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130 energy to the world : Volume two

chapter five

Achieving the Vision

The central crude oil processing


facility at Khurais.

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132 energy to the world : Volume two

In early 2005, then-Crown Prince Abd Allah,


Minister Al-Naimi and other Saudi senior
government officials began discreetly contacting the Kingdoms major trading partners
and allies to alert them about an important
development.
After reassessing the Kingdoms oil and gas strategies, the Saudis had news that was likely to
make headlines and move oil markets when it was announced in May: Saudi Arabia was budgeting tens of billions of dollars over five years on one of the largest oil industry capital-spending
programs anywhere in the world.
More than half the total was slated for the construction of a half-dozen sprawling oil production facilitiesany one of which deserved a place in oil industry record books. Collectively, the
new facilities were designed to boost the companys maximum sustainable production capacity
of crude oil by 2 million bpd to about 12 million bpd. That increase, roughly equivalent to the
total daily production of Venezuela, would maintain Saudi Aramcos spare capacity of at least 1.5
million to 2 million bpd to help meet unexpected demand. In addition, plans were prepared for
expanding maximum sustainable production capacity to 15 million bpd in the following decade
if market conditions warranted such an increase.

Some of the funds were earmarked for boosting Saudi Aramcos refining capacity and

producing significantly more natural gas and related products. The natural gas would be used
to fuel Saudi Arabias industrial growth, especially its petrochemical industry. Spurring the next
phase of Saudi industrialization, the plastics and petrochemicals produced by these new industries
would help the nation diversify its economic base and provide greater employment opportunities
for its young and rapidly growing population.

In the summer of 2008, amid the worldwide escalation of prices for construction materials,

Saudi Aramco reaffirmed its commitment to push ahead with its expansion plans. At an industry
Engineer Jamal Al-Marhoun, far
left, and Saudi welders, left to right,
Abbas Al-Darwish, Mohammad
Al-Noor, Mohammad Al-Khabbaz,
Hasan Al-Hasawi and Ali Al-Abbad
pose in front of two storage tanks
they helped construct at the Hawiyah
NGL Recovery Plant in 2007.

gathering in Bahrain, Khalid Al-Falih told the audience, As we speak, the company has an active
project slate totaling some 65 billion dollars, while our five-year business plan, which begins next
year, encompasses capital spending approaching 59 billion dollars. The company held fast to
its strategy of adding production capacity based on its long-term outlook for global oil demand
and its experience in building for the future, even in down times, in order to cover shortfalls and
help stabilize global energy markets.

It had been more than a generation since Saudi Arabia had seen anything approaching the

scope of the combined projects announced in 2005. In the mid-1970s, the oil company had built
the countrys Master Gas System to capture and process natural gas for industrial use. While it was
the largest such project of its era, its price tag, adjusted for inflation, came to roughly $35 billion.

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134 energy to the world : Volume two

Ziyad Al-Qasim, studying for a


degree in chemical engineering,
works out a problem in a classroom
in Seoul University in the Republic
of Korea in 2006. Saudi Aramcos
growing presence in Asian markets
is mirrored by a greater number
of Saudi employees studying at
universities in the region and
going on orientation courses.

Industry consultancy Cambridge Energy Research Associates (CERA) estimates that based

on expected worldwide investments in oil exploration and production technologies, global oil
production will not peak and then decline sharply. Instead, it will reach an undulating plateau,
where global oil production will level off and slowly start declining over the course of several
decades, beginning around the year 2030. This decline will be cushioned by significant amounts
of production from unconventional oil sources such as heavy oil sands, which will become commercially viable as processing technologies improve and world oil prices rise.

Claims that the world faces an imminent shortage of oil are alarmist, CERA believes. This

is the fifth time that the world is said to be running out of oil, said CERA Chairman and Pulitzer
Prizewinning author Daniel Yergin. Each timewhether it was the gasoline famine at the
end of WW I or the permanent shortage of the 1970stechnology and the opening of new
frontier areas have banished the specter of decline. Theres no reason to think that technology
is finished this time.

The Asian Boom

What was driving the Saudi investments? The basic economics of supply and

demand. Depressed oil prices worldwide in the latter part of the 1990s, combined with the Asian
financial crisis, discouraged global investment in the energy industry. Investors overlooked the
resilience of the developing economies of Asia and elsewhere, and their thirst for oil. Led by China
and India, economic development in areas of Asia came roaring back in the early years of the
new millennium. Suddenly, oil industry experts realized that demand for crude oil was bumping
up dangerously close to existing supplyand that the call for crude oil was going to increase.
Fueled by double-digit economic growth rates, Chinas oil imports jumped 17 percent in 2004,
compared to gains of 10 percent in 2003 and 8.5 percent in 2002.

According to the Paris-based International Energy Agency (IEA), global demand for oil was

projected to increase from roughly 88 million bpd in 2010 to 92 million bpd by 2015, with 90
percent of the increase in demand coming from developing countries. By 2030, the IEA estimated
worldwide demand for oil would reach 105 million bpd, even after accounting for anticipated
alternative-fuel use and conservation efforts. Those projected increases loom especially large
in light of one inescapable fact: Annual oil production over this period is expected to decline
in several oil-producing regions, including the North Sea and Alaskas North Slope, as their oil
reserves are gradually depleted.
Drawing upon its continued success at finding additional sources of oil, and reassessing
what can be produced from existing fields to replace the approximately 3 billion barrels of oil
Saudi Aramco entered the new millennium assessing both its ability to execute

produced each year, Saudi Aramco wasand still isconfident the country is nowhere near

PEOPLE POWER

reaching a peak in oil production, as some industry experts have postulated. Current reserves

major projects and its ability to empower and motivate employees. The company strove to improve

are sufficient to meet demand for decades to come, company executives note, and advances

its track record when it came to completing facilities on time and within budget. Equally important

in technology will likely enhance both oil exploration and oil production capabilities.

was improvement in its performance on the soft side of the business to continue to attract the

Saudi Aramcos confidence is partially based on the fact that its total proven recoverable

best Saudi students and professionals, and remain a top choice among expatriate professionals.

reservesroughly 260 billion barrels of crude oilis a conservative estimate. A vast area of

Building for the future isnt simply a matter of laying pipeline, erecting distillation columns or

promising territory in the Kingdom has not been explored fully or with the latest technology.

building gas plants, Jumah said. It also means developing mindsand mindsetsready to

In addition, even small increases in oil production technology can yield big results, and the

meet the scientific, technical and intellectual challenges for an ever more complex world.

companys goal to raise recovery rates to 70 percent for most of its fields could translate into

billions of barrels of additional reserves. Even assuming that Saudi Aramco significantly increases

Nights fables about the genie to fashion a metaphor for transforming Saudi Aramcos corporate

its production above the current rate of roughly 3 billion barrels a year, it clearly has reserves

culture. It was time for the company to let the genie out of the bottle, Jumah declared. I

to spare.

wanted the brainpower of this company to be released, he recalled.

At a management retreat for company leaders in 1998, Jumah tapped into The Arabian

Aviation apprentices do their


coursework in the Dhahran Industrial
Center in 2007. Participants in
the Apprenticeship Program for
Non-Employees go through 24 to
27 months of training and study
English, science, computer science
and mathematics, in addition to job
skills, before they begin working.

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136 energy to the world : Volume two

A Burst of Energy

Haitham Ruwaili, coordinator of the Radiology Group at Saudi Aramco Medical Services
Organization in 2001, was one of the employees who benefited from the emphasis on self-

Until 1946, the predecessors of Saudi Aramco, first known as Casoc and then Aramco, oper-

development. Not long after he joined Saudi Aramco in 1995, Ruwaili was selected for a

ated under the concessionaires corporate identity and thus lacked a distinctive individual logo.

scholarship in the United States to obtain additional technical certification in radiation therapy,

All that changed with the announcement in the June 2, 1946, issue of the company news-

but instead opted to pursue a university degree in Riyadh during his off-duty hours. We

paper the Arabian Sun and Flare of a contest to design the first Aramco logo. By the end of the

[Ruwaili and his wife of four months at the time] realized it would be difficult; however, we

month, at least 110 responses had been received. Harry Flackmeiers double-A design, below

also realized that Saudi Aramco would give us full support. He used vacation days and leaves

left, served as the companys official trademark for the next 40 years.

without pay, and his managers allowed flexibility in his work hours. As a result, two years later

he obtained his degree.

In November 1988, with the creation of Saudi Aramco, a new logo was needed. Once

again, the call went out within the company, and in June 1989, the board of directors

endorsed the design, below right, created by company graphic artist Abd Al-Aziz Al-Ridhwan.

benefit the company, Jumah declared 2002 the Year of Innovation. Employees were encouraged

Keeping the focus on the potential of each employee to use insights and experience to

to submit ideas for improving company performance via the companys proprietary Web-based
Idea Management System. By the end of the year, nearly 3,500 suggestions had been received.
Proposals ranged from ways to improve basic work processes or pieces of equipment to patentable
ideas. Added together, those suggestions saved the company hundreds of millions of dollars
within a few years and created new sources of revenue. Sami A. Abdel Mohsin and his team
from the Central Ghawar Well Services Division, for example, found that pumping units could
be built from recycled parts at a fraction of the cost of a new unit. Abdel Mohsin submitted this
idea, and its implementation enabled his unit to cut costs significantly.

