Amin H. Nasser, CEO of Saudi Aramco, spoke to Petroleum Economist about the current landscape in the energy sector and the challenges ahead.
How do you see the Ukraine crisis and the current energy crisis in Europe affecting the pace of the global transition to a low-carbon economy?
Nasser: The situation in Ukraine has exposed the limitations of current energy policies and underscored the critical role energy companies play in providing reliable, affordable and increasingly sustainable energy. Specifically, it has highlighted how geopolitics can impact fragile energy transition plans. However, it is important to recognise that the conflict is not the root cause of the crisis. The oil market was already stretched following years of underinvestment. To ensure an orderly transition, the world needs conventional and new energy to run in parallel for as long as needed. Prematurely discontinuing investments in conventional energy will likely lead to serious supply shortfalls and slow the pace of the global transition towards lower emissions.
How is the transition to a low-carbon economy affecting oil and gas firms’ investment strategies in conventional energy assets?
Nasser: Discouraging investment in oil and gas has hindered—rather than helped—the global energy transition. Indeed, this has left economies and consumers more vulnerable to the sort of shocks we have seen during the past year. We believe that continued investment in conventional energy alongside ongoing efforts to advance renewable technologies is the most effective way to deliver an orderly transition that does not come at the expense of economic prosperity or energy security. Ensuring this security is why we aim to increase our capacity through multiple increments. At the same time, we also intend to increase our natural gas production by more than half by 2030 to help the Kingdom achieve a lower carbon energy mix.
How well is Aramco placed to address the global transition to a low-carbon firm compared to other competitors?
Nasser: As the lowest-cost producer globally, we are uniquely positioned to leverage the emerging technologies needed to support a stable and orderly transition. Additionally, with our track record in technology leadership and upstream low carbon intensity, we have potential for large-scale, sustainable fuel production, including hydrogen.
We are focused on further improving our performance, and we have announced interim targets for 2035 as part of our ambition to achieve net-zero scope one and scope two greenhouse gas emissions across our wholly owned operated assets by 2050.
We are also expanding our portfolio to include solutions such as lower-carbon ammonia, which we believe may have an important role to play in a lower-emission future.
How is Aramco progressing on its plans to reach net-zero scope one and two emissions by 2050?
Nasser: We are making good progress. Last year we presented our roadmap to reach 2050 targets with specific interim targets for 2035, which provide a good indication of our approach and progress. We aim to further reduce our, already low, upstream carbon intensity by at least 15% by 2035 against our 2018 baseline. We also aim to reduce, or mitigate, more than 50m t of CO₂ equivalent (CO₂e) annually from 2035 onwards, compared to our business-as-usual forecast. Additionally, we aim to capture, utilise or store 11m metric t/yr of CO₂e by 2035, out of which we intend to capture up to 9m t/yr CO₂ by 2027 through our recently announced CCS Hub. Through our investment in renewables, we also hope to achieve a 14m t/yr CO₂e reduction from 2035 onwards.
Other plans include:
- Methane and flaring reduction (to achieve 1m t/yr CO₂e reduction)
- Offsets purchased through voluntary markets and planting of mangroves (to achieve 16m t/yr CO₂e reduction)
- Our $1.5bn Sustainability Fund, one of the world’s largest sustainability-focused venture capital funds, which aims to invest in technologies with potential to address climate challenges.
What action is Aramco taking on methane emissions?
Nasser: We are proud that we already have one of the lowest upstream carbon footprints in the world, and our methane emissions are also among the lowest in our industry. As you know, methane contains more greenhouse gas warming potential than carbon dioxide, which is why this is such an important focus for us. In fact, methane emissions are responsible for about 30% of global warming to date, so reducing them must be a priority for all stakeholders.
Aramco and other members of the Oil and Gas Climate Initiative (OGCI) have launched the Aiming for Zero Methane Emissions Initiative, which calls for the energy industry to strive to reach near-zero methane emissions from operated oil and gas assets by 2030.
For Aramco specifically, our upstream methane intensity remained low in 2022 at 0.05% (equal to 2021) and is already well below the OGCI ambition to achieve at least 0.20% by 2025—and we are working to share best practices to maximise global impact.
Can you talk about Aramco’s plans in low-carbon hydrogen?
Nasser: We see huge potential for large-scale, competitive hydrogen production, which is why Aramco intends to be a leading player in the new markets for hydrogen solutions. To support that ambition, we are developing a low-carbon hydrogen programme, which will be one of the world’s largest production facilities with the capacity to produce blue ammonia in the range of 11m t/yr by 2030.
As a carrier of hydrogen, low-carbon ammonia can help overcome obstacles with the transportation of hydrogen, in addition to being an important commodity in its own right.
Hydrogen is a primary element in the oil and gas value chain, and it offers significant potential as a lower-emission and sustainable energy source that could support significant emissions reductions, especially in sectors that are hard to decarbonise such as heavy transport, heating and industry. This is why we are seeing major industrialised economies such as Korea and Japan rapidly pursuing and incentivising hydrogen solutions to propel their economies forward, while lowering emissions.
We continue to work with potential customers and other stakeholders around the world, making real progress across the blue hydrogen value chain. This includes receiving the world’s first independent certification with SABIC Agri-Nutrients for blue ammonia and blue hydrogen production, as well as delivering three shipments of blue ammonia to customers in Asia.
Do you see any demand for low-carbon hydrogen offtake agreements yet? How will the industry develop?
Nasser: Commercial offtake agreements will be a critical cornerstone in the development of a thriving global hydrogen economy. Given the relatively high cost of establishing this energy source and a lack of both the required infrastructure and supportive policies, offtake agreements will be needed to safeguard all stakeholders and encourage investment. We believe that such required support can help blue hydrogen and blue ammonia play a significant role in the energy mix. Policymakers need to provide reliable signals to potential investors in this fuel of the future.
Does the firm see a big role for CCUS technology in the oil and gas industry of the future?
Nasser: CCUS will play a pivotal role in our shared efforts to reduce emissions. This is particularly true given the need for reliable, affordable and more sustainable supplies of energy, particularly considering that alternatives are not yet ready to replace conventional resources.
As mentioned previously, we are targeting the capture of as much as 11m metric t/yr of CO₂e by 2035 and Aramco is committed to becoming a leader in this field. As part of that ambition, we are establishing one of the largest planned CCS hubs in the world. Located on the east coast of Saudi Arabia in Jubail, it will potentially be able to safely store up to 9m t/yr of CO₂ by 2027.