Saudi Aramco’s strategic positioning holds lessons for NNPC
Saudi Aramco, the world’s biggest oil company is strategizing to take advantage of forecasted 1.5million barrels per day (bpd) oil demand growth through an integrated investment strategy that comprises the entire value chain as well as reducing its carbon footprint, something the Nigerian National Petroleum Corporation (NNPC) can take a cue from.
In the organisation’s Annual Review published last week, Khalid Al-Falih, chairman of the board of directors outlined the company’s vision to deal with an increasingly volatile oil market.
“Saudi Aramco is committed to playing its unique part in meeting the world’s energy needs today and tomorrow by continuing to invest wisely throughout the cycle and across the value chain, reinforcing our preeminent leadership position in the industry,” Al-Falih said in the report.
This vision is premised on the fact that oil will still play a major role in meeting the world’s energy needs. But the world now expects that oil production does not compromise the environment. This informs the company’s plan to ramp investment aimed at reducing its carbon footprint.
In October 2017, Amin H. Nasser, Saudi Aramco president and CEO, joined fellow oil and gas CEOs and key energy and climate leaders for the third annual meeting of the Oil and Gas Climate Initiative (OGCI), where they announced investments in promising low-emission technologies to be implemented by OGCI Climate Investments (OGCI CI), the investment arm of OGCI.
Oil companies that will stay competitive would make sustainability a key part of its operations. Saudi Aramco says it is not only investing to further strengthen its premier upstream oil position, but wants to be world leader in the downstream segment of the business.
“We are leveraging our excellence in research and innovation to address areas of strategic technology importance. These include advancing sustainable transport through the development of ultra-clean and integrated fuel engine systems of the future, and driving other high-impact solutions such as carbon capture, utilization, and storage as well as beneficial uses of carbon.
“In addition, considering the projected rapidly growing role of cleaner natural gas, the company expects to double the domestic production of gas while taking steps to establish a profitable international gas business,” said Al-Falih.
In Nigeria, the International Oil Companies are moving away from onshore fields to offshore production motivated by economics and pragmatism, in a region where oil assets are vulnerable to vandalisation. However, the NNPC does not have capacity to continue developing these fields.
The Nigerian Petroleum Development Corporation (NPDC), a subsidiary of the NNPC handling production has been unable to vie for divestment deals in the sector. Analysts blame the poor form on dearth of capita and a cohesive strategy
“Does NPDC have the funds to make big ticket investments at this time? Second, how attractive are these divestments?” said Rafiq Raji, chief economist at Macroafricaintel.
According to the report, state-of-the-art refining and marketing manufacturing complexes continue to be implemented in the Kingdom and in the fast growing markets of Asia and the United States.
Oil feedstocks are playing an increasingly larger role in the company’s petrochemicals production, which is on its way to becoming a world-class business. In addition, differentiated and branded base lube oils, manufactured at wholly owned and joint venture facilities are moving toward a leading international position, said the Aramco’s boss.
This presents a path to profitability for oil companies including the NNPC. An integrated approach including refining, petrochemicals and industrial development must be part of a cohesive strategy to deliver the best value to the country.
ISAAC ANYAOGU