Aramco CEO at the Oil & Money 2019 Conference

[Applause] thank you mean for that comprehensive view of both what Aramco's doing on the climate side and it fits a lot with what was said yesterday so I think this is quite interesting I I do want to start first with the first point of your speech which was the attacks on Saudi Aramco I think anybody that saw the videos the pictures the aftermath of what happens and then heard your press conference 48 hours later was skeptical that this could actually be achieved that you could return to the production that you were at by the end of September you know missile strikes drone attacks but yet you've announced you've done it ahead of schedule so it so I think it'd be important to sort of talk through how you're able to achieve that because I'm not sure other companies would have been so successful thank you Alex first let me describe how the whole thing happened it's a it's a Saturday morning unique you can imagine at 3:00 around 3:30 in the morning more than 20 drones and rockets I think the two major facilities in the kingdom happening at the same time simultaneously which is AB Kagan Horus AB gig with a maximum sustained capacity of about 5.5 million barrels per day and raised with close to 1.5 million barrels per day so it's very significant we talked about an interruption on that day because they were producing you see this is there MSC with our maximum sustained capacity is 12 million barrels per day but in that particular day the two facility were contributing 5.7 million barrels that production was off down our Ethan production went down by almost 50% our LNG in jail capacity also went down by almost 40 to 50 percent so it is a major attack happening on a weekend Saturday at almost 3:30 in the morning our thanks to the emergency response the training the development of our be able I we always say we have a ninety nine point nine ninety nine point eight nine two point seven percent over the last three years in terms of reliability but our reliable system from three things first is our well trained people second is our resources and how do we manage them third is our infrastructure what was attacked is our infrastructure but number one and number two were not attacked nobody was injured thank goodness if not even small injury everybody was safe and as long as we had number one and number two we can easily put number three which is the infrastructure back on operation it took us 24 hours to start for race at a lower production and it took us about 48 hours to start up gig at a lower production the good thing about Saudi Aramco is in addition to the emergency response and everybody knowing what he is supposed to do in an emergency we have drills and all of that and scenarios for including a doomsday scenario if you can imagine to handle certain things of course not to that scale like I honestly cannot say we had a scenario where we have 10 major fires and six fires in one plant these are freud's with 1 million barrels but our people even at 3:30 in the morning with no management by the way the leaders were all at home at this time we're able to depressurize the system which is saved the plans because these are steroids if you don't give pressurize quickly you will Bend these freud's and the compressors and everything around them they depressurized because every second counts when you have an accident like this they depressurize the system they cut the feed for all of these plants from because it comes from so many other plants of gig is 5.5 so many God's feeding into up gate they cut the feed immediately within minutes and they the dilute system work we but the fire hydrants our firefighters were assemble in the facilities and all nearby firefighters capability we're protein the fires and grace were put down in five hours the fires in a big in seven hours no one can do that within that seven hours and hydrocarbon with oil and gas and in jail and all of these things and after reboot of the fires I think the issue became is the restoration and we do have business continuty system what we call an Aramco what-if scenarios and what do you need to do afterward an incident like this a major incident like this and basically always an armed quote any day you will have four thousand to six thousand contractors working in different plans we have 100 plants all over the kingdom all of them were all the contractors in the kingdom were made available to the two managers that were impacted in a big alone two thousand contractors mobilized in 24 hours at the scene knowing what they are supposed to do it's not like bringing people and putting them everyone know what he's supposed to do the work started in parallel so we talked is Freud each compressor everything that was impacted we treated it as a project by itself in order to finish the works and the restoration activities quickly took us 10 days 10 days because we brought the facility one week earlier than the target to bring all the facilities at a production level around eleven point three one the production level that we were at during the attack and we said at that time that twelve million barrels will be restored by November and hopefully end of November and hopefully earlier but as I said without the emergency response without the business continuity without the skillful people trained not only operator technician firefighters but even engineers project management we know how to build things we have done a lot of mega project so for us when we focused on these two facilities and we gave our people the full resources required we made everything in the company available to them all the contractors anywhere even in other projects our procurement engine worked we have the u.s. we have in Europe within I would say 48 hours we had materials if we were short of any type of materials everything worked like a clock so you need to be prepared they always say and we always drill based on that but as I said this is a test that we never thought that we will have that magnitude in terms of I think two facilities at the same time needing to respond to them all at the same time and doing the work to restore in two major plants a bag is not a symbol you know if you look at phrase who raises the size of a country production raised 1.5 