As the new millennium approached, the company revamped its corporate identity. At

the official unveiling of the new logo on April 24, 2000, CEO Abdallah Jumah told employees

Suggestions continued to come in, even after 2002 came to a close. In 2003, the programs

first full year, 3,890 employees participated. In 2006, that figure jumped to 6,200. By year-end
2009, nearly 80,000 ideas had been submitted through the system.

gathered in the EXPEC plaza in Dhahran, This energy burst represents not only our companys
commitment to meet the energy needs of the world, but also the human energy, mobilized
through teamwork, that has propelled Saudi Aramco into the new century.

RETHINKING PERFORMANCE STANDARDS

To ensure the success of future construction projects,

Saudi Aramcos senior management understood that it had to analyze its own performance as
well as long-embedded company practices. They decided Saudi Aramco needed to be measured
against its global best-in-class competitors if it was truly going to be transformed into a highperformance organization.

Jumah declared 2001 the Year of Self-Development for Saudi Aramco, and the company
instituted new programs, increased its support for employee participation in professional societies,
hosted exhibitions and launched a special website to help employees take control of their own
intellectual growth and career paths. The initiative emphasized the potential for employees to
use personal computers to take courses tailored to their specific fields.

Self-development became an integral part of company culture. Nine years later, during

2010, more than 51,000 employees registered for e-Learning courses and completed an average
of roughly 5.5 courses during the year, selecting from more than 3,645 offerings. Meanwhile,
between 2005 and 2010, company oil and gas operators registered for more than 11,500 Webbased Operator Training Simulation courses. Employee Abdulrahman M. Abdulqadir said he felt
the system demonstrates that Saudi Aramco is looking for ways to lead, not just survive. Senior
Vice President of Finance Abdullatif A. Al-Othman noted, We understand that sustained business
success comes through providing our employees with opportunities to hone their skills and apply
their talents, and helping them realize their potential as professionals, and as people.

Hawiyah Gas Plant came online in


mid-2001, under budget and four
months ahead of schedule, testament
to the push for improved performance
brought about by the companys
experience with the Shaybah and
Ras Tanura Refinery projects in the
previous decade.

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138 energy to the world : Volume two

The results were sobering. In 2000, Independent Project Analysis (IPA), a private U.S. con-

Research and Development Center

sulting firm, conducted a benchmark study of 30 industry projects. It found that Saudi Aramcos
Members of the Research and
Development (R&D) Centers
biotechnology group, left to right,
Vedamuth J. Vedakumar, Hanaa H.
Habboubi and Mousa S. Enezi
investigate the possibility of
employing bacteria to remove sulfur
from crude oil before it is refined.

projects were taking 60 percent longer than the average industry project and costing almost 30
percent more.
Rather than searching for excuses, Saudi Aramco redoubled its efforts to improve performance.
The Hawiyah Gas Plant, completed in 2001, was the first $1 billion-plus project completed since the
IPA benchmarking. It provided the first solid evidence that Saudi Aramco was applying the lessons
of Shaybah and Ras Tanura, as well as value engineering and related concepts. By mid-decade,
major projects were being completed on schedule and under budget 80 to 90 percent of the time.
NATURAL GAS MOVES TO CENTER STAGE

The stakes could hardly have been higher. Representing

the first expansion of the MGS since the 1970s, the Hawiyah Gas Plant was a critical component
of the Kingdoms industrial infrastructure, which was being taxed by the greater than expected
local demand for natural gas fuel and feedstock. The complex, the first plant built exclusively to
process non-associated gas, provided facilities to process 1.6 billion scfd of gas from the deep,
Like its sister plant at Hawiyah, the
Haradh Gas Plants project team was
nearly all Saudi. The Haradh facility,
with a processing capacity of 1.8
billion standard cubic feet per day
of non-associated gas, started up
in June 2003. Both gas plants were
named Project of the Year by the
Project Management Institute.

A pair of R&D personnel discuss


their work with a Fourier
transform mass spectrometer,
used to measure extremely low
levels of contaminants, such as
sulfur, in crude oil and refined
products. Left to right are Saeed
H. Al-Shahrani, lab technician, and
Hendrik Muller, senior lab scientist.

Scientists who had been engaged in research and development work for years at widespread
Saudi Aramco facilities got their own home beginning in November 2000: the state-of-the-art
Research and Development (R&D) Center in Dhahran. The center takes a portfolio approach to
devising research programs, targeting near-, medium- and long-term market needs. The first
priority is the desulfurization of crude oil. In the medium-term, the company is investigating
clean fuels, and the third research focus is the management of carbon release.
The R&D Center has entered or is considering entering into collaborations with leading
universities, commercial technology providers and other oil companies, refiners, petrochemical
companies and the automobile industry. Company scientists at the center have been responsible for nearly one-third of the companys patents. In 2008, researchers began performing
representative pilot plant testing in which refining processes are reproduced on a small scale.
Currently, eight pilot plants are in operation, with future plans calling for a total of 25 plants
to be grouped in one facility.

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140 energy to the world : Volume two

high-pressure Khuff and Jawf gas reservoirsthe latter a sandstone formation found in 1994

plant was still under construction, Saudi Aramco formed its first Gas Operations business line

lying even deeper than the limestone Khuff formationat the southern end of the Ghawar

to consolidate all gas-related activities. M. Yusof Rafie, who joined the company in 1970 after

field. The gas produced by the plant freed up for export crude oil that had been used to fuel

graduating from the University of Cairo with a bachelors degree in petroleum engineering, was

domestic industry.

appointed the first senior vice president of Gas Operations in June 2000. Rafie, who retired as

The Hawiyah Gas Plant was the model of a modern construction project. The Project

a senior vice president in December 2008, became responsible for all gas plants, as well as the

Management Institute (PMI) awarded the plant its prestigious Project of the Year Award in

planning, engineering, maintenance and future development of the companys gas facilities.

2002. The equally large, more energy-efficient and environmentally friendly Haradh Gas Plant,
Passengers board one of the companys five Boeing 737 jetliners at
the Haradh airstrip while a company
helicopter lifts off in the background
in 2007. Saudi Aramco flies one of
the largest corporate air fleets in the
world, with roughly 200 pilots and
copilots at the controls of a variety
of fixed- and rotor-wing aircraft.

In 2000, Rafie also was tapped to be a member of the Saudi

which reduced the amount of energy lost in the plants steam cycle from 65 to 20 percent, was

THE NATURAL GAS INITIATIVE

completed two years later, also at the southern end of the Ghawar field, and won PMIs Project

governments negotiating team for its Natural Gas Initiative (NGI). Khalid Al-Falih, who had been

of the Year Award in 2003.

serving as president and CEO of Petron, the companys refining and marketing equity venture

The construction of the Hawiyah and Haradh gas plants, and later upgrades, increased

in the Philippines, was assigned to lead the negotiating team in 2001. At the same time, he was

the total capacity of the MGS to 9.4 billion scfd. The giant projects underscored the increasing

named vice president of Gas Ventures Development Coordination. The NGI was the outgrowth

importance the Kingdom and the company placed on developing the countrys gas resources,

of an effort on the Kingdoms part to attract international oil companies to prospect for and

especially the gas produced independently of crude oil. Indeed, in June 2000, while the Hawiyah

develop gas reserves in regions that were not being actively explored by Saudi Aramco. In the
late 1990s, Al-Falih had helped draft the Kingdoms first gas strategy and development options
to grow supplies to meet rising demand. The Hawiyah and Haradh gas plants were two of the
more tangible results.

By 2000, the government, under the leadership of King Abd Allah, then Crown Prince, was

focused on negotiating with international companies to help develop the Kingdoms gas resources.
The Saudi team discussed several complex ventures with three consortia of international oil and
gas companies. The Saudi team and the international oil companies, however, could not agree
on the ventures. Alignment was proven to be next to impossible to achieve, between their
expectations and our expectations, said Al-Falih. Two key roadblocks were disagreement over
the extent of gas reserves open to development and the rates of return on invested capital. In
June 2003, the Crown Prince directed the team to put the exploration portion of the ventures
out for competitive bidding.
The Natural Gas Initiative benefited from a timely change in Saudi Aramcos corporate
structure. In 2002, Jumah convened a retreat for senior management at Shaybah to set longterm goals for the company, encapsulated in a set of strategic imperatives. One of the results
of the retreat was the realization that the company needed to create a new organization to
launch business-development initiatives, especially those involving international joint ventures
or international investment in the Kingdom. Too often in the past, executives agreed, ideas or
proposals for new businesses had failed to take root for lack of a dedicated corporate structure to
nurture them. The gas joint ventures were put under the aegis of the New Business Development
organization in 2003, and Al-Falih was named the vice president of that organization.
The first international gas exploration joint venture, the South Rub al-Khali Company Ltd.,
or SRAK, was formed with Royal DutchShell and Frances Total in October 2003. Three more
ventures followed the next year, with Saudi Aramco holding a 20 percent equity stake in each:
Luksar Energy Limited, with Russias Lukoil; Sino Saudi Gas Limited, with Chinas Sinopec; and
EniRepSa Gas Limited, with Italys ENI and Spains Repsol YPF. In total, the four ventures covered
more than 330,000 square kilometers of the Rub al-Khali.

