Exploring the impact of the energy industry on KSA’s social, environmental, and economic development from 1930-2030

By SandRose Editorial Team 

The Saudi Aramco journey has developed hand in hand with that of modern Saudi Arabia. Over the decad es, the company has grown and evolved in response to myriad challenges and opportunities and continues to reinvent itself, adapting to a dynamic future. We are now in a time where the energy industry is at a crossroads once more as imminent realities challenge the status quo. As a result, the Kingdom has developed an ambitious plan to diversify the Kingdom’s financial portfolio. However, there is still a long way to achieve our goals and fully adapt to the changing world. Still, the Kingdom is more than prepared to rise to the challenge with its boundless resources beyond hydrocarbons, influence in the region, and a proven track record of adaptability and resilience in the face of market challenges. Here we select milestones from the past, current exciting projects, and promising future developments to showcase this remarkable journey. 

The Inception of the Energy Industry and Major Field Discoveries 

Figure 1: Well no. 7 discovered in Dhahran, Saudi Arabia in March of 1938.

In the 1930s, the Kingdom fielded proposals and offers from other nations to develop its hydrocarbon resources, eventually agreeing with a group of American oil majors, Standard Oil California (SoCal) signed the concession agreement, which later formed the subsidiary the California-Arabian Standard Oil Company (CASOC). The Kingdom was forever transformed with the discovery of Dammam well no. 7 known as the Prosperity well in 1938 and the Ghawar oil field in 1948 as seen in figure 1. In 1944, in light of the growing discovery and development of new fields, CASOC became known as the Arabian American Oil Company (Aramco). The discovery of the major oil fields marked the foundation of modern Saudi Arabia. The pursuit of hydrocarbon development continues across the Kingdom today. In early 2020, Saudi Aramco announced the development of the Jafurah field, the largest non-associated gas field in the Kingdom of Saudi Arabia to date. Beyond powering the world, the oil and gas industry was the main driver behind the economic and social reform that Kingdom experienced in the 40s, enabling the development of the lives we lead today.

Social Development 

With the discovery of major oil fields came many opportunities for social and economic development. One such development was the short-haul rail line connecting the Eastern Province to Riyadh, officially completed in 1951. As Saudis began to join the Saudi Aramco’s workforce continuously, the Saudi government rolled out extensive labor relations laws in 1942, giving employees access to basic health care and even rolling out vaccination programs increasing average life expectancy. Aramco also bolstered local business funding to the service sector and vitalized local business, creating a continuously growing middle class. The role of the Saudi energy industry also extended to education. In 1963, by royal decree, the King Fahd University of Petroleum and Minerals (KFUPM) (previously known as the University of Petroleum and Minerals) was established to train the next generation of Saudis leaders as seen in figure 2. In addition, In addition to that Aramco built the first Saudi elementary school for girls in the eastern province in 1964, and that same year Aramco hired its first female employee, Najat Al-Husseini seen in figure 3. Through the 1970s, this social development progressed with an increasing number of Saudis joining the workforce. Shortly after Saudi Aramco became fully Saudi-owned in 1980, in 1984, the company appointed its first Saudi President, H.E. Ali Al-Naimi. Mr. Al-Naimi, a beneficiary of the company’s career development and Saudization program, and is widely credited for paving the way for the many Saudis that succeeded him. The pursuit and care for knowledge and educational development continue even today, more recently, in 2009, with the inauguration of the King Abdullah University of Science and Technology (KAUST), a globally recognized center for scientific achievement.

Figure 2: KFUPM Campus Today

Female Empowerment 

 In 1964, Aramco built the first formal girls’ schools in Saudi Arabia in Al-Khobar and Rahimah, in addition to training female teachers. By 1967, the company built over 30 schools in the Eastern Province alone, educating 2,400 girls. That same year, the first Saudi woman, Najat Al-Husseini, was also hired. The first generation of women workers worked in the health sector, with time, more women integrated into other professional areas. Na’ilah Mousli is another pioneer, she was the first female petroleum engineers in the company and the first female to assume the role of department manager. 

Figure 3: Images of the first school’s developed in the eastern province

Economic Prosperity 

Figure 4: Sadara chemical complex in Jubail. Joint project between the Dow Chemical Company and Saudi Aramco.

Kingdom alongside it. As oil production increased, the company launched into international renown, partnering with and investing in refineries such as S-Oil in South Korea in 1991 and Petron Corporation in the Philippines in 1994. However, to fully realize the ambition of becoming an integrated energy company and diversifying the Kingdom’s energy portfolio, Saudi Aramco pursued growth opportunities in the downstream sector, forming JVs with major players in the industry to create SATROP, SADARA, and YASREF in 2008, 2010 and 2011, respectively (figure 4) . Recently, in 2020 Aramco’s landmark majority stake acquisition of SABIC was also one of its critical efforts to grow as an integrated energy and chemicals company, catalyzing the commercialization of innovative crude-to-chemicals technologies. These crude-to-chemical technologies will remove or streamline several conventional industrial processes, resulting in the production of less expensive chemicals all while reducing the associated carbon footprint. 

