‘Oil and gas will continue to play a major role in the world,’ says Aramco’s Nasser

In his keynote address at the CERAWeek by IHS Market gathering in Houston, Texas, Saudi Aramco Chief Executive Amin Nasser warned that the oil market faces ‘multiple downside political risks,’ and needs $20 trillion of investment over the next 25 years. (Reuters)
Updated 06 March 2018
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‘Oil and gas will continue to play a major role in the world,’ says Aramco’s Nasser

HOUSTON: Amin Nasser, chief executive of Saudi Aramco, said the oil and gas industry must “push back” against suggestions that oil demand is in long term decline and that Saudi energy assets will be left “stranded” in the ground as alternative energy sources are developed.
In a keynote address at the CERAWeek by IHS Market gathering of top energy experts in Houston, Texas, Nasser also warned that the oil market faces “multiple downside political risks,” and needs $20 trillion of investment over the next 25 years — the size of the American economy.
He was speaking on the 80th anniversary of the discovery of oil in Saudi Arabia, when American geologists found significant reserves of crude in Dhahran, which led to the creation of Saudi Aramco.
“Today I want to be clear about what really lies ahead for our industry, and the actions we must take to secure that future,” he said.
“We must leave people in no doubt that misplaced notions of ‘peak oil demandʼ and ‘stranded resourcesʼ are direct threats to an orderly energy transition and energy security,” he said, adding: “Oil and gas will continue to play a major role in a world where all energy sources will be required for the foreseeable future.”
On the current oil market, he said market fundamentals were healthy. “Despite recent volatility in the financial markets, the broad-based recovery in the global economy remains on track. It is particularly encouraging to see expectations of stronger economic growth in the emerging and developing world because that is where most oil demand growth is expected to be. Oil demand globally also remains healthy,” he said.
Nasser pointed to flaws in all the various alternatives that have been advocated as future energy sources.
“The hot topic in energy transition is the future role of oil in transport. At the heart of it is the light duty road passenger vehicles segment (cars) that accounts for about 20 percent of global oil demand today. Many wrongly believe that it is a simple matter of electric vehicles quickly and smoothly replacing the internal combustion engine,” he said.
The future for alternatives to the motor car and internal combustion engine was “far more complex,” he said.
“In fact, there are five strong technology horses racing each other to become the powertrain of the future — advanced internal combustion engines; hybrid electric vehicles; plug-in hybrid vehicles; pure battery electric vehicles; and hydrogen fuel cell vehicles. The first three are powered by an internal combustion engine. And let us not forget that more than 99 percent of the passenger vehicles on the road today have an internal combustion engine and will be with us for a long time,” he pointed out.
The transformation of the motor industry was still unclear, Nasser said. “In fact, some of the most disruptive technologies are only just emerging, including highly advanced integrated engine-fuel systems like the ones our researchers are working hard on at Saudi Aramco in collaboration with car and truck engine manufacturers.
“So, given the world’s focus on climate change, there should be a global priority on improving the efficiency and lowering carbon emissions from internal combustion engines as well as fuels, especially when the other two horses in the race — pure battery electric vehicles and hydrogen fuel cell vehicles — still face a range of problems,” he added.
There were other factors that further complicated the search for oil alternatives. “There are also major hurdles before alternatives can be deployed at scale. Affordability is one, as customers continue to place great importance on up-front costs, especially in developing nations. Another is that it will become increasingly difficult for governments to subsidize such enormous numbers, although this is often glossed over,” Nasser said.
“It will require massive infrastructure, which is particularly challenging in developing nations as they are least well-equipped and can least afford this in the face of other economic and social priorities. Yet the majority of vehicle growth will be in those very same nations.”
Analysts estimate that traditional motor car usage accounts for 20 percent of global oil demand, but that figure is complicated by future demographic trends.
“Further adding to the complexity will be the extra two billion people on the planet by 2050, a world economy three times its current size., and a global middle class that will reach five billion by 2030 – with two-thirds of it in Asia driving consumption. These macro factors will only grow demand for road passenger transport,” Nasser said.
“So, yes, battery electric vehicles will grow and have a welcome role to play in global mobility. But given the competition and complexity of the transition, their impact on the 20 percent oil demand should not be exaggerated,” he added.
The rest of the demand side presented great opportunities for oil producers, he said. “In petrochemicals alone, oil use is expected to increase by almost 50 percent, while the number of air passengers each year is expected to almost double to 8 billion over the coming two decades.”
There were also new outlets being developed for Aramco products, he insisted. “For example, Saudi Aramco recently signed an agreement centered on a potential breakthrough technology that will directly convert up to 70 percent of a barrel of crude into petrochemicals.
“This could transform the role of oil as a major petrochemical feedstock, substantially lighten the carbon footprint of oil consumption because of its non-combustible nature, and reduce costs by 30 percent, and become a large and reliable outlet for our future oil production,” he said.
“I also see huge potential in producing advanced materials for use in a wide range of high growth industries. Just imagine a future where skyscrapers, cars (including electric ones!), and even our own pipelines are built with these advanced oil-based materials.
“Looking further ahead, if we combine hydrogen from oil with carbon capture, utilization, and storage then green hydrogen comes within reach – not only for transport but also power and heat,” he added.
Oil and gas will continue to play a major role in a world where all energy sources will be required for the foreseeable future.
But he insisted that the energy industry needed action in four main areas to enable it to face the future:
“First, we need to expand exploration. Last year, only 7 billion barrels equivalent of oil and gas combined were discovered, which is among the lowest on record.
“Second, we must not only meet the growth in oil demand but also offset a large natural decline in developed oil fields. Even conservative estimates suggest about 20 million barrels per day of new capacity is required over the next five years,” Nasser said
“Third, our industry needs more than 20 trillion dollars over the next quarter century to meet rising demand for oil and gas (including in aging infrastructure). That is virtually the size of the US economy, and we have already lost 1 trillion dollars of investments since the downturn.
“This staggering amount will only come if investors are convinced that oil will be allowed to compete on a level playing field, that oil is worth so much more, and that oil is here for the foreseeable future,” he said.
“That is why we must push back on the idea that the world can do without proven and reliable sources. We also need an environment that encourages long-term investments, as we are seeing here in the United States, and in Saudi Arabia with our ambitious Vision 2030,” Nasser added.
Finally, he said, we need to intensify our efforts to both enhance current technologies as well as create new, game-changing ones. That requires us to devote more resources to longer term research, particularly low-to-no carbon products. And it means regulators must be policy holistic and technology agnostic – let the market decide,” he said.