In early February 2008, Total exercised its right to withdraw under the terms of the agree-

ment, transferring its stake in SRAK to project partners Royal Dutch-Shell and Saudi Aramco.
The exploratory drilling by the four joint ventures has resulted in two announced discoveries by
Luksar and an excellent gas rate produced in one of SRAKs wells. As of the end of 2010, all four
ventures were engaged in drilling exploration or appraisal wells.
Working in these remote locations, where the summer heat is extreme and infrastructure is
practically nonexistent, could make the best geologists yearn for a desk job. Not SRAK CEO Patrick
Allman-Ward and his crew, however. Most geologists spend their lives remapping prospects
that other people have already mapped, he said. In this project, we are putting new prospects
on the map that have never been seen before. That, of course, is very exciting.

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QATIF : BLEN DING SUCCESS

The first big crude oil increment of


the new millennium was the Qatif
project, which added 800,000 bpd of
production capacity in the summer
of 2004. The project also included
expansion of Berri Gas Plant to handle
the additional volumes of associated
gas produced with the crude oil.

Saad Turaiki, vice president of Southern Area Oil Operations,

embodies the characteristics of innovation and self-motivation that the company has been
promoting among employees. Long before innovation became an official part of the Saudi
Aramco management vocabulary, Turaiki championed ideas that at first left many co-workers
scratching their heads. In short order, however, they were applauding the implementation of
his concepts.
Turaiki joined Aramco in 1975 after graduating from the University of Petroleum and Minerals,
and worked in the mid-1990s on the Qatif field development. Production was declining as OPEC
tightened supply in an effort to curb falling prices, and managers were trying to cut operating
costs any way they could.
One day, Turaiki was thinking about processing costs and how Saudi Aramco needed different facilities to process each grade of oil it produced. I said, Why do we have to have three
increments at Qatif? Its in one area. Cant you blend the crude and produce it as one increment?
The Advanced Fire Training Center
features realistic training environments to simulate firefighting
scenarios such as tank storage,
petrochemical processing, marine,
commercial and residential sites.
The center opened in 2005.

He wrote a letter to his superiors asking that the company investigate blending the crude oil
grades, a concept that did not receive much initial support from his peers. Everybody was sort
of saying, you know, What is this crazy idea? he said. Company engineers nonetheless took
the idea to research and development. To their surprise, they came to me and said, You know,
Saad, its great. Its great Arabian Light crude, Turaiki recalled.

CAPACITY CONCERNS

Saudi Aramco significantly increased production in 2003 to help compensate

for the Iraqi production taken off the market following the U.S. invasion of Iraq in the spring of
that year. The companys average production for that year was 8.1 million bpd, up 1.3 million bpd
from 2002. When production from the Qatif plant came online in 2004, average daily production
increased to 8.6 million bpd, helping to meet rapidly increasing demand from China in particular.
The production hike narrowed Saudi Aramcos spare production capacity to less than its
comfort level of 1.5 million to 2 million bpd (out of a total of about 10 million bpd) and all
signs indicated that world demand was likely to continue increasing at a brisk pace. At the same
time, the level of hostilities in Iraq, including the sabotaging of oil facilities and pipelines, made
it increasingly clear that world markets could not expect significant amounts of crude oil from
that country anytime soon. Saudi Aramco and government officials realized by the latter part of
Given the associated costs, senior operations management had not been interested in

2004 that the Qatif complex, while setting important milestones in terms of size and complexity,

producing individual grades of Qatif crude oil if they could be delivered in increments of only

was a harbinger of even bigger, costlier and more complex construction projects to come.

150,000 to 200,000 bpd for each grade. Bringing the field online as a single, 500,000-bpd incre-

The company quickly began firming up plans for the unprecedented capital spending

ment of blended crude oil, processed in a single facility, was a far more attractive proposition.

program announced in 2005. Concerns about reserve capacity were underscored within a few

With prices clearly recovering by 2000 (when Arabian Light hit a year-high of $31.93 a barrel on

months of the announcement when hurricanes Katrina and Rita slammed into the U.S. Gulf coast,

September 22), the project, which included doubling oil production capacity from the offshore

disrupting production and refining in several locations and sending crude oil and gasoline prices

Abu Safah field to 300,000 bpd, got the green light. Development of the increment began in

soaring. The twin disasters sent a clear message to world energy markets: The sooner additional

2001 and was completed in July 2004, three months ahead of schedule.

production could be brought online, the better.

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144 energy to the world : Volume two

POINT OF TRANSFORMATION

A host of new technical advances the company had recently rolled

Using MRC wells guided by geosteering reduced by nearly 90 percent the number of wells

out or was in the process of employing in the field gave Saudi Aramco officials confidence that the

needed to produce 300,000 bpd, compared with traditional vertical drilling used earlier on the

company was more than ready for the massive projects in the works. At the southern tip of the

Ghawar field. Haradh-3 required only 32 MRC wells versus the 280 that would have been required

Ghawar field, 280 kilometers from Dhahran, the Haradh-3 crude oil increment was completed in

using vertical wells.

January 2006, five months ahead of an already tight 26-month design and construction schedule.

Today, Saudi Aramcos upstream technological development is spearheaded by scientists

Equally remarkable, the project came in under budget. The Haradh-3 GOSP and associated

at EXPECs Advanced Research Center (EXPEC-ARC) in Dhahran. Teams of researchers explore

facilities added 300,000 bpd in Arabian Light crude oil production and also produced 140 million

new avenues in the fields of geophysics, geology, reservoir engineering (including enhanced oil

scfd of associated gas.

recovery technologies), computational modeling of reservoirs and drilling. Advising EXPEC-ARC


is an advisory councilan international body of high-profile scientists, academics and industry
experts that reviews and guides the technology strategy of the ARC. The council includes members from King Fahd University of Petroleum and Minerals (KFUPM), Massachusetts Institute of
Technology (MIT), the Center for Remote Sensing at Boston University, Texas A&M University
and the University of Texas.
Muhammad M. Saggaf, chief petroleum engineer, is eminently qualified to lead company
scientists on their quests. Saggaf joined the company in 1989 after completing a degree in
mathematics at KFUPM. That same year, he earned his masters degree in geophysics from MIT.
After stints in Geophysical Research & Development and Reservoir Characterization at Saudi
Aramco, he returned to Cambridge in 1998 and completed his doctorate at MIT in geophysics in
less than two years. Saggaf is also a recipient of the prestigious J. Clarence Karcher Award from
the Society of Exploration Geophysicists.

About 250 people work at EXPEC-ARC, and nearly half have doctoral degrees. [W]e have

people working here from all over the world, of many different nationalities, Saggaf said. We
believe in the value of working with a diversity of cultures to include the breadth of experience and
knowledge that people from different countries can bring to Saudi Aramco. We also appreciate
the value of the synergies that can be developed from this interaction between people.

At the peak of construction, more


than 15,000 laborers, craftsmen and
professionals of various nationalities
were at work on the Qatif project at
different sites, in and out of Kingdom.
More than 98 percent of the team
members involved in the project
design, implementation management and inspection were Saudis.

Located in the midst of a barren, tabletop terrain of gravel and sand, the Haradh project
became recognized around the world as a showplace for cutting-edge technologies. Here, the
unprecedented integration of drilling and producing technologiesmaximum reservoir contact
(MRC) wells, geosteering for optimal placement of wells, smart well completion technology
and the revolutionary intelligent field concept (in which surface and subsurface sensors transfer
real-time data on temperature, pressure, flow rates and other factors to Dhahran)represented
a point of transformation for Saudi Aramco, said Amin H. Nasser, then executive director of
Petroleum Engineering and Development. Nasser, named senior vice president of Exploration &
Production in May 2008, said bundling these technologies created a model to be followed by
the rest of the industry.
Many of these practices had been used separately or in pairs by the company on individual
wellsthe first MRC well in Saudi Arabia was drilled in Shaybah in 2002, and the first smart
well was drilled in Shaybah in 2004. But Haradh-3 was the first major addition to production
capacityat Saudi Aramco or anywhere else in the worldthat bundled the technologies and
applied them to a drilling program developing a particular field.

