In Abqaiq, the biggest oil processing facility on the planet, there is no sense the world may be coming to the end of the oil era.
The complex, about 25 miles from the coastline of the Persian Gulf, is the size of about 350 football pitches. In one of three control rooms, a dozen Saudi Aramco staff sit behind computer screens monitoring a system that can process as much as 7mn barrels of oil per day, representing one in every 14 barrels sold worldwide.
The crude is depressurised in silver, dome-shaped “spheroids” and then piped into 18 stabiliser columns, where impurities like dissolved gases and hydrogen sulphide are removed, before it is sent for refining.
As the case against use of fossil fuels hardens, several of the biggest western oil companies have in the past five years reconsidered their commitment to the crude oil that has been the bedrock of the global economy for over a hundred years. Aramco is doing the opposite: it is doubling down.
The state-owned giant that already produces about 10 per cent of the world’s oil is boosting its maximum production capacity from 12mn barrels a day to 13mn b/d by 2027 and aiming to increase its gas production by more than 50 per cent by 2030. Aramco has also invested in petrochemicals production and hydrogen projects.
Ultimately, the world’s biggest crude producer is betting that it can continue to do what it does best: pump oil for decades to come and gain even more market power as other producers cut back.
“We have more at stake than most companies in terms of this industry,” says chief technology officer Ahmad al-Khowaiter.
Al-Khowaiter, a second-generation Aramco employee educated at the University of California and the Massachusetts Institute of Technology, is a key figure in the company’s drive for “sustainability”.
The energy group’s pitch is that it can provide the “lowest carbon” barrel of oil in the industry and that as long as the world needs to use oil, that oil should be Aramco’s.
In the company’s first ever sustainability report, published in June, the phrases “lowest carbon” and “least carbon” appear at least 14 times in the first 33 pages. “As you know, we are the world’s lowest emitter of greenhouse gas per barrel of oil among major producers, around 10.7kg [of CO₂ equivalent per barrel of oil equivalent],” continues al-Khowaiter.
Aramco increasing its oil production and market share is therefore “better for the world”, he argues. “You really want the lowest carbon emitter to take a larger market share, because that will bring down the overall carbon footprint of the oil industry.”
But the question of whether cutting operational emissions has any real climate impact if the world is still burning millions of barrels of Aramco’s oil a day is a subject of fraught debate.
On average, roughly 85 per cent of the emissions linked to a barrel of oil is produced when it is burnt, and only 15 per cent during its production.
“You can’t decarbonise oil because of the fundamental end-use emissions,” says Michael Coffin, a former BP geologist who is now the head of oil, gas and mining at the think-tank Carbon Tracker. “It’s a myth.”
Ever proud of its contribution to the development of modern Saudi Arabia, Aramco straddles the old and the new. The corridors of its headquarters are lined with black and white photos of the past, while a generation of bright, young Saudis work on the latest technologies in adjacent rooms.
Founded in 1933 as a partnership with Standard Oil of the US, Aramco produced its first oil in 1938. The Saudi Arabian government acquired 25 per cent of the company in 1973 and had taken full control by 1980.
Aramco’s rivals such as US supermajor ExxonMobil and Europe’s Shell have global portfolios of oil and gas assets, which they can reshuffle as political and commercial priorities change. Aramco’s oilfields, in contrast, are all in Saudi Arabia, where they remain central to the government’s economic plans.
The company has produced more than 145bn barrels of oil since it drilled that first successful well more than 80 years ago, and it claims to have at least 253bn barrels of proven reserves available in the kingdom — enough to meet total global demand for about seven years.
In a marked shift, in October 2021 Saudi Arabia pledged to lower its emissions to net zero by 2060 through investments in renewable energy and carbon capture technology to reduce the emissions from its oilfields. However, the government has no plans to lower hydrocarbon’s production.
In fact, shifting domestic power generation to renewable sources will have the added advantages of freeing up more oil for export and thereby generating additional revenue for the kingdom, according to energy minister Prince Abdulaziz bin Salman. “It’s a triple-win situation,” he told the FT last year.
Clean energy investments are part of an ambitious plan by Crown Prince Mohammed bin Salman to modernise the conservative country. But to fund each megaproject the kingdom’s day-to-day leader needs the petrodollars to continue to flow, even as he seeks to diversify the economy.