Closing Bell: Saudi main index slips to close at 11,849

Updated 22 December 2024
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Closing Bell: Saudi main index slips to close at 11,849

  • Parallel market Nomu lost 205.92 points, or 0.65%, to close at 31,238.29
  • MSCI Tadawul Index shed 4.86 points, or 0.33%, to close at 1,484.56

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Sunday, losing 43.07 points, or 0.36 percent, to close at 11,849.37.

The total trading turnover of the benchmark index was SR4.14 billion ($1.1 million), as 84 of the stocks advanced and 137 retreated. 

The Kingdom’s parallel market Nomu lost 205.92 points, or 0.65 percent, to close at 31,238.29. This comes as 37 of the listed stocks advanced while 49 retreated. 

The MSCI Tadawul Index also lost 4.86 points, or 0.33 percent, to close at 1,484.56. 

The best-performing stock of the day was Saudi Vitrified Clay Pipes Co., whose share price surged 9.89 percent to SR38.90. 

Other top performers included SHL Finance Co., whose share price rose 6.43 percent to SR18.20, as well as Taiba Investments Co., whose share price surged 4.97 percent to SR39.05.

Riyadh Cables Group Co. recorded the biggest drop, falling 6.30 percent to SR136.80.

Al Hassan Ghazi Ibrahim Shaker Co. saw its stock prices fall 5.15 percent to SR26.70.

Dr. Sulaiman Al Habib Medical Services Group also saw its stock prices decline 4.02 percent to SR286.60.

Meanwhile, Al-Baha Investment and Development Co. has announced moving its headquarters to Riyadh.

The company’s shares will be suspended for two business days starting Dec. 22, following the board of directors’ recommendation to reduce capital by 26.5 percent from SR 297 million to SR 218.3 million during an extraordinary general meeting held on Dec. 19.

The National Agricultural Development Co. has announced the release of its Sustainability and Environmental, Social, and Governance report.

According to a Tadawul statement, it outlines the company’s approach to embedding sustainability criteria within its strategic direction and operations as well. It reflects the firm’s commitment to its ESG responsibilities along with its devotion to sustainable development objectives in line with the Global Reporting Initiative standards. 

NADEC’s strategy complements the requirements for economic growth, keeps pace with developments in the Kingdom, and aligns with Vision 2030, which emphasizes environmental sustainability and renewable energy as fundamental components of development.

The analysis further provides a comprehensive insight into NADEC’s sustainability initiatives and commitments for the year 2023. The statement also disclosed that NADEC will periodically issue reports to keep stakeholders informed of ongoing developments going forward.