For decades, Saudi Aramco aimed to maximize long-term economic growth and diversification through localization of the workforce, technologies, and manufacturing, which is also in agreement with the ambitions of Vision 2030 which was introduced in 2016In 2015, Aramco launched the in-Kingdom Total Value Add (IKTVA) program, realizing this dream to localize 70% of the workforce by 2021 and in-collaboration with in-Kingdom companies. In 2018, the Kingdom also announced the King Salman Energy Park (SPARK), a 50 km2 energy city in the eastern province that will serve as a hub for the energy sector supporting the mission of IKTVA in creating jobs and maximizing the value-chain. In 2019, the largest Initial Public Offering (IPO) of Aramco the largest of its kind, also represented another critical opportunity to drive economic growth and diversification. Expanding on the industrial investment program, in 2021, the Namaat program was also inaugurated with the signing of 22 new Memoranda of Understanding (MoU’s) and one joint venture (JV) agreement focusing on developing the infrastructure and capacity in four key areas: sustainability, technology, industrial and energy services, and advanced materials as seen in figure 5. The Kingdom’s strategy to invest locally and internationally, in addition to growing domestic capacity, has allowed the energy sector to continue to thrive. However, sustainable practices are also critical for further growth and development.   

Figure 5: Saudi Aramco CEO, Amin Nasser, announcing Namaat project on the 7th of September, 2021.

Environmental Stewardship and Sustainability 

Saudi Aramco’s commitment to the environment has long been a part of its journey. Refineries have been built to deliver high-quality, low-sulfur products to reduce emissions while meeting and exceeding future environmental standards. Through the decades, several projects have highlighted the Kingdom as an industry leader in mitigating environmental impact. In 1975, the Kingdom asked Aramco to develop the Master Gas System, a gas gathering and processing system to fuel industrial activities and provide domestic electrical power across the Kingdom, dubbed as the “most ambitious energy project” of its time. MGS has undergone several upgrades and expansions since its development. Currently, it has one of the lowest flaring intensities and annually removes 100 million metric tons of CO2 equivalent. In 1986, the first modified safety flare system was installed in Abqaiq, significantly reduced when compared to its predecessor. The Kingdom of Saudi Arabia was also among the first GCC countries to lead the charge of producing non-leaded gasoline in the early 2000s

The care for the environment also extended to preserving nature and wildlife. In 2016 the Shaybah Wildlife Sanctuary was inaugurated. The project reintroduced Arabian oryx, Arabian sand gazelles, and ostriches that had been near extinction for decades figure 6In January of 2021, Saudi Aramco unveiled the Mangrove Eco-Park, a facility dedicated to preserving mangrove forests that protect shorelines from erosion and preserving the local ecosystem and biodiversity

Did you know

In 1999, a young Saudi engineer named Mazen M. Mashour invented a smokeless flare system technology won a Gold Award at the International Inventors Conference in Geneva in 2006. Mashour discovered that injecting a relatively small amount of high-pressure air into the flare eliminated smoke from the flares, with significant savings over larger, complex systems. In addition, the invention creates hotter flame burning off the impurities instead of releasing them into the atmosphere, significantly reducing associated emissions. It was deployed at Shaybah in 2000 and Uthmaniyah and Shedgum in 2005.

To find out more, read SPE-138493

Figure 6: Saudi Aramco Board of Directors release Arabian sand gazelles to inaugurate the Shaybah Wildlife Sanctuary in 2016

 

Figure 7: A view from the Ras Tanura Mangrove Eco-Park, officially opened in early 2021

A New Era for Energy: International Agreements and National Targets 

In 2015, the Paris Accord was signed by almost 200 countries, with the ambition to limit the global average temperature rise to well below two degrees centigrade above pre-industrial levels. The Kingdom was one of those signatories and supported the Paris Accord, with the nationally determined contribution (NDC) of 130 million tons of CO2e. Taking the proactive approach, in 2015, Saudi Aramco was also a founding member of the Oil and Gas Climate Initiative (OGCI). This CEO-led initiative aims to accelerate the industry response to climate change and recognize the Paris Agreement’s ambitions. Reducing emissions to address climate change while meeting the world’s energy needs remains the most significant challenge of this century. 

