Saudi Arabia is often looked at as a vast desert that contains a major religious center and a huge amount of oil. Formerly sold to industrialized countries in crude form, the country has gradually taken over the entire industry by replacing most workers with Saudi nationals. Nowadays the products sold are not only crude oil, but all types of petrochemical products used in industry or residential life. The entire oil industry is unified via state ownership in one entity—Saudi Aramco. The country has been a steady supplier of crude oil and petroleum products for nearly a century. Why then should there be any concerns about its future?
Saudi Aramco’s Ecological Dilemma: Saudi Aramco is the world’s largest producer of crude oil. As recently as 2022 it was the second-largest company in the world measured by revenue. It operates the largest single hydrocarbon network in the world, and the world’s largest single onshore oil field. It has arguably more oil reserves than any other company, and its market capitalization is close to two trillion dollars. Every barrel of oil it pumps generates $75-85 of revenue at current market rates, but costs only $3 to produce. Although owned by the Saudi Arabian Government, a decision was made a few years ago to bring in outside capital via an initial public offering equal to about 5% of its overall total (a second public offering took place recently). To make an even longer story short, it is a large, rich, and powerful entity with a long and prosperous future ahead of it. However, Saudi Arabia’s Crown Prince, Muhammad bin Salman, has formulated a strategy to ween his country off of reliance on oil production, by diversifying the economy, and decarbonizing its oil industry. Further, Saudi Arabia has pledged to reduce net greenhouse gases to zero, by the year 2060. Owing to its dominance in the industry, Aramco is at the cutting edge for making the changes to bring this about.
Cleaner Extraction: Aramco’s first move has been to invest in the development of cleaner methods of extracting petroleum from the ground. In the last five years, the company has funded nearly 500 separate studies to boost production, develop more efficient gasoline, enhance extraction, and increase the flow from oil wells. Other projects include developing a device that would trap some of the carbon dioxide from cars that run on gasoline, and a partnership with Hyundai Motor Company to perfect a fuel to be used in hybrid electric cars. There is a shift in emphasis in Aramco’s downstream operations to integrate refineries with petrochemical facilities.
Less Methane: To achieve its goals Aramco tightened down on methane emissions, a major component of natural gas that is often produced alongside oil. However, methane can leak from processing facilities and drift through the atmosphere. It is usually flared (burned off) for safety purposes in the refining process. Aramco is a member of the Oil and Gas Climate Initiative, a group of major oil producing companies, and has vowed to reduce methane emissions to nearly zero by 2030. By using drones to detect methane leaks so that they can be quickly repaired, Saudi Arabia became the oil producing country with the second lowest methane emissions world-wide in 2023.
More Diversification: The high demand for oil has dominated Aramco decision making for decades. But as the demand for gasoline tapers off, the need arises for developing other oil-based products namely petrochemicals. A Saudi Arabian petrochemical company 70% owned by Aramco is working on technology that would heat oil with electricity instead of natural gas to create various petrochemical products. Natural gas itself provides an element of diversification as increased demand for it in recent times has shown that it can be a stepping stone to green energy from using oil or coal. Further, natural gas burns more cleanly, and the carbon dioxide emissions are easier to capture and place in storage.
Utilize Decarbonization: About 10% of Aramco’s capital spending is being invested into energy projects that do not involve petroleum. Including research and development this comes to about $5 billion per year. As many as 200 patents Aramco filed in the U.S. in 2023 pertained to decarbonization and digital technologies. Additionally, Aramco intends to invest about half of the $4 billion it brought in through a second IPO into green projects. One category at the top of the list is renewables, primarily solar and wind. The hot desert sun and nighttime winds fit in directly with this approach. “Green” hydrogen created through hydrolysis that splits a molecule of water into its two elemental components, hydrogen and oxygen, is a major method of hydrogen capture that can be used in various industries. Aramco further intends to pursue “blue” hydrogen, another clean fuel that’s derived from breaking natural gas down into its elemental components as well. The company is also working with a Dutch Engineering firm to better capture the escaping carbon during the creation of blue hydrogen, and the creation of blue ammonia that holds the hydrogen better during transport.
Carbon Capture Methods: Saudi Arabia’s oil facilities are usually located close to rock formations instrumental in storing carbon emissions. Aramco is further interested in a technology know as “direct air capture” of carbon. Using machines created by Siemens, a German engineering company, amounts of carbon dioxide already released into the atmosphere can be sucked back out and placed in storage. But all of these new ideas and technologies are still in their infancy and run into a variety of problems such as increased costs that could stand in the way of the country achieving its clean energy goals.
Conclusions: It’s still too early in the battle against global warming to place Saudi Arabia in the forefront. However, scientists and concerned governments everywhere agree that the efforts being made are definitely beneficial in the long run, and the Saudis and their leadership should be applauded for it.
Sources:
The Economist, Turning Brown Desert into Green Oasis, June 8th 2024.
Wikipedia, Saudi Aramco.