NADEC ended the session at SR25.50, up 0.98 percent.

Alhasoob Co. has announced the termination of the non-binding memorandum of understanding to acquire all shares of Alkhorayef Printing Solutions Co. by issuing shares to its owner Alkhorayef Group Co. 

A bourse filing revealed that this comes without reaching an agreement between the two parties and without any obligation on either party.

Alhasoob Co. ended the session at SR64.20, down 3.07 percent.

Saudi Basic Industries Corporation has announced the board decision to distribute SR5.1 billion in interim cash dividends to shareholders for the second half of the year. 

According to a Tadawul statement, the total number of shares eligible for dividends amounted to 3 billion shares, with the dividend per share standing at SR1.70. The statement also revealed that the percentage of dividend to the share par value stood at 17 percent.

SABIC ended the session at SR67.00, up 0.30 percent.


Saudi Arabia accelerates digital transformation with new transport initiatives

Updated 22 December 2024
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Saudi Arabia accelerates digital transformation with new transport initiatives

  • Aim to increase the transport and logistics sector’s contribution to Kingdom’s GDP from 6% in 2021 to 10% by 2030
  • Strategy envisions increasing air freight capacity to over 4.5 million tonnes annually

RIYADH: Saudi Arabia’s Ministry of Transport and Logistics has taken a significant step forward in its digital transformation with the launch of a new Digitalization and Technical Processing Center, alongside the unveiling of the Unified Documents and Records Platform.

These initiatives were announced by Minister of Transport and Logistics Services Saleh Al-Jasser during a ceremony attended by senior officials and industry leaders, as reported by the Saudi Press Agency.

The new center and platform are part of the ministry’s broader strategy to accelerate digitalization in line with the National Transport and Logistics Strategy and Vision 2030 goals.

A primary aim of these efforts is to increase the transport and logistics sector’s contribution to Saudi Arabia’s gross domestic product from 6 percent in 2021 to 10 percent by 2030. This would generate an additional SR45 billion ($11.9 billion) in non-oil revenues annually.

To achieve these goals, the NTLS prioritizes infrastructure development and operational improvements. Key plans include expanding the railway network by approximately 8,080 km, which features the 1,300 km “land bridge” project, and enhancing port infrastructure to accommodate over 40 million containers annually.

The strategy envisions increasing air freight capacity to over 4.5 million tonnes annually, as well as expanding international flight destinations to over 250.

Improving service quality and safety is another critical focus. The NTLS aims to position Saudi Arabia among the top 10 countries in the Logistics Performance Index and secure 6th place in the Road Infrastructure Quality Index. It also seeks to reduce road traffic accidents and fatalities by over 50 percent and cut fuel consumption in the transport sector by 25 percent.

In conjunction with the digitalization efforts, the ministry also inaugurated a historical exhibition that highlights key documents, photographs, and equipment used throughout the history of Saudi Arabia’s transport sector.

The exhibition also includes specialized laboratories for document restoration and sterilization, as well as a centralized destruction center to safeguard the security and confidentiality of information.

Bandar Al-Roqi, general supervisor of the ministry’s Document and Archive Center, emphasized the collaborative nature of the project, acknowledging the contributions of various ministry departments in its successful realization.

The project reflects the ministry’s commitment to integrating modern technologies to drive digital transformation while preserving the country’s transport history.


Saudi flyadeal records lowest complaint in November, 99% resolution rate: GACA

Updated 22 December 2024
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Saudi flyadeal records lowest complaint in November, 99% resolution rate: GACA

  • flynas was second, with 12 complaints per 100,000 travelers and a resolution rate of 100%
  • Saudia was third, with 13 complaints per 100,000 passengers and a resolution rate of 99%

RIYADH: Saudi low-cost airline flyadeal recorded the fewest complaints among its competitors in November, with just 11 per 100,000 travelers, and achieved a 99 percent resolution rate, a recent report revealed.

Issued by the Kingdom’s General Authority of Civil Aviation, the classification index for air transport service providers and airports is designed to inform passengers about performance, helping them make more informed decisions.

Low-cost carrier flynas was second, with 12 complaints per 100,000 travelers and a resolution rate of 100 percent, and Saudia was third, with 13 complaints per 100,000 passengers and a resolution rate of 99 percent. 

Saudi Arabia’s aviation sector is rapidly growing as the nation aims to become a regional hub and major tourist destination. Through the Saudi Aviation Strategy, which opens the sector to global investors, streamlines licensing, and promotes competition, over $100 billion in aviation investment is being attracted to support the Kingdom’s Vision 2030’s goals.