A team from the Exploration and


Petroleum Engineering Centers
Advanced Research Center (EXPECARC) discusses extreme reservoir
contact well technology in 2007. Team
members, left to right, are Hiba A.
Dialdin; Nabeel S. Habib; Mohammad
N. Asker; Muhammad M. Saggaf,
then manager of the center; Jin Jiang
Xiao; and Abdullah M. Al-Qahtani.

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146 energy to the world : Volume two

EXPEC-ARC is just one of the many success stories that symbolize the growing capability of

As Saudi Aramco expanded its operations and production capacity, it continued to forge

the company since its transformation from a foreign-owned enterprise to one owned, managed

new contractual relationships with local and international companies. The strategy was, and still

and largely operated by Saudis. Former Saudi Aramco board of directors member James Kinnear

is, vital to the growth of both the company and the local economy. By engaging other companies

once observed that the transformation of Saudi Aramco from a foreign-run company to a Saudi-run

to perform important support tasks, Saudi Aramco could concentrate its own resources on

company may be the greatest transfer of technology in the history of mankind, and the EXPEC-

its core business tasks. At the same time, the contracts provided welcome opportunities for

ARC advisory council members agree. I think its quite amazing what has been done here [at

entrepreneurial Saudis, including those just beginning to do business. In 2009, the company

Saudi Aramco] in the last 20-30 years, said Stephen Holditch, head of the Petroleum Engineering

executed 2,200 contracts and amendments valued at more than $15 billion, 83 percent of which

Department at Texas A&M University and a member of the advisory council. This was more or less

were contracts awarded to local companies and contractors.

an expat-run organization, and now thats totally changed where its all run by Saudi nationals.

On several of the major projects, aggressive schedules and the tight market for materials
led to innovative construction approaches. In response to the shortage of steel fabrication facilities, for example, the Khursaniyah team used concrete as well as standard steel pipe racks. The

Award-winning geophysicist Mustafa


Naser Al-Ali, shown here on the
campus of the Delft University of
Technology in the Netherlands, earned
his doctorate from that institution
in 2007. Al-Ali was sponsored in his
studies by Saudi Aramcos Advanced
Degree Program, one of 227 employees
in the program that year.

concrete columns were mostly prefabricated by Snamprogetti, a subsidiary of the Italian energy
company ENI, and shipped to the construction site, with the final concrete work done on-site.
One of the most innovative arrangements was with al-Zamil Heavy Industries, which
won the contract to build and deliver 39 pressure vessels in 21 months. Six of the vessels were
submarine-sized NGL storage vessels, or tanks, each measuring 67.7 meters long and 6.6 meters
wide and weighing 1,050 metric tons. In a first for a Saudi Aramco project, the contractor built
and heat-treated the tanks on-siteraising the vessel temperatures to 690 degrees Celsius for
seven daysto speed the construction and installation process.
The Khursaniyah project was especially challenging: A crude oil processing facility and a gas
plant were built simultaneously, side by side. The complex has the capacity to process 500,000
bpd of Arabian Light crude oil from the Khursaniyah, Abu Hadriya and Fadhili fields and 1 billion
scfd of associated gas. The gas plant receives gas from five different sources with varying pressures
and hydrogen sulfide contents. The size and scope of the plants gas processing makes it the
most complex project ever executed by Saudi Aramco, noted Usama Badghaish, lead project
engineer for the gas plant.
Fawaz Hassan, left, a safety officer
with a contractor company on the
Khursaniyah Gas Plant project, discusses proper safety harness rigging
with a fellow employee early in 2007.
Hassan was one of thousands of
young Saudis trained to take on
important construction jobs essential
for the success of the long list of
Saudi Aramco projects under way
in the mid- to late 2000s.

EXPANSION CHALLENGES

The number and scope of the new projects forced the company to create

construction cities for temporary workers on a scale not seen since construction of the MGS in
the 1970s. To house the Khursaniyah project workforce, for example, a temporary city was built
and supplied with recreation and other support facilities. More than 30,000 men from roughly 30
countries, speaking more than 15 languages, were living there at the peak of construction in 2006.
The high demand for skilled labor on other similar projects in the Gulf region prompted
a renewed focus on training. Saudi Aramco contracted with private companies to train Saudis
in construction, and some contractors provided their own training. Fawaz Hassan from al-Hasa
signed on with Khursaniyah contractor Consolidated Contractors Company in the spring of 2006.
A former communications operator, Hassan received on-the-job training as a safety officer. He
encouraged other Saudis to consider the building trades. I tell my friends that if they get the
chance to come onto this kind of job, they will have a good future. I tell them they should take
English courses and work on their computer skills, and theyll get good jobs, too.

148 energy to the world : Volume two

Achieving the vision 149

Assisted by tugboats, a supertanker


all 333 meters and 300,000 tons of
hereases into a crude oil loading
berth at Ras Tanura Sea Island while
a departing ship crosses her bow in
early 2005. The delicate procedure
of berthing and unberthing these
enormous ships was performed by
company harbor pilotsall Saudis
thousands of times during the year
in which more than 2.6 billion barrels
of oil were exported to markets
around the world.

Achieving the vision 151

150 energy to the world : Volume two

The Khurais crude oil increment was the crown jewel of the capital program and demon-

Women in Todays Workforce

strated the massive scale of the companys effort to maintain stability in world energy markets.
The project tapped into three fieldsKhurais, Abu Jifan and Mazalijand with total production

Increased educational opportunities for Saudi women in recent years have created a pool

capacity of 1.2 million bpd, it is the largest single production increment added in company history.

of well-educated and well-trained professionals ready to move ahead in their careers.

The projects enormous scale and complex requirements, combined with an overheated world

Economic issues, especially the rising cost of living in Saudi Arabia, have also prompted

market for construction and manufacturing materials and services, created serious challenges for

significant changes in the roles of Saudi women in the Kingdom. Today, both partners

Saudi Aramco from a project management perspective. The company responded with innovative

in a Saudi household often work outside the home. For many Saudi women, Saudi Aramco

contracting, planning and engineering solutions, and Khurais came onstream on time, below

is a popular career option.

budget and with a stellar safety record.


Eiman A. Al-Hazza, left, a supervisor


in Saudi Aramcos Drilling and
Workover Department, discusses
safety and leadership issues with
Bassam H. Bahrabi, right, during the
companys Exploration & Producing
Management Forum in 2008.

At the same time that work was progressing on the massive Khurais and Khursaniyah

projects, Saudi Aramco was also building a 100,000-bpd oil increment in Nuayyim, south of
Riyadh, adding 250,000 bpd of capacity to Shaybah and beginning work on the Manifa project,
a 900,000-bpd oil increment slated for partial start-up in 2013.
The capital program also included major components designed to meet growing demand
for natural gas. Saudi Aramco oversaw a number of simultaneous, interrelated gas and NGL
projects and expansions, primarily the grass-roots project to build the Hawiyah NGL Recovery
Plant. The facility started up in the summer of 2008 with a process capacity of 4 billion scfd of
sales gas from the Hawiyah and Haradh gas plants to yield 310,000 bpd of NGL. The capacity of
A worker is dwarfed by an NGL
storage vessel under construction
on the Khursaniyah project site
north of Dhahran in 2006. A Saudi
firm was contracted to build six of
the mammoth NGL tanks and 33
other vessels, and did so on-site.

the nearby Hawiyah Gas Plant to process non-associated gas was increased by 50 percent, from
1.6 billion to 2.4 billion scfd, and the fractionation capacities of the gas and NGL plants in Yanbu
and of the Juaymah Gas Plant were also increased substantially.
The capital program also required increasing the capacity of pipelines and other support
infrastructure. The need for more treated seawater to maintain pressure in the Khurais and

Abeer M. Al-Mutlaq, a career counselor at the King Abdullah University


of Science and Technology (KAUST),
guides Ali I. Al-Naimi, Minister of
Petroleum and Mineral Resources,
through a photo gallery in Jiddah in
early January 2009, part of an event
for the first class of KAUST students.

Hiring and promoting qualified Saudi women is crucial to the companys ability to tap
the best minds in the Kingdom, male and female. Today, more than 1,100 Saudi women
are full-time employees, including more than 750 who have college degrees, and more
than 1,300 women are supplemental employees or contractors with the company. Since
1995, a handful of women have risen to the level of manager, and two held that position
in 2010. More than 40 women hold positions ranging from supervisor to administrator.

Dr. Salwa S. Sheikh is a pathologist


for Saudi Aramco Medical Services
Organization and the first Arab
woman to represent the College of
American Pathologists as a team
leader. Her mother passed away from
cancer when Sheikh was seven, causing her to make a commitment to turn
that tragedy into something positive,
so she chose pathology as a career.