million is the production of a country a big five point five is maybe with two three countries together this is the size of the facility that we're attack yeah I mean so so if production capacity is at eleven three so what does that leave your spare capacity at right now what are we looking at until the end of November we will bring it back to twelve but currently you compared to production eleven point three versus how much you're producing production we don't talk about production it's that production is around what the target is nine point nine that we received from the ministry for or the month of October okay this is how much we need to average during the month you know where the good thing also about what happened none of our international customer was shipment was interrupted when we say we are reliable we made sure they received their shipments even during the attacks not even a single we could have called the Force Majeure these are a huge attacks rockets in people with a small incident they call force majeure imagine the size that happened to Saudi arm not a single shipment to our international customer was interrupted we didn't call a force majeure we supplied and reliability continued as is if you go to our auspice center where we monitor everything you will find out the reliability did not change this is very important for us that's why we had to come 48 hours after the attack to calm the market we know the prices will because the market talked about 5.7 but if you look at it in a maximum sustained capacity basically it wiped your spare capacity 5.5 and 1.5 is much more we had at that time in a minute of the incident 5 million barrels only and we had to calm the market and assure them shipments everything is going back to normal some people even questioned our capability to bring everything by end of September they wanted to send auditors we said you don't need to do that we brought it one week earlier so and you cannot hide production levels you know let's say we have customers around the world they take their shipments in 24 hour basis well take it from us I mean I think you know as an organization whose job it is to cover these events the messaging around the event was actually quick and quite strong and I think the market I mean there were doubts of course as I've mentioned but but they did buy it and you did deliver and I think that's part of it but I want to ask you about your other favorite topic which is the IPO which everyone always asked you about I think it wouldn't be appropriate not to ask and in this case you've been in London I think we understand you're talking to some of the financial institutions that could be part of the IPO has there been any concerns from potential investors in the wake of this attack about the IPO have they asked any questions we know you know when you we sit with investor this is the highest the most profitable company in the world right the highest cash free cash generation anywhere in the world our KB eyes and performance indicators is not only in cash generation and investment capacity and excellence on all of these but also on safety and reliability on technology on carbon intensity I shared with you some numbers these are audited by the way also and these all are elements important for any investor and when they look at climate changes in their mind and seeing our numbers when it comes to meeting and co2 looking at our as I said safety technology performance and our strategy it's all important and significant of course they asked about what happened in AB Kagan phrase and our answer it is a testament of the strength of the company of anything this is a company that they tried everything they hit the east-west we were back in no time they hit chamber a month earlier in August unfortunately I was during my short leave I had to come back and we were able to bring it back in no time they hit up gig and race with 20 rockets and drones and you name it and we were able to bring the facility back with no impact on any of our customers international and at the same time no reduction in our revenue our revenue was not impacted we were able to supply we have storage facilities here for crude in the kingdom we have it outside the kingdom so there was no reduction in the revenue of Saudi Aramco it's a testament of the capability of the company to respond regardless of what you throw at Saudi Aramco the other thing is I think we caught up to everybody at the investors and and I think I'd like to share it here is that this is as I said in my remarks this is not an attack on Saudi Aramco and so idea Arabia this is an attack on the global economy producers the prices will go up you need to think that way if five million barrels have seven million barrels disappear from the market a producer the prices will go up they will not go down all what you have to do is to take it out of the market for a couple of months and see what will happen to the prices model it prices will shoot and the global economy will be impacted this is an attack on the global economy this is not an attack on Saudi Arabia and everybody need to understand everyone will be impacted if the interruption that if we were not able to restore the facility back to normal so the capability in the company the well-trained skillful manpower the emergency response not only tested in a big and courageous leaders in in Schaben the east-west pipeline and other accidents incidents or accidents show that this is a company that has always take to ensure reliable production maximizing cash flow to the investors and at the same time look at safety environment technology at the same time now I want to go to the audience for some questions in one minute but one one more thing on the on the IPO will it happen by the end of this year do you think oh yeah I missed the I've always continuing what we said it's a decision for the shareholders the company is ready what happened if anything it strengthened their company position when it comes to the IBO we have no issue to proceed anytime we are told the choice actually showed more value that the company is worth much more than you know just by sharing numbers we have been tested tested not once we have been tested now three times one after the other and in every time we bounce back