S04 ORME 8 2021 Saudi Aramco_Layout 1 13/12/2021 08:51 Page 14
Aramco Review
Aramco squares up to the
energy transition A changing world calls for a changing company, as Aramco gears up to meet all the challenges of the energy transition head on, says Martin Clark. S THE WORLD grapples with the energy transition and the challenges of net zero, so too does top oil producer Aramco. Saudi Arabia’s flagship company has long pioneered hydrocarbons development, underpinning the world’s oil supply at critical times, but it is also exploring its long-term options as climate change concerns come into focus. At the start of December, it signed agreements with a number of French firms in areas ranging from carbon capture to hydrogen-powered vehicles. Clearly, these are changing times for all. Indeed, the state oil giant provided a glimpse of what to expect in its hugely successful initial public offering (IPO) two years ago, in which it raised US$30bn from investors – an event that would have seemed unlikely not too many years earlier. It marked the start of a new era for the oil champion.
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Image Credit : Aramco
Aramco sees gas playing a crucial role in the energy transition.
Energy infrastructure Aramco is still every bit in favour with global investors, as it seeks to leverage its vast infrastructure base that spans every corner of the kingdom’s energy sector, from production to trading. In the latest example, BlackRock Real Assets and state-backed Hassana Investment Co. signed a US$15.5bn leasing deal for Aramco’s gas pipeline network in December. The three partners are to form a new company, Aramco Gas Pipelines Co, that will receive a tariff payable for Aramco gas that flows through the network over a 20-year period. Aramco still retains full ownership and operational control of the network. It follows a separate US$12.4bn deal earlier in 2021 selling 49% of Aramco’s oil
Responsiblymanaged natural gas infrastructure has a meaningful role to play in this transition.” 14
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Issue 8 2021
pipelines to a consortium led by US-based EIG under a similar structure. The transactions together highlight the ongoing appeal of Aramco’s energy infrastructure to global institutional investors. The gas network transaction also marks the largest energy infrastructure deal in the region thus far. It highlights the importance of natural gas during the energy transition, according to Aramco’s president and CEO, Amin H. Nasser. “With gas expected to play a key role in the global transition to a more sustainable energy future, our partners will benefit from a deal tied to a world-class gas infrastructure asset,” he said. BlackRock’s chairman and CEO, Larry Fink, called it a “landmark transaction” for Saudi Arabia’s infrastructure sector. “Aramco and Saudi Arabia are taking meaningful, forward-looking steps to transition the Saudi economy toward renewables, clean hydrogen, and a net zero future,” said Fink. “Responsibly-managed natural gas infrastructure has a meaningful role to play in this transition.”
Business as usual In many ways, though, things continue much as before for Saudi’s state oil giant. Announcing its third quarter results for 2021 recently, the company enjoyed a 158% year-on-year increase in net income to US$30.4bn, largely the result of higher crude oil prices. As ever, Aramco continues to underpin Saudi Arabia’s evolving economy with its sustained oil and gas production from the fields that have powered the world for decades. Nasser identified some economic headwinds facing the global economy, notably supply chain bottlenecks, but was optimistic overall about future energy demand. He also pledged to continue with the strategy to invest for the long term, which inevitably means pushing into new energy technologies as part of Saudi Arabia’s transition to achieve net zero by the middle of the century. Total hydrocarbon production in the third quarter of 2021 stood at 12.9mn bpd of oil equivalent (boepd), including average crude oil production of 9.5mn barrels per day (bpd).