Achieving the vision 153

152 energy to the world : Volume two

To make this vision a reality, the company has been pursuing grass-roots projects, expansion
programs and joint and equity ventures in-Kingdom and overseas. In addition to the expansion
of affiliate Motivas Port Arthur refinery in the United States to process heavy, sour grades of
oil, the projects include development of export refineries in Yanbu and, in a joint venture with
Total, in Jubail. These refineries will be designed to refine heavy crude oil with high sulfur content
into high-quality, low-sulfur products to meet current and future international environmental
specifications. Another project will construct a world-scale full-conversion refinery along with
associated terminal facilities in the Jazan area.
AN INCREASING INTERNATIONAL PRESENCE

For both crude oil and refined products, Asia has

been Saudi Aramcos fastest growing market and is likely to be a source of steadily increasing
demand for many years. More than half of Saudi Aramcos exports of crude oil, NGL and refined
products ship to Asia, where the company has a number of refining and marketing joint and equity
ventures. Saudi Aramco increased its investments in the Far East in 2004, buying an equity stake
in Japans Showa Shell Sekiyu K.K., a refining and marketing company. In 2005, Saudi Aramco
raised its stake in the publicly held company to 14.96 percent.

We are currently the number one supplier of crude oil to Japan, to China, to the Republic

of Korea, and to Taiwan, noted Ahmed A. Al-Subaey, then general manager of the Tokyo branch
of affiliate Saudi Petroleum Ltd., in a 2006 speech. Frankly, given its geographic proximity to
Saudi Arabia and the escalating demand for energy in Asia and the Pacific, this is our natural
market, and we value it accordingly.
Teamwork and quick thinking
enabled this teamleft to right,
Noora Shaikh, Deema Alomair, Aysha
Alomair and Fatima Kabato tie for
second place in the womens division
of the 2007 Grand Quiz. The annual
event, which tests students cognitive
skills, was hosted by Saudi Aramcos
College Preparatory Program.

Ghawar fields drove plans to increase capacity at the Qurayyah Seawater Treatment Plant by 4.5

million bpd to nearly 13.5 million bpd. The capacity expansion of the seawater treatment facility

related projects are a key component of the companys future business in the Peoples Republic.

China has fast become one of Saudi Aramcos most important markets, and a pair of inter-

was the largest one-step increase at the facility ever undertaken by the company. The capacity

In 2007, company subsidiary Saudi Aramco Sino Co. Ltd. (SASC) signed agreements forming

of various crude oil, gas and NGL pipelines was also increased substantially, and power networks

two equity ventures with ExxonMobil, Sinopec Corp. and the Fujian provincial government. Its

were expanded.

very important for us to be there in the refining and petrochemical marketing business. Its a

breakthrough for us, said Saudi Aramco Chairman and Minister Al-Naimi.

Saudi Aramco completed major work on the capital program in 2009 and wrapped up

remaining work in 2010. Going back to the first crude oil increment at Shaybah in 1998, the

The two ventures were the Fujian Refining and Petrochemical Co. Ltd. (FRPC), the first fully

company had completed an unequaled roster of projects, adding more than 3.8 million bpd of

integrated refining and petrochemicals venture with foreign participation in China, and Sinopec

oil production capacity and more than 6.3 billion scfd of raw gas processing capacity.

SenMei (Fujian) Petroleum Co. Ltd. (SSPC), a marketing venture. The FRPC project, completed in
2009, tripled the refining capacity of an existing refinery from 80,000 bpd to 240,000 bpd and

One of the prime factors in the rise in fuel prices in the mid-2000s

added petrochemical production units and a crude oil terminal. The SSPC venture started opera-

was the worldwide lack of refining capacity. Much of the world has long depended on the more

tions in 2007, marketing wholesale and retail motor gasoline, diesel and illuminating kerosene

EXPANDING REFINING CAPACITY

easily refined light, sweet grades of crude oil, but the forecast is for the world, and Saudi Aramco,

to customers in Fujian Province and the eastern part of the adjacent Guangdong Province.

to rely on heavier, sour grades in the future. Many of the worlds refineries are not equipped to

process these heavier grades. Weighing all these factors together, Saudi Aramco determined in

a mutually beneficial relationship with companies in the United States that extends beyond the

2006 that it needed to build additional refining capacity, especially for heavy oil.

simple supply-and-demand concerns of the petroleum market. American firms continue to play

Saudi Aramcos energy strategy also looks to the West. Saudi Aramco has long enjoyed

Conventional wisdom had always been to build the refineries where the market is, to

prominent roles for the company in oil field services, project engineering and management,

take advantage of reduced freight costs, explained Abdulaziz F. Al-Khayyal, who was senior

and Saudi Aramco relies heavily on the industrial equipment, IT hardware and software, and

vice president of Refining, Marketing & International until moving to head Industrial Relations in

advanced technological tools produced in the United States. [It] is because of the mutually

2007. Lately, weve seen a shift in the market. Certain regions are becoming more demanding,

beneficial relationship we enjoy with the United States, Khalid Al-Falih said, that Saudi Aramco

preferring one product over another. That means there may be demand for gasoline in America,

is committed to remaining one of the top suppliers of petroleum to the U.S. for many decades

diesel in Europe and naphtha in the Far East. If we locate a refinery in Saudi Arabia, were able

to come.

to supply one product to the Far East, one product to Europe and one product to the U.S., and

take advantage of our location between the three markets.

Purchasing Company. The Rome-based company was renamed Aramco Overseas Company (AOC)

Saudi Aramcos European presence dates back to 1948 with the creation of the Aramco

The companys long-term vision sees a mix of refineries integrated with petrochemical

in 1950, and two years later, the office moved to The Hague in the Netherlands, where it remained

facilities linked to associated industrial parks, export refineries and upgraded domestic refineries.

for 30 years before moving to Leiden, where it was based until moving back to The Hague in 2009.

The benefits of such a strategy are many and include adding value to the countrys hydrocarbon

Today, AOC operates branch offices in London, Milan, Tokyo, Hong Kong, Shanghai and New

resources, increasing refining capacity capable of processing heavier grades of crude oil, provid-

Delhi, and the services provided range from purchasing and supply chain management to finance,

ing greater volumes of fuels and feedstocks for domestic industries, promoting local economic

law and human resources. Saudi Aramco also operates various affiliates that provide international

development and diversification, and creating jobs and investment opportunities.

marketing services, with offices in London, New York, Tokyo, Beijing and Singapore.

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154 energy to the world : Volume two

The Nerve Center


Saudi Aramcos Operations Coordination Center (OCC), which is managed by the Oil Supply
Planning and Scheduling (OSPAS) Department, is the central control room for the Kingdoms
far-flung oil and gas operations. Entrance to the cavernous space in Dhahrans core office
complex is tightly controlled, and with good reason. Here, the biggest video display wall in
the hydrocarbon industryforming an arc 67 meters long by 3 meters highprovides
real-time monitoring of virtually all of the companys operations: terminal scheduling; electric
power generation and distribution; and the production and distribution of oil, gas and NGL
and refined products.
Most of the data used to generate the displays is refreshed every 15 seconds. This
enables operators to track the flow of virtually every drop of hydrocarbons produced and
shipped by Saudi Aramco, from wellheads to processing facilities, through more than 17,000
kilometers of pipeline, and finally to loading terminals on both the Gulf and the Red Sea.
Operators work shifts around the clock to constantly track performance of key system
components and have the ability from their desks in the OCC to shut off a remote pipeline
valve, for instance, if sensors embedded in the distribution system detect a malfunction.
The company uses the system to respond to international events as well. In the wake
of hurricanes Katrina and Rita in 2005, OSPAS operators redirected tankers headed for
The Big Board in the Operations
Coordination Center (OCC)
provides a real-time snapshot of
Saudi Aramcos operations, from
wellheads to company terminals.

damaged U.S. Gulf coast refineries, built up inventory of other products and juggled delivery
schedules to major international clients. The result was that the company met clients
needs on a global basis and did not have to cut back production, despite the damage to
U.S. oil facilities.

Keeping pace with the increase in international business, Vela, the companys shipping

affiliate, moved its headquarters to Dubai in 2005. The same year, two double-hull product
tankers, the Altarf and Zauruk, were added to the Vela fleet, and contracts were signed for the
construction of six double-hull VLCCs in the Republic of Korea, part of the long-term program to
replace existing single-hull carriers in advance of international maritime agreement requirements.
Five of these tankers entered service in 2008 and the sixth in early 2009. Another two were
added in 2010.

Vela is consistently recognized for its safety and environmental achievements. In July

2007, Velas engineers pioneered a new ballast exchange system for crude carriers to reduce
the transmittal of invasive organisms. This new system, which was developed in response to
2004 regulations by the International Maritime Organization, continuously exchanges seawater
for ballast to ensure organisms in the water are not transported out of their habitat and into
foreign waters.

In 2010, the Vela fleet of 17 VLCCs, one smaller Aframax-class vessel and four product

carriers completed more than 1,000 voyages, transporting nearly 2 million bpd of crude oil to
customers primarily in the United States and Europe. One of the new tankers, the Sirius Star,
was seized late in 2008 by Somali pirates. The vessel and its crew were released unharmed
early in 2009.