The report is in line with GACA’s efforts to promote transparency, demonstrate its credibility and keenness to deal with travelers’ complaints, stimulate fair competition, and develop and improve services.

The figures from the analysis also align well with the National Aviation Strategy by the Kingdom, which aims to increase the air passenger throughput more than three-fold to 330 million by 2030.

The GACA data further revealed that despite serving over 6 million annual passengers, King Khalid International Airport in Riyadh had 13 complaints, a low rate of 0.4 percent per 100,000 passengers, and a 100 percent resolution record.

Prince Sultan Bin Abdulaziz International Airport, with nearly 6 million annual passengers, also had a complaint rate of 0.4 percent per 100,000 passengers and a 100 percent resolution rate.

King Saud Airport had the lowest complaints among domestic airports, with a rate of 3 percent per 100,000 passengers and a 100 percent resolution rate.

The most common complaints in November were related to luggage, flights, and tickets.

According to the 2024 State of Aviation Report by GACA, a key measure of the aviation sector’s success is the 7 percent growth in air cargo, reaching 900,000 tonnes, alongside a record-breaking 112 million passengers in 2023.

This passenger volume was surpassed by a 17 percent increase in the first half of 2024, with the number of flights growing by 12 percent compared to the same period last year, reaching 815,000.


Six initiatives unveiled to strengthen Saudi-Yemeni economic ties

Updated 22 December 2024
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Six initiatives unveiled to strengthen Saudi-Yemeni economic ties

  • Initiatives were unveiled during a joint council meeting held in Makkah
  • Council has proposed upgrading the infrastructure at border crossings between the two countries

RIYADH: The Saudi-Yemeni Business Council has announced six key initiatives aimed at enhancing trade and investment ties between Saudi Arabia and Yemen, while also supporting Yemen’s ongoing economic development.

The initiatives were unveiled during a joint council meeting held in Makkah on Sunday, attended by over 300 Saudi and Yemeni investors, according to Al-Ekhbariya.

Abdullah bin Mahfouz, chairman of the Saudi-Yemeni Business Council, which is part of the Federation of Saudi Chambers, disclosed that agreements had been made to establish three new Saudi-Yemeni companies.

The first company will focus on renewable energy, with an initial capital investment of $100 million, to generate solar-powered electricity for Yemen.

The second venture will operate in telecommunications, utilizing Starlink satellite networks. The third company will organize exhibitions and conferences in Yemen to promote Saudi products and support the country’s reconstruction efforts, as reported by the Saudi state-owned channel.

In addition to these initiatives, the council has proposed upgrading the infrastructure at border crossings between the two countries, improving logistics services to facilitate smoother trade.

The trade volume between Saudi Arabia and Yemen currently stands at SR6.3 billion ($1.6 billion), with Yemeni imports from Saudi Arabia accounting for just SR655 million. However, sectors such as mining, agriculture, livestock, and fisheries in Yemen remain largely underdeveloped and present significant growth opportunities.

Among the key recommendations is the establishment of quarantine centers to inspect Yemeni livestock, agricultural products, and seafood, aimed at increasing Yemen’s exports to Saudi Arabia. There are also plans to create “smart food cities” in border regions to bolster food security and promote sustainable agricultural practices through advanced resource management and technology.

Addressing banking and credit challenges is another priority. The council has called for improvements to Yemen’s banking infrastructure, including better collaboration with Saudi banks and the development of Yemen’s exchange sector, to facilitate smoother financial transactions for traders from both countries.

A significant proposal also includes the creation of a Yemeni Investors Club in Saudi Arabia, designed to encourage joint investments and foster business partnerships between the two nations.

Abdulmajid Al-Saadi, co-chairman of the Yemeni Business Council, commended Saudi Arabia’s recent reforms in investment regulations, highlighting that Yemeni capital, estimated at SR18 billion, has increasingly been channeled into Saudi markets. This places Yemen third among foreign investors in the Kingdom.

For over 23 years, the Saudi-Yemeni Business Council has played a pivotal role in fostering economic relations between the two countries, organizing forums, identifying trade and investment opportunities, and promoting bilateral business exchanges. The targeted sectors for cooperation include renewable energy, agriculture, livestock, telecommunications, and trade development, in line with regional and global food security challenges.

In 2023, trade between Saudi Arabia and Yemen amounted to SR6.2 billion, with Saudi exports totaling SR5.6 billion, which included dairy products, fuels, and vegetables. Yemeni imports from Saudi Arabia reached SR661.9 million, consisting of fruits, seafood, and printed materials.