In October 2021, Saudi Aramco announced their ambition to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions across their wholly owned and operated assets by 2050. This announcement came following the Kingdom’s announcement to reach net-zero by 2060. As part of the Saudi Green Initiative (SGI) forum this year, Saudi Arabia effectively doubled its NDC ambition to 278 million tons CO2e removed per year. Under SGI, the Kingdom introduced an afforestation program to plant 10 billion trees, reduce emissions by investing $7 billion USD in low-carbon solutions as part of the OGCI, and increase the proportion of protected areas in both land and sea to 30% of total land.

Circular Carbon Economy 

In recognition of the need to mitigate carbon emissions, Saudi Arabia and Saudi Aramco adopted the Circular Carbon Economy (CCE) framework, a closed-loop system where emissions are reduced, reused, recycled, and removed (4R’s). Saudi Aramco’s innovative low-carbon practices and technologies already position the company as one of the lowest carbon emitters per barrel in the industry. The company has already pledged to reduce emissions with the World Bank’s ‘Zero Routine Flaring by 2030’ initiative in 2019 through the MGS. Saudi Aramco also removes CO2 by capturing and injecting it into reservoirs and testing the feasibility of enhancing oil recovery for potential future applications in the Kingdom’s various oil and gas fields. Efforts to reduce carbon emissions have also extended to the automotive sector using Saudi Aramco’s global research network, which includes the development of promising technologies such as gasoline compression ignition (GCI).

The Rise of Hydrogen Power 

Leading the charge on CCE, both Saudi Arabia and Saudi Aramco acknowledged hydrogen’s key role in achieving a low-carbon future. Hydrogen can be produced from both renewable resources (green hydrogen) and carbon-abated fossil fuels (blue-hydrogen). Hydrogen’s versatility in storage and transport, abundance, and virtually zero carbon emissions make it promising. In 2019, Aramco and Air products inaugurated Saudi Arabia’s first hydrogen fueling station. In 2020, Aramco, the Institute of Energy Economics, Japan, and SABIC successfully shipped 40-tons of blue ammonia to Japan, the first shipment of such a product in the world figure 8. As the Kingdom seeks to reduce its carbon footprint while taking advantage of its natural resources, it is rapidly diversifying its energy portfolio with the development of blue-hydrogen. This demonstrates Saudi Aramco and the Kingdom’s ability to diversify its energy mix and portfolio while continuing to extract value from our natural resources and reducing carbon emissions. Additionally, the Jafurah field, the largest unconventional gas field in Saudi Arabia, is also expected to fuel the development of blue hydrogen, solidifying Aramco’s position as Potential hydrogen supplier in a low-carbon future.

Figure 8: Tanker carrying 40-tons of blue ammonia to Japan, the first shipment its kind. When combusted in a thermal power plant to generate energy, it does not emit any CO2

Market Readiness for Clean Energy, Renewables, & Alternative Energy 

While the Kingdom of Saudi Arabia is ambitiously expanding its renewable and alternative energy projects, this growth must be calculated and planned to consider present and projected market needs. Under the Vision 2030 development program, the plan for the Kingdom is to produce 50% of its power needs from renewables. Other notable goals to this end include replacing 30% of vehicles on the road in Riyadh with electric vehicles (EV’s) by 2030. With that being said, promising new initiatives such as Saudi Aramco’s promising hydrogen business will need to grow alongside customer demand for these products. Neom, a smart city planned in Tabuk, northwest of the Kingdom, will be solely powered by renewables. Neom aims to be the first carbon-free ecosystem of its kind powered by green hydrogen, leading research and development in renewable energy, and a model for the cities of tomorrow as seen in figure 9. 

Figure 9: Neom’s “The Line” city, a 106-mile-long city stretching from the mountains to the Red Sea. The largest carbon-free system in the world, powered by solar power, wind farms, and emerging green hydrogen.

When we explore the evolution of the energy industry and Saudi Aramco throughout the decades, we note that the role of Saudi Aramco is constantly evolving and has a ripple effect that extends to other sectors from social to economic development and beyond. Over the decades, Saudi Aramco has continuously reinvented itself, starting as the Arabian American Oil Company, as created by the initial concession agreement with SoCal, to becoming Saudi in 1980. The company’s role also shifted with time from an oil-producing and exporting company to an integrated petroleum enterprise developing enhanced petrochemical products. The current shift takes Aramco to a publicly listed integrated energy and chemicals company that in addition to producing hydrocarbons will play a key role in building a low carbon economy by developing technological solutions and clean fuels. The enduring success of Saudi Aramco and the Saudi energy industry can be attributed to a lifelong legacy of looking beyond the raw value of hydrocarbons, from developing communities, training the leaders of tomorrow, to leveraging our access to solar energy, and protecting and reinvigorating the local environment. To sustain this success, however, we need to realize the world around us is constantly changing and to continue to anticipate what lies ahead, creating new opportunities wherever they may be. If we succeed, we will have witnessed 100 years of sustainable development in an ever-evolving landscape

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