Khalid Al-Abdulwahed, Abdullah


Al-Dossari and Bader Al-Mousa, left
to right, share a moment on the Piazza
Duomo in Milan, Italy, where in 2007
they were working on a company
project with an Italian engineering
company. With affiliate offices and
activities in North America, Europe
and Asia, company employees work
in a wide variety of cultures.

Achieving the vision 157

156 energy to the world : Volume two

STEINEKES LEGACY

A Saudi Aramco affiliate in 2004


bought an equity stake in Showa
Shell Sekiyu K.K. of Japan, one of
the largest refiners in the country
and a company that is also active
in researching solar energy and
hydrogen fuel. The following year,
Saudi Arabia was the number one
supplier of crude oil to Japan, China,
the Republic of Korea and Taiwan,
and a major supplier to India.

If he were around today, Max Steinekethe renowned geologist who set

the standard for oil exploration in Saudi Arabiawould be proud and amazed. His combination
of intelligence, intuition, team building and risk taking contributed to the discovery of some of
the largest oil fields in the world. These standards continue to be reflected in the values that drive
Saudi Aramco today. Saudi Aramcos geologists have been using the same skill set, and they are
equipped with the latest in exploration technology, particularly 3-D seismic imaging, to advance
the process that Steineke helped start more than seven decades ago. Their discoveries, and the
companys ability to find and produce oil from older fields, have played a critical part in Saudi
Aramcos ability to replace the oil and gas it produces. In the case of natural gas, the company
has actually added to its reserves despite sharp increases in production. Between 2000 and 2010,
18 new oil fields and 11 new gas fields were discovered.

Ali Al-Hauwaj, manager of the Exploration Department since 2004, noted that since the

mid-1990s, the emphasis in exploration has shifted from finding additional oil and gas fields in
central Arabia to a concentrated focus on finding non-associated gas in the Eastern Province.
Based on seismic interpretation and years of working with existing fields, Saudi Aramco decided
to look for gas near existing oil fields. That strategy has paid off, as witnessed by the discovery
of the mammoth reservoir of non-associated gas in the offshore Karan oil field in 2006, making
it Saudi Aramcos largest offshore gas field.

Al-Hauwaj had his Max Steineke moment the previous year. His team had been exploring

around the Midrikah area south of Haradh. The fact that wells had hit gas on the southern end
Khalid G. Al-Buainain, senior vice
president of Refining, Marketing &
International, center, tours a refinery
in May 2008 in Fujian Province,
China, site of a joint venture refining
and petrochemicals project.

of the Haradh structure to the north gave Al-Hauwaj confidence that gas could be found near
Midrikah. Even some of his closest associates doubted him, however. Abdulkader Afifi, manager
of Exploration Technical Services at the time, recalled, I had given up on some areas where Alis
people subsequently discovered major accumulations of gas. I thought this Midrikah area
would not be a gas discovery.

Al-Hauwaj had to all but plead for approval to drill a wildcat well. A seismic interpreter

pointed out that the seismic interpretation on the area did not indicate a geologic trap in the
strata likely to contain gas. But more than a quarter-century of experience with the rocks in the
region, and seeing similar formations that contained gas, convinced Al-Hauwaj that it was worth
the risk. I said, Give me the location and I will prove the trap. Well take the risk and drill it.
His bet paid off. By February 2006, the well was producing 30 million scfd of gas and 900
bpd of condensate (liquid hydrocarbons produced with natural gas).
CARING FOR THE ENVIRONMENT

From the companys earliest days, it has had an awareness of its

potential impact on the environment, resulting in a broad array of environmental requirements,


engineering standards, air quality and emission standards, noise control regulations, landfill
standards, water recycling procedures and hazardous material disposal rules.
This awareness also manifested itself in publications such as Biotopes of the Western Arabian
Gulf: Marine Life and Environments of Saudi Arabia in 1977, the result of a five-year company
study, which included a list of the animals and plants inhabiting the Gulf and created a biological baseline against which future ecological changes could be measured. Similar studies were
undertaken on the ecosystem of Tarut Bay in the mid-1980s in cooperation with the University
of Petroleum and Minerals, and the ecology of Manifa and Tanajib bays, which was completed
in 1986. In 1989, Saudi Aramco assisted in the publication of the most complete work on the
birds of the western Gulf and its hinterlands ever printed: Birds of the Eastern Province of Saudi
Arabia, a volume that covered 340 species.

In the early 1990s, the company began devoting billions of dollars to produce more envi-

ronmentally friendly products. The world started to see evidence of these initiatives by the turn of
the new millennium. The company already was a Gulf area industry leader in the effort to remove
lead from gasoline. By 1998, Saudi Aramco had reduced the lead content in its gasoline to half of
the 1991 level, and on January 1, 2001, it stopped producing leaded gasoline altogetherwell
ahead of the schedule set by Gulf Cooperation Council member countries.

The Saudi Aramco logo began


appearing on Sinopec SenMei (Fujian)
Petroleum Co. gas station signage
in China in the summer of 2007. A
company subsidiary signed agreements that year, forming two joint
ventures, a manufacturing arm and
a marketing venture in the Fujian
Province of China.

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158 energy to the world : Volume two

Saudi Aramco is positioning itself to take a leading role among state-owned oil companies

on green issues, particularly in regard to reducing the environmental footprint of the petroleum
industry, among producers and consumers alike. As Abdulaziz Al-Khayyal, senior vice president
of Industrial Relations, put it, There are opportunities to mitigate this environmental impact all
the way from the wellhead to the wheel. One such promising opportunity is greater efficiency.
Even incremental improvements in petroleums energy efficiency have enormous environmental
and economic benefits, Al-Khayyal observed, while major breakthroughs could revolutionize
our energy future.
A NATIONAL OIL COMPANY WITH INTERNATIONAL ROOTS

While Saudi Aramco began as the

business venture of a publicly traded international oil company (IOC), today it is a fully integrated
national, or state-owned, oil company (NOC). The fact that Saudi Aramco is now state-owned is
not unusualworldwide, NOCs now manage more than 90 percent of known oil reservesbut
Saudi Aramco has been uniquely successful at retaining the management culture of an IOC while
adopting the long-range views and responsibilities of an NOC.
Though NOCs and IOCs are in the same business, they operate differently. While IOCs
focus purely on profit, NOCs often take on additional roles for the state, such as creating jobs,
supporting the development of the national economy and supplying low-cost fuel, to name just a
few. Because NOCs are responsible for their countries energy resources and cannot simply move
on to a different region once the easily accessible oil has been extracted, they typically invest
more effort into long-term planning than do IOCs. Saudi Aramco, for example, continuously
develops new reservoir management techniques to preserve the Kingdoms energy resources
for as long as possible.

In May 2007, Vela appointed two new


members to its board of directors
Ali A. Attiyah Al-Lafi, back left, and
Huda M. Al-Ghoson, back center,
a 26-year veteran of Saudi Aramco
and the first woman to serve on the
board of a Saudi Aramco affiliate.
Also shown are board members
Mustafa A. Jalali, back right;
Abdulaziz F. Al-Khayyal, front left;
and Saleh B. Kaki, front right.

Environmental issues continue to be a primary focus at Saudi Aramco, with programs


focusing on monitoring and mitigating any impact on the quality of the environment in which
the company operates. A series of upgrades in the first decade of the new century at Shedgum,
Berri and Uthmaniyah gas plants significantly reduced sulfur emissions. New diesel hydrotreaters
at three Yanbu and Riyadh refineries will reduce emissions from burning diesel by 95 percent, as
all the diesel fuel produced in-Kingdom will be low-sulfur diesel fuel.

For more than 20 years, Saudi Aramco has been closely monitoring air quality near all of

its facilities to ensure they continue to meet or exceed stringent company air quality standards
as well as government environmental regulations. Ongoing monitoring also tracks water quality
near company facilities.

Sensitive to the issue of climate change, Saudi Aramco, in collaboration with the Ministry

of Petroleum and Mineral Resources, organized a May 2006 international symposium on carbon
management, the first such meeting held in the Middle East. The company has also created a
carbon-management team to focus on coordinating the companys efforts to minimize carbon
emissions.

Saudi Aramco is also collaborating with international research institutes and technology

developers to develop new environmental technologies. High on their research agenda are
carbon capture and sequestration (capturing heat-trapping carbon dioxide from large sources
such as power plants and refineries, liquefying it and injecting it into underground reservoirs),
cleaner-burning fuels and more environmentally friendly automobile engine designs.

In addition, Aramco Services Company co-sponsors the Weyburn-Midale CO2 Monitoring

and Storage Project managed by the Petroleum Technology Research Centre in Canada. Other cosponsors of this initiative include companies such as Chevron and Schlumberger, Japans Research
Institute of Innovative Technology for the Earth and the regional electric utility SaskPower.