As a result, Aramco is even more focused than its rivals on maximising the longevity of its fields.
Last year, Aramco had 864 patents granted by the US Patent Office, most of which related to innovations in “subsurface” technology designed to improve the efficiency of its oil production and prolong the life of its fields, says al-Khowaiter. This is between two and three times more patents than the next international oil company, he estimates.
The high number of patents also reflects Aramco’s involvement in all phases of the hydrocarbon supply chain from exploration to refining and distribution — a characteristic Aramco says will be an advantage as the emissions-reporting demands from regulators and customers increase.
“You’ll see our ability to track every drop of oil, every cubic foot of gas from its source to at least the Saudi point of sale,” says al-Khowaiter. In comparison, in parts of the US oil and gas industry, for example, different companies are involved in production, transportation and liquefaction, he says. “That gives us an advantage because we can commit with very high accuracy to the carbon footprints that we provide for our products.”
Some of the efforts to reduce operational emissions across Aramco’s operations are easy to spot. Drones are used at Abqaiq to check equipment for leaks of methane, a greenhouse gas that is the second biggest contributor to climate change after carbon dioxide.
At the Hawiyah natural gas liquids recovery plant, 150km further south, the kingdom’s first carbon capture and sequestration (CCS) project collects carbon dioxide and re-uses it for enhanced oil recovery in part of the neighbouring Ghawar oilfield, the largest in the world.
Ramping up the use of CCS technology is central to Aramco’s strategy. The Hawiyah facility, which opened in 2015, can currently capture about 800,000 tonnes of CO₂ a year. Aramco aims to capture 11mn tonnes across its facilities by 2035, which could then be used for chemicals, plastics and polymer production, it says.
Ultimately Aramco argues that its “lower carbon” barrels will command a higher price in the future than rival barrels with higher associated emissions.
“If you have to offset the emissions associated with that oil, that’s a lower offset cost, so there’s economics behind it as well,” says al-Khowaiter. “We believe that as we . . . create products that are even lower emissions with offset carbon credits, it will become even more attractive.”
‘Elephant in the room’
Some experts agree with al-Khowaiter’s argument. “Bar any political obstacles Saudi Aramco will be the last oil producer standing,” says Valérie Marcel, an expert in national oil companies at Chatham House. “They have the lowest costs and now they have the lowest emissions. It obviously is a barrel of oil that has a more rightful place in international markets.”
However, despite the company’s commitment to reduce the carbon produced by its operations, the absolute emissions from Aramco’s wholly owned assets will barely change between now and 2035, according to its own sustainability report.
Aramco’s operations and the energy they consumed emitted 68mn tonnes of carbon in 2021. In 2035, those emissions, known as its scope 1 and scope 2 emissions, are expected to be 67mn tonnes.
Aramco says that without mitigation these emissions would rise to 119mn tonnes of CO₂e by 2035, given its plans to increase production of oil and gas over the period. Its plans to “mitigate this growth” means the “carbon intensity” of its oil and gas products will therefore fall by 19 per cent over the period from 10.7kg of CO₂e per single barrel of oil equivalent to about 8.7kg, it says. In comparison, the carbon intensity of Chevron’s operated oil and gas projects in 2021 was 28.6kg, while BP’s was 15.5kg.
Carbon Tracker, which analyses the impact of the energy transition on fossil fuel producers, described Aramco’s sustainability report as “heavy on rhetoric and light on substance”.
To even assess a company’s compliance with the goals of the 2015 Paris climate agreement, the think-tank says corporate targets need to be set on the basis of an absolute reduction in emissions, include the carbon produced when the products are burnt by the consumer, known as scope 3 emissions, and cover the company’s entire sales and production.
“Aramco’s targets don’t meet any of the three of our hallmarks, which we see as prerequisites for climate targets to be potentially Paris-aligned,” says Coffin, of Carbon Tracker.
He sees Aramco’s argument that its barrels are “lower-carbon” than others as a distraction, adding that the average scope 3 emissions of a barrel of oil are 430kg CO₂e. Reducing operational emissions by half will only reduce a barrel’s total carbon emissions by 7 per cent, he says. “That’s playing at the margins and totally ignoring the elephant in the room that you’re still burning oil.”