Saudi Arabia has provided significant financial support to Yemen over the past few decades, including over $50 billion in funding for central bank deposits, government budgets, and development projects.


Riyadh leads Saudi real estate surge with 20.8% rise in office rents

Updated 22 December 2024
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Riyadh leads Saudi real estate surge with 20.8% rise in office rents

  • Report attributes rise in office rents to the Kingdom’s economic diversification efforts
  • Capital remains an attractive destination for businesses and investors

RIYADH: The real estate market in Riyadh is experiencing significant growth, with rents for Grade A office spaces rising 20.8 percent year on year in the third quarter of 2024, reaching SR2,131 ($567.31) per sq. meter.

This increase reflects the city’s expanding economic activity, driven by both a thriving private sector and ongoing government initiatives aimed at positioning the capital as a global business and investment hub.

According to JLL’s latest market analysis, this surge in demand for high-quality office spaces is contributing to a historic low in vacancy rates, which fell to just 1.6 percent in Q3 2024.

The report attributes the rise in office rents to the Kingdom’s economic diversification efforts, particularly the continued growth of the private sector in Riyadh.

The city remains an attractive destination for businesses and investors, with strong demand for Grade A office space in key districts.

JLL also highlighted that Northern Riyadh, with its superior accessibility and high-quality developments, is increasingly favored by occupiers, driven by the area's efficient workspaces and ample parking, which help mitigate rising traffic congestion.

In Jeddah, Grade A office rents rose by 11.6 percent year on year, reaching SR1,338 per sq. meter, with a low vacancy rate of 3.7 percent. These trends reflect broader market strength across Saudi Arabia’s key cities.

Hospitality sector thrives

Saudi Arabia’s hospitality sector continues to see impressive growth, fueled by a combination of high-profile events and the Kingdom’s expanding tourism infrastructure. With events like Riyadh Season and AlUla Season drawing millions of visitors, coupled with the ongoing development of urban infrastructure, the Kingdom is solidifying its status as a leading global leisure and business destination.

According to the Ministry of Tourism, Saudi Arabia’s leisure tourism has skyrocketed by 656 percent since 2019, with 17.5 million international visitors arriving in the first seven months of 2024 alone.

This boom in tourism, supported by initiatives such as the streamlined tourist visa system and a growing entertainment sector, has boosted the Kingdom’s appeal as a global leisure destination.

Saudi Arabia has already surpassed its original Vision 2030 target of attracting 100 million visitors and is now aiming for 150 million by 2030.

“The hospitality sector is set for continued expansion, driven by a packed events calendar and a steady influx of religious tourists,” said Saud Al-Sulaimani, country head of JLL Saudi Arabia. “These factors will fuel demand for accommodations and enhance occupancy rates in key cities.”

In Riyadh, the average daily rate for hotels increased by 19 percent year on year in Q3 2024, reaching SR736.3, while revenue per available room saw a 17.1 percent rise to SR440.3.

Despite a minor dip in occupancy by 1.2 percentage points, these metrics reflect the growing strength of the hospitality sector. Jeddah, on the other hand, saw a 10.3 percent year-on-year decline in RevPAR, attributed to a 12.1 percent drop in ADR, although occupancy rates rose by 1.4 percentage points.

Makkah and Madinah presented mixed trends, with RevPAR declining by 2.9 percent in Makkah, while Madinah saw a slight increase of 1.6 percent.

“Performance metrics in the hospitality sector are expected to improve as we approach the year's end, fueled by key events like the Riyadh and AlUla Seasons, as well as continued religious tourism,” JLL added.

Residential market growth

The residential markets in Riyadh and Jeddah also saw strong performance in the third quarter of 2024, driven by strong demand and shifting buyer preferences.

In Riyadh, 4,000 new residential units were added in Q3, bringing the total stock to 1.46 million. Jeddah saw even greater growth, with 8,000 new units delivered, increasing its stock to 899,000 units.

Residential property prices in both cities also saw significant increases, with Riyadh experiencing a 12 percent year-on-year rise in sales prices, while Jeddah saw a 6 percent increase.

“This is an exciting time for Saudi Arabia, with unprecedented growth across multiple sectors,” said Al-Sulaimani. “The combination of soaring tourism numbers, rising hospitality revenues, and strong demand for residential properties is creating a dynamic environment that presents immense opportunities for investors and businesses alike.”

He added: “The Kingdom’s commitment to diversifying its economy is evident, and we are excited to see how these developments will shape our future.”