Abd Allah S. Al-Saif, senior vice


president of Exploration & Producing,
standing at center with his hands
crossed, and other company executives in April 2006 visit the crew
of the offshore drilling rig that
discovered Karan, the companys
largest offshore gas field.

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160 energy to the world : Volume two

At the same time, Saudi Aramcos organizational structure remains influenced by its days

In this relationship, the United States and other oil-importing countries rely upon the oil-

as an IOC. Unlike other NOCs, the company operates to implement the governments energy

exporting nations for reliable supplies of petroleum to fuel their economic growth and maintain

policy, but does so with a large degree of independence. As Nansen Saleri, who for many years

their quality of life. In turn, oil-exporting countries need the energy markets of consuming countries

oversaw Reservoir Management, explained, Today, when you look at [Saudi Aramco], it is an

to generate revenue to fund their own economic growth. Furthermore, the United States, Europe

international oil company. Even though its a national company, in many respects it operates

and Asia provide services and technology to countries such as Saudi Arabia. Moreover, many

like a private oil company its thinking its management style the way it addresses its

Saudis in key positions in Saudi Aramco and the government received their higher education or

needs. The amount of empowerment that middle management has far exceeds the amount

advanced training in the United States and Europe.

of empowerment that other middle management has anywhere else in the world. And I think
this is a key differentiator as far as the performance of the company. Its that empowerment.
ENERGY INTERDEPENDENCE

In the first eight years of the new millennium, crude oil prices more

than quadrupled, and on March 3, 2008, oil reached a high of $103.95 a barrel on the New York
Mercantile Exchange, beating by 19 cents the inflation-adjusted record of April 1980. Four months
later, in early July, oil prices briefly touched a new record price of $147 a barrel. The reasons for the
escalation in prices were complex and varied. Saudi Aramco believed, and many energy analysts
agreed, that the reasons were aboveground issues, rather than a lack of hydrocarbons beneath
the surface. Some of these reasons included the growing demand from emerging markets in
China, India and the Middle East, global underinvestment in oil infrastructure, a worldwide
shortage of refining capacity, conflict and tension in key oil-producing areas of Latin America,
Africa, the Middle East and Central Asia, and financial speculation in commodity markets such
as oil and gold. In the build-up to the record price of March 3, other factors also came into play,
as noted by The New York Times: the recent fall in the value of the U.S. dollar and the actions of
investors, including pension and hedge funds, as they sought financial refuge in commodities
such as oil to offset the slowing economy.
Aramcons and local students join
together to plant mangrove seedlings
in 2004 as part of an effort to restore
the natural habitat of Tarut Bay. Saudi
Aramco has sponsored mangrove
research and restoration since the 1980s,
and its volunteer planting campaigns
have become an annual tradition.

One key factor in the discussion of the future of the worlds energy supply is the growing role
of energy sources other than petroleum. Perhaps surprisingly, Saudi Aramco has advocated the
development of alternative energy sources as necessary to help meet future demand for energy. As
Jumah remarked in an address at the Harvard University Center for the Environment in January 2007,
As an oil man, I not only welcome additional contributions from alternative fuels, but I believe these
contributions will be essential if we are to meet the growing needs of global energy consumers.
This growing need for additional energy supplies is why I think work on alternative energy is so
important, and why such efforts should be based on a realistic appraisal of their potential, including
the rate at which their contributions to global supplies can be expanded.
One promising direction for alternative sources of energy is a natural resource Saudi Arabia
also possesses in abundance: sunshine. In 2009, Saudi Aramco signed an agreement with Showa
The higher energy prices produced calls from some quarters in the United States and other

Shell Solar, an affiliate of Showa Shell that was later renamed Solar Frontier K.K., to share infor-

countries for energy independence, but Saudi Arabia and Saudi Aramco have long championed

mation with the intention of mutual commercial and technical development of electrical power

energy interdependence: cooperation among producers and consumers to encourage energy

generation plants in the Kingdom based on Solar Frontiers technology. In 2010, work began on

diversity, efficiency and conservation. In remarks made at the 15th Annual Arab-U.S. Policymakers

small-scale solar power pilot facilities that can generate 12 megawatts.

Conference in Washington, D.C., in October 2006, Al-Falih framed the relationship in this manner:

The record-high oil prices in 2008 dropped sharply later in the year in the wake of the

If one defines the pursuit of energy independence as essentially a quest for reliable and affordable

financial crisis that gripped much of the world. Most experts agreed, though, that a return to

supplies, then the best way to achieve that is by strengthening relationships in the context of a

higher energy prices was likely as the global economy recovered, mainly because most of the

diverse global marketplace.

factors cited in the rise to the record-high prices remained valid.

Khalid A. Al-Falih, center, in lightcolored coveralls, leads a review


of progress on the Hawiyah NGL
Recovery Plant project in August
2008. Three months later, in
November, Al-Falih, a 30-year
veteran of the company and
member of the board of directors
since October 2004, was named
CEO and president of Saudi Aramco.

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162 energy to the world : Volume two

The Saudi governments goal is to capture more of the value of the countrys resources, in
this case natural gas, at every stage of the production process, not just as basic petrochemicals.
Achieving this goal will lead to realizing another parallel goalcreating local industries that provide
lucrative and sustainable employment opportunities for Saudi Arabias burgeoning population.
Two large petrochemical projects will form the backbone of the latest phase of Saudi
industrialization. The first is Petro Rabigh, a roughly $10 billion joint venture with Japans Sumitomo
Chemical Co., Ltd., which transformed Saudi Aramcos Rabigh Refinery on the Red Sea into an
integrated refining and petrochemical processing plant. The second is a proposed multi-billion-dollar
project with The Dow Chemical Co. to develop a petrochemicals facility in the Jubail industrial
area north of the Ras Tanura Refinery complex and Juaymah Gas Plant. The world-scale chemicals
and plastics production complex includes plans for an associated conversion park for local and
foreign private-sector companies.

Saudi Aramco and Sumitomo broke ground on the Petro Rabigh project in March 2006.

In addition to originating about 30 percent of the financing within Saudi Arabia, 25 percent of
the equity in the project was sold in an initial public offering to Saudi citizens and institutions
in January 2008. The stock offering raised $1.23 billion. It was the largest stock sale in Saudi
history and marked the first time that Saudi Aramco had offered shares in one of its affiliates to
the public.

Petro Rabigh commenced operations in early 2009 and is capable of producing 2.4 million tons

per year of petrochemical solids and liquids, mainly ethylene and propylene. The petrochemicals
will be used to make everything from plastic fibers and films to foam for furniture and automobiles,
sealants, resins and antifreeze. Large volumes of gasoline and other refined products will also be
produced. Saudi Aramco and Sumitomo are exploring a proposed second phase of the venture
to expand both refining and petrochemical production.
The unprecedented expansion of Saudi Aramco oil, gas and petrochemical facilities in the
Kingdom, impressive in its own right, is itself only a part of an even more ambitious and sweeping
modernization plan that is reshaping Saudi society. The hydrocarbon expansion is one aspect of
an estimated $500 billion investment program designed to further diversify the Saudi economy,
provide millions of new jobs for Saudi citizens and greatly expand educational opportunities in
the Kingdom.
An 800-ton regenerator is offloaded
at the Petro Rabigh project site in
2007. The regenerator and several
other larger vessels were later lifted
into position by an MSG80 heavy-lift
crane, one of the two largest cranes
in the world.

The following year, in October 2009, the oil market witnessed another significant development

BUILDING A KNOWLEDGE-BASED SOCIETY

in the price of crude oil: Saudi Aramco announced it would switch from West Texas Intermediate

ahead, Saudi Aramco received another task. In July 2006, King Abd Allah, who became King

Even while the petrochemical projects were forging

(WTI) to the Argus Sour Crude Index as a benchmark price for all grades of crude oil sold to customers

in 2005 after King Fahds death, asked the company to take the lead in building and developing

in the United States. High inventories of WTI at its trading hub in Cushing, Oklahoma, in the first

the King Abdullah University of Science and Technology (KAUST), a centerpiece of the plan

quarter of 2009 dislocated the price of WTI from the global oil market. The change in pricing to the

to broaden the Kingdoms educational offerings. The company was charged to construct the

less-volatile Argus Index, a basket of three grades of crude oil from the Gulf of Mexico, reflected

graduate research university from scratch on a 36 million-square-meter site located near the

the growing importance of sour grades of crude oil in the world market.

fishing village of Thuwal about 80 kilometers north of Jiddah on the Red Sea. Saudi Aramco
assembled a project team and enlisted the help of an international advisory council to craft the

A HEIGHTENED PROFILE FOR PETROCHEMICALS

The MGS was the first major effort of Aramco

to support the launch of the Kingdoms national industrialization plans and its petrochemical

university based upon the best practices of the worlds top academic and research institutions.