Aramco, however, is not the only oil producer that has not set scope 3 targets. Exxon has no scope 3 target, while Shell and Chevron have only committed to reduce end-use emissions in terms of “carbon intensity” — a relative measure, which allows the carbon produced by oil and gas to be offset against a company’s low and zero-carbon energy products.
The International Energy Agency forecasts that global oil demand may fall from more than 100mn b/d today to 24mn b/d in 2050 if the world successfully cuts emissions to net zero by then. In contrast, Aramco argues that the energy transition will move at a different pace across different markets and that there will be a need for its hydrocarbons “well beyond 2050”.
“We only produce oil because people want to buy it, so it’s up to the countries to decide how they want to manage that,” says Olivier Thorel, Aramco’s vice-president for chemicals and hydrogen. As long as there is demand, he adds, Aramco will aim to meet that in a “reliable way”.
It is an argument that has found new support from governments and investors in the past 12 months after Russia’s invasion of Ukraine upended energy markets, sending European countries racing to secure alternative supplies of fossil fuels.
In May, Aramco briefly reclaimed from Apple the title of the world’s most valuable company, as its market capitalisation soared to $2.426tn after oil prices rallied.
At the most recent COP climate meeting in Sharm el-Sheikh, Egypt, Saudi officials held discussions about greening the oil industry, while successfully campaigning alongside other countries to keep language on the phaseout of all fossil fuels out of the final declaration.
“They are the most powerful market actor right now because of the concentration of capacity that they hold and their supply flexibility,” says Ahmed Mehdi, an oil market expert at Renaissance Energy Advisors, a consultancy.
By 2050 Mehdi thinks Aramco will still be the world’s biggest crude oil producer. However, the company would benefit from being “more transparent about this massive PR assertion that ‘we have the lowest [carbon] intensity in the world’,” he says, adding that verification is key to building trust with emissions reporting. “They have made bold claims. Well then, make the methodology public, show the data.”
Life after oil
There are other strands to Aramco’s plans for longevity even if demand for crude oil eventually enters a rapid decline.
The first, petrochemicals, has been a focus since Aramco completed construction of the $20bn Sadara chemicals plant in Saudi Arabia’s Eastern Province in 2017. Then about 12 per cent of the company’s crude was used to produce petrochemicals.
Thorel, a French national who previously spent 15 years at Shell, says Aramco aims to increase that to about a third — approximately 4mn barrels of oil equivalent — by 2030-35. In 2020, it acquired a 70 per cent stake in Saudi Arabia’s state-owned petrochemicals company Sabic.
The speciality chemicals, which can be found in everything from plastic bags to cosmetics and car parts, are generally not burnt and therefore have no scope 3 emissions. However, the shift means Aramco products are likely to contribute to more plastic waste.
The second strand, hydrogen, which is pitched as a low-carbon alternative to fossil fuels, is a more nascent area of focus. In 2020, Aramco produced and delivered the world’s first shipment of hydrogen to Japan in the form of ammonia. Aramco produces hydrogen from natural gas, while capturing the CO₂ generated during the process. It aims to produce up to 11mn tonnes a year of so-called blue ammonia by 2030. At the headquarters in Dhahran a futuristic hydrogen-powered bus is used to ferry important visitors.
Other areas of work at Aramco’s research and development centre include “advanced combustion systems” to lower the emissions of traditional vehicle engines, a “low-carbon synthetic gasoline” and mobile carbon capture technology, which it argues could cut vehicle CO₂ emissions by up to 40 per cent by preventing the fumes from being released. Aramco spent $94mn investigating “sustainable mobility” in 2021 out of a total research and development budget of $607mn.
Such initiatives feel more speculative and less likely to see widespread uptake than, for example, hydrogen, says Medhi. Yet they also feel more directly aligned with Aramco’s ultimate goal of prolonging the oil era.
“Aramco recognises that there is a window of time that is significantly longer than what the west perceives where they can optimise oil,” says Christyan Malek, global head of energy strategy at JPMorgan. “The west is thinking five to 10 years. They’re thinking 20 to 30 years. That makes all the difference.”