stronger so what we told the investors the minute the shareholder decide on the timing we are ready okay let's Saudi Aramco no impact on the IBO whatsoever okay one more question because this is a question that we hear a lot and I'll put it to you right now many people ask they say why is Saudi Aramco doing an IPO why are you doing it yeah you are a giant company that makes a lot of money for your shareholder why are you doing an IPO I think you know you have to go back to when His Royal Highness the Crown Prince you know talked about 15 20 30 for the kingdom and they need to be to develop multiple engines to drive the economy the economy is driven by one engine one mega engine which is the oil and gas and I think it is good to have for a more sustained economy over the long term you need multiple engines and they talked about privatization as one of the better for vision 2030 and what privatization you need to privatize everything and you cannot take your crown jewel which is Saudi are not gonna say I'm not going to privatize this one this is good I'm going to privatize the other sectors that we have so the idea is that everything will be put on the table of course the amount of what will be that they talked about less than five percent still small but it's an indication that everything is being privatized transparency is good sharing our data if you ask me as a management of the company we are happy to share our data this is the first time by the way with investors and with the public we share our data before the numbers I shared with you about how much it cost per barrel for example left and cost three dollars I can say it now before it was difficult for us even to mention these numbers because the shareholder was telling us you are not a public company you share it with the shareholder a lot of things happened as a result of the listing which is gate good for the company for example and also it gave the company more weight they told us you cannot list without auditing or reserve and they told us in order to list you need to do also something good which is the carbon intensity need to be audited because your numbers and reserves is too good and carbon intensity is also too good to be true so if they need to be audited both so we said fine took us 18 months to audit our reserves we got more than 99 point something percent accuracy on something that we have been doing for 85 years without a third-party auditing us so it shows this company has system has principles they know their job they know what they are doing carbon intensity also we say these are our numbers methane and as I said no but we need to take sniffers and gadgets and they go to your pump and compressors and flare system and image it and we said fine but it takes six took six month why we have too many plants in the kingdom too many brands and the numbers also we're extremely accurate actually they gave us a better number than what we are carrying in our book it's further when we share all of these things with investors or it validate the principles the standards the good work that is being done for 85 years without somebody third party auditing your numbers always the share hole which is the government told us when it comes to his f we trust you even to our number didn't change and a lot of people did not trust us 260 billion a lot of people questioned that even in the kingdom but when the auditors came 3040 beeble for 18 months looking at every reservoir and modeling everything and they came up with the same number that we have been sharing and saying these are our numbers everybody understood that this is a company that understand what they are doing they have the right people the right skills to do all of these things so for us transparency in terms of sharing our data our records and all of these things is something good it's now we are sharing all of these things with the investors and we are proud of what we have achieved so far so so what you're saying is it's worth two trillion dollars this is what okay questions from the audience please identify yourself thank you very much thank you so much Halima Croft or all Bank of Canada you've become an amazing story about resilience of your company I'm just asking what can the international community do to help protect facilities in the region and to deter future attacks great question I think for protect you see contingent Emergency Response a lot of people when they do drills and they have an emergency response sometimes they take it seriously they don't sometimes they do not take it serious you need to take your emergency response and the drills so many of them that we do we need to take it very serious you need to make sure also you have the right skill skillful people my point is the first responder to this fire where our operator and craftsman it's not only the firefighter that put the fire it is this everybody and without the right training and skills so people need to be ready they need to install all of these skills own everybody working they need to work as a team infrastructure structures it's good to have a redundancy it is always good sometimes in the midst of cutting cost and all of that sometimes you look at a redundancy and you say why should I have all of this redundancy it's not required spacing what things closer to each other's and that would hurt you of god forbid something happens so redundancies is important in terms of and also business continuty you need to have a business continue to you need to have an if in case something happened to this for oide this compressor this motors what is it that needs to be done and we do have a business continue to scenario for everything we look at plants god forbid this is knocked out completely so and and looking at provision other than redundancy when you look at these things in that level of details and we do that a lot then you would say ok I have a connection here and connect can I have another connection and have a provision that was not going to cost us a lot but you would need it one day and when you need it it's worth it for example in a big we have a super dumb we call it a super no we never used it for 50 years people were doubting even we finished on the TN either maybe this is secret just a couple of weeks back on this