In an innovative approach, the university was organized around four interdisciplinary research

industries. In recent years, the companys involvement in the petrochemical industry has taken

institutes and also features an adjacent research park to link activities with private-sector research

a new turn. Integrating petrochemical manufacturing centers with Saudi Aramcos refining and

and economic development. The university, with a multi-billion-dollar endowment that places

related activities became the focus of the companys New Business Development administrative

it among the top universities in the world, is open to men and women and attracts top science

area following the signing of the joint-venture gas exploration agreements in 2003 and 2004.

and technology students and faculty from around the world as well as from within the Kingdom.

The Kingdom and the company brought in consultants to help focus discussions on pet-

rochemical development options and to learn from other countries successes. We said, How

ceremony presided over by King Abd Allah, emphasized the twin goals of the institution. KAUST

KAUST Interim President Nadhmi A. Al-Nasr, speaking at the October 21, 2007, groundbreaking

did Singapore do it? What did Korea do? How did Japan industrialize? recalled Al-Naimi. Saudi

will collaborate with the best institutions and convene the most talented scientists from around

Arabias existing petrochemical company established in 1976Saudi Arabia Basic Industries

the globe to enable discovery that will help all humanity, he said. It will also deepen and diversify

Corporation, or SABICgoes to a point and stops, said Al-Naimi. They sell basic materials,

Saudi Arabias knowledge-based economy, added Al-Nasr, who was Saudi Aramcos vice president

and then the industrialization is done in the Far East or in Europe. Its not done here.

of Engineering Services prior to being assigned to lead the KAUST development effort.

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164 energy to the world : Volume two

The Evolution of Social Responsibility


The Kingdom of Saudi Arabia and the company that became Saudi Aramco grew up together.
Even in the early days, the Kingdoms leadership knew the petroleum industry wouldliterally
and figurativelyfuel the countrys growth and development. The company also realized its
responsibility to help develop a healthy society and a vibrant economy, both of which were in the
long-term interests of the company and the Kingdom.

From its first days, the company was involvedby internal initiative, business need, social

need or government requestin developing the nation in the broadest sense, far beyond
its commitments as an oil concessionaire. In the beginning, the company had to do literally
everything itself, and not just core activities such as surveying, drilling and building company
facilities, but everything related to supporting itself: health care, power generation, water supply,
laundry and food preparation. As the company grew, its social responsibility initiatives expanded,
ranging from public health and safety programs, publishing, TV programming and transmission,
and industrial development, to school building, land development, and home ownership and
education programs, to name a few.
One of the central areas of focus
in the companys contemporary
community outreach philosophy
is to develop a stronger culture
of volunteerism in the Kingdom,
especially among younger
generations.

As time passed, the company was woven into the countrys economic and social services

fabric: It supported or complemented services provided by the government, and it increasingly


depended on goods and services provided by the private sectora private sector the company
helped create by supporting employees who founded new businesses.
Until 1980, Aramco was required to pay the government the concession rental and a share
of its profits. Social responsibility initiatives and other developmental programs were paid for
with the companys share of profits or compensated for by the government. When the company
became fully Saudi owned, all of its income became the governments, and although some
social responsibility programs were continued or expanded, its social responsibility strategy
became more focused on increasing the Kingdoms revenues from petroleum and on being
a catalyst, role model and supporter of growth and development in all aspects of society in
general, and in the economic sector in particular.

In a very real sense, the scope and scale of the companys contribution to the economic

and social development of Saudi Arabia increased exponentially. Instead of being directly
responsible for building some government schools, Saudi Aramco now contributes about 80
percent of the cost of every government school built because it contributes about 80 percent

of the governments total revenue. This applies to government hospitals, health clinics, water
treatment plants, highways and other infrastructure. And the oil, gas and feedstocks Saudi
Aramco produces fuel water desalination, power plants and numerous domestic industries.
Given this context, the company has reduced or ended programs now run by the government and has adopted new programs and expanded existing ones to be more compatible with
its revised role. In 2009, the company articulated its citizenship vision: To be an influential
leader in creating sustainable social and economic opportunities for the welfare of the Kingdom
and in other locations where we do business. It focused its citizenship efforts on four sectors, or
pillarseconomy, community, knowledge and environment.
Representative of the companys citizenship vision was the Traffic Safety Signature
Program initiated in 2009, an effort to address one of the Kingdoms most critical challenges.
The program focused on making a lasting difference through building capacity through
strategic alliances with a goal of reducing traffic deaths.

King Abd Allah has stressed the need for Saudi Arabia and all developing countries to

make greater academic progress in the fields of science and technology: We are living in an era

pioneering graduates were awarded masters degrees. About one-third of them intended to

Fifteen months later in December 2010, at the schools first graduation ceremony, 292

of scientific and technological advancement. There is no real power without achieving progress

continue at KAUST in pursuit of doctoral degrees, and about half were planning to remain in

in science and technology.

Saudi Arabia to contribute to the development of the Kingdom.

Officials of the nascent university began creating programs and signing international devel-

opment agreements even while facilities were under construction. KAUST initiated partnerships

speaker May Alqurashi. It was not all about academics. Here, we met friends from all over

Life at KAUST also taught us how to extend our family, said student commencement

with some of the worlds foremost research institutions, with each partnership drawing upon the

the world. We found that although we are different in many ways, we are so close and similar.

strengths of the respective institution. For example, KAUST and the Woods Hole Oceanographic

Anyone walking around the campus would see friends gathering together and feel the spirit of

Institution in Massachusetts are engaged in research focused on coral reefs, coastal hydrography,

everlasting friendship all over the place.

and fisheries and aquaculture, while a partnership with the Institut Franais du Ptrole focuses

This same spirit was very much in evidence when Saudi Aramco celebrated its 75TH anniversary

on carbon capture, clean fuels, catalysis, polymers and chemical engineering modeling.

in May 2008. The centerpiece of the yearlong festivities was King Abd Allahs visit to Dhahran

In January 2008, the university awarded its first KAUST Discovery Scholarships to 178

on May 20 in remembrance of historic visits to company facilities in the Eastern Province in 1939

outstanding male and female engineering and technology undergraduate students from around

and 1947 by his father, King Abd al-Aziz. On both occasions, when the Kingdoms founder

the world, including more than 80 students from Saudi universities. The students, whose selection

visited the fledgling oil camp at Dhahran, among many other activities, he received the expatri-

was based on academic criteria, were part of the first group of graduate students when the

ate employees, their wives and their children. In 2008, the company brought 29 of those 1947

campus opened for classes in September 2009.

Kids, some now accompanied by their spouses or grown children, back to Dhahran to meet King

Throughout its history, Saudi Aramco


has served as a role model and innovator in the Kingdom in a wide variety
of endeavors, from health care and
education to environmental practices
and safety standards. Here, Sahar A.
Al Dughither works as a volunteer in
the companys hospital in Dhahran.

Achieving the vision 167

166 energy to the world : Volume two

Students head to class on the


campus of the King Abdullah
University of Science and
Technology. The graduate
research university, built by
Saudi Aramco, opened its
doors in the fall of 2009.

Abd Allah. Saudi Aramcos pioneer spirit, exemplified by the many retired Saudi and expatriate
employees honored during the anniversary, is a living part of Saudi Aramco today, and a source
of inspiration for the new generation of Aramcons.
On his visit to Dhahran to mark the companys anniversary, King Abd Allah laid the symbolic
cornerstone for the King Abdulaziz Center for World Culture, Saudi Aramcos flagship community
outreach initiative. The Center, which will feature a public library, a museum, a childrens center
and other facilities, is envisioned to be a catalyst for cultural and social progress and a forum
for knowledge dissemination and innovation. Located near the site of Well No. 7, the Center
will be an iconic architectural landmark and a model for social progress through education and
cross-cultural exchange.

For Al-Naimi, developing Saudi Arabias petrochemical industry, founding its newest

university and building a world-class cultural center are closely linked to the Kingdoms future,
and all are linked to Saudi Aramcos legacy of reliability and transformative power. Hydrocarbons
will always be important to Saudi Arabia, he said. Currently the Kingdom is exploiting them
as the flywheel for developing industrialization across the country. But in the future we need to
use them as the flywheel for converting [Saudi Arabia] into a knowledge-based society. That is
the challenge.
The vision of King Abd al-Aziz remains central to Saudi Aramcos comprehensive strategy,
which aims to ensure success both today and for generations to come. The Kings vision, embodied
in the terms of the original concession agreement with Socal, has been realized many times over.
King Abd al-Aziz would approve of the enormous expansion of Saudi Aramco throughout
the Kingdom and around the world, and the improvements in processes and technology that
contributed to it, but he would be most pleased to see that many Saudi men and women are
largely responsible for that success.

King Abd Allah, center, joined by


leaders of other Gulf states, members
of the royal family, Saudi Aramco
management and a group of Saudi
children, celebrates Saudi Aramcos 75th
anniversary in Dhahran in May 2008.