the most important enabler of our success is our human resources,” he pointed out. “People remain the greatest competitive advantage that we enjoy as a business,” he said. Despite the constraints affecting the global economy at present, Al-Falih assured that “Saudi Aramco possesses the financial, industrial, technological and human resources needed to meet our commitments and maintain our reputation for operational excellence and reliability... and to add value to the Kingdom's economy.” The energy forum was organized by management consulting firm McKinsey & Company. __
