Mr. Abdallah S. Jum’ah, President and Chief Executive Officer of Saudi Aramco was recently selected the Petroleum Executive of the Year for 2005 by the Energy Intelligence Group. He began his career in Saudi Aramco in 1968 and has since 1995 served as President and CEO of the world’s largest oil producing company, managing a quarter of the world’s total oil reserves. Mr. Jum’ah also serves on the company’s Board of Directors and on the Supreme Council of Petroleum and Mineral Affairs chaired by H.M. King Fahd of Saudi Arabia.
In this continuing “CEOs’ Corner” of the Newsletter, Mr Jum’ah gives his industry perspectives on energy challenges ahead as we approach the 10th IEF Ministerial and the Second International Energy Business Forum in Doha in April 2006.
Energy is the prime mover of world economies, and indeed of our civilization. Consequently, the availability of stable and adequate energy supplies is central to sustainable economic development.
The availability of stable energy supplies, however, is impacted by complex and evolving factors. Developed nations have a large and mature base of energy consumption, while their growth rates are relatively moderate. On the other hand, developing nations currently have a smaller base of consumption, but higher growth rates. Available information on the future, and even current, demand varies in quality and entails many uncertainties. At the same time, the gap between the consumption and indigenous production of energy around the world, of oil in particular, is growing, leading to more petroleum trade. The rapidly increasing trade in all products, including petroleum, is a welcome development, as it leads to interdependence, reduced barriers between nations, and a more integrated and harmonious world. Looking at energy markets, oil in particular is increasingly becoming a “financial” commodity, as well as an economic input for end-users. The future availability of alternative sources of energy and technologies provide additional dimension to the global energy scene.
In this environment, keeping abreast of economic developments across the globe and developing deep understanding of demand growth patterns, supply-side issues, and long-term energy objectives of governments, is essential to reliably meeting energy demand. Achieving this objective clearly requires a two-way flow of information between consumers and producers.
Certainly, free markets have a role in commercially meeting the world’s energy demand. However, governments, and the industry, also have a responsibility to consumers when it comes to further lightening the environmental footprint of energy products. They also have a legitimate role in policy-level energy planning, oversight of financial markets, and ensuring that various energy sources are offered a level playing field that would enhance energy supply prospects.
With growing international oil trade, government involvement in facilitating cross border pipeline trade and managing sea lanes and strategic channels is also a foregone conclusion. So, appropriate government involvement in the energy business serves a useful purpose. However, if such involvement were to interfere with the smooth and economic running of businesses, it could lead to inefficiency that would run counter to the long-term public interest. These pros and cons call for a delicately balanced partnership between governments and industry.
Energy businesses involve long time horizons. In the case of oil, investments in exploration and discovering sufficient reserves well ahead of the need to develop them, as well as production flexibility, are important factors in ensuring global supply reliability. Well-run national oil companies, which are less prone to short-term investor pressures, play an important role in helping the world meet the need for reliable oil supplies. In fact, the foundation of Saudi Aramco’s strategic direction includes providing energy to the world, actively supporting the further development of Saudi Arabia's social and economic capacity, while fulfilling corporate social responsibilities in the international arena. And, at the same time, we maintain a strong commercial focus.
I have no doubt that despite complexities and challenges, the industry will meet the world’s energy demand, with national and international energy companies playing their appropriate roles. This enterprise will be facilitated by a robust consumer-producer dialogue, and by governments and industry partnering, while keeping in mind both public interest and the companies’ needs for legitimate profits.
I would like to conclude by stressing the importance of the Joint Oil Data Initiative spearheaded by the International Energy Forum Secretariat. This initiative will undoubtedly contribute to better information for both producers and consumers, thus enhancing the planning and reliability of future energy supplies. This will be of valuable service to the world economy, and the fulfillment of people’s ambitions for a better life around the world.