thing and people doubted if do you need this super dumb this is taking drain everything quickly to the fluid because took us a lot of time to do that he and I on this and we said keep it they said 15 years we didn't use it in our gig is a very old vessel we said keep it do the TN I and look at what happened it was very instrumental in depressurizing all of our facilities flare system where some of them were knocked out for example in chamber if you don't have a contingency to divert to another flare and you rely only on one main flare you are going to be in trouble because the facility were hit on the trains and at the flare system so building all of that and making sure at the same time you are very commercial and you know we always proud to say we can do all of that with a fork on our cost per barrel and of course per million Btu if you can't do that your shareholder will always allow you to do all of these things next question here in the front row as a result of these attacks are you planning to divert more exports to the west the east-west pipeline is ready it's available before the end of the year it is more it's five to seven million before the end of the year we'll be at close to close to seven million barrels in terms of capacity so it's a significant capacity to take from the east of the kingdom to the west side of the kingdom and it has all the terminals everything ready but this is not something you built a year ago this is something that we have been doing for the last as I said more 30 years and we kept expanding it so it is not oil it's oil in GL gas you name it that has been built over 30 years the company is ready to make sure to shift crude from east to the west probably have time for one more question right here mr. no sir thank you very much for my name is Ziad Lebon I am a retiree of Saudi Aramco after 35 years so I'm biased I think it would be interesting for the audience to learn how large the company is manpower wise and of that manpower what is the percentage of Saudis running the company globally we have about 76,000 in Saudi Arabia who have about 68,000 and out of that 88% are Saudis this is thank you I mean I I have one because we talked a lot about other things but not their energy transition but I think the one question people have on Saudi Arabia is you have a ton of reserves and people I mean if you saw the McKinsey presentation yesterday there's sort of the potential for oil demand to go down to 81 million barrels a day in the next couple of next decade or so so with countries with huge amounts of reserves this raises the question of will you ever produce all the barrels in the ground now I know that the case in the RAM codes you're the lowest cost producer you will probably always be able to sell your barrels no matter how much oil is required but I'm wondering if you guys are updating your thinking on how you produce oil in order to deal with potentially the energy transition issues that are coming up if you there is a new IHS report I don't know if you've seen it but it's a new and just came the last couple of weeks chose a base case had close to 100 million barrels 90 something and growing until 2050 and the liquid production from Saudi Aramco will go to 16 million barrels by 2050 in a base case and it showed also what you call it a transition case renewables electrification electric cars will kick in the amount production will go by 2050 in a state of 100 something hundred and 607 I don't remember now 272 million barrels by 2050 Saudi Aramco based on their assessment will be producing 15 million dollars why we are the lowest cost producer it's know that a lot of marginal barrels will go out to the markets before the barrels from the kingdom ii you've seen the numbers in carbon we are a greener also so if you are talking about climate change our numbers are there and audited if you're talking about cost per barrel over the long term everything is is there so it's a con but it's also it shows that and based on their assessment that we are driving cost down it's not really going up in terms of looking at the future so you will be producing more barrel much more barrels in any case it was impacted by only a million barrel between the base and that transition case by 2050 yeah so we still have need to need we need to find more reserves you know to beyond 20 so you will have to expand beyond 12 million barrels a day someday potentially well better the concession agreement there are four touchpoint with a government the royalty taxes the maximum sustained capacity is decided by the government a shareholder the government based on the concession agreement and production levels every the target for every month is also decided by the government so ami see if the government decide that there is more demand I'm sure they will look into it and but based on our reserves and our capability we can of course meet whatever is required you can go to 15 if you had to you have you've seen the reserve you know our reserves is six times you know people we're talking about a war going down and all of that you know how are I told them 48 for 48 billion barrels of reserve it produced three 3.8 million barrels today maximum seating capacity if you combine the reserves of five of six of the top top companies that's less than lower and producing only 3.8 so even in an existing views if you want to expand your production you can expand it big time but we always look at the bleaching and make sure our depletion rate is very low because it helps us to manage our reservoir and our water cut but we have extensive amount of reserves and we keep adding you see the good thing about what's happening in the kingdom and with Saudi Aramco is that we replaced every barrel that we produced that's why the question and we had to go to the auditors about our reserve because we will say every area have the same reserve cannot you produce 3.5 billion and you'll carry at the end of the year the same reserves we are able to find and replace whatever we produced and that hopefully will continue great we have to leave it there but big thank you to me Nasser for his comments today thank you very much [Applause]

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Length: 32min 1sec (1921 seconds)

Published: Thu Oct 10 2019