SAUDI ARAMCO Saudi Arabian Oil Company (Aramco)

Headquarters in Dhahran, Saudi Arabia

By

Buke Ivan (IPSK)

INDUSTRY - OIL AND GAS HEADQUARTERS - DHAHRAN, SAUDI ARABIA

History

Operations

Energy strategies

Global marketing challenges

Cultural factors and barriers

Summary

Lessons for Uganda’s nascent industry

PRODUCTS PETROLEUM, NATURAL GAS AND OTHER PETROCHEMICALS REVENUE US$478 BILLION OWNER SAUDI ARABIAN GOVERNMENT (100%)

HISTORY Industry Oil and gas

Founded 1933 (as California-Arabian Standard Oil Co.)

1944 (as Aramco)

1988 (as Saudi Aramco)

Headquarters Dhahran, Saudi Arabia

Area served *Worldwide

Saudi Aramco's origins trace to the oil shortages of World War I and the exclusion of American companies from Mesopotamia by Great Britain and France under the San Remo Petroleum Agreement of 1920

On 31 January 1944, the company name was changed from California-Arabian Standard Oil Co. to Arabian American Oil Co. (or Aramco)

Started production from the Karan Gas Field, with an output of more than 400 million scf per day

Owns world's largest proven crude oil reserves at more than 261 billion barrels

Saudi Aramco operates the Ghawar Field, the world's largest onshore oil field and Safaniya Field, the world's largest offshore oil

Operates the world's largest single hydrocarbon network, the Master Gas System.

Manages over 100 oil and gas fields in Saudi Arabia, including 288.4 trillion standard cubic feet (scf) of natural gas reserves

2015 Forbes report, Aramco is said to be the world's largest oil and gas company.

The world's largest oil and gas company.

STRATEGIC INTENT. IN 2020, SAUDI ARAMCO IS THE WORLD’S LEADING INTEGRATED ENERGY AND CHEMICALS COMPANY, FOCUSED ON MAXIMIZING INCOME, FACILITATING THE SUSTAINABLE AND DIVERSIFIED EXPANSION OF THE KINGDOM’S ECONOMY, AND ENABLING A GLOBALLY COMPETITIVE AND VIBRANT SAUDI ENERGY SECTOR.

OUR VALUES

• integrity

• safety

• accountability

• excellence

• citizenship

Employer of choice 61,907 employees

Joint and Equity Ventures

Houston

Motiva Enterprises LLC

Alexandria

The Arab Petroleum Pipeline Co. (SUMED)

Fujian

Fujian Refining and Petrochemical Company Ltd.

Sinopec SenMei Petroleum Company Ltd.

Seoul

S-OIL

Tokyo

Showa Shell

Guide to Strategic Intent.

Reinforce our preeminent position in oil and gas exploration

and production.

Integrate our business across the hydrocarbon value chain

to create impact

Enable the sustainable development of the Kingdom

Lead in technology development and innovation

Strengthen our position as an employer of choice

wise stewardship of our resources

For this reason, the wise stewardship of our petroleum

resources is our number one priority. We continually seek new

ways to find and produce these resources more efficiently, from improving our understanding of subsurface dynamics to

deploying cutting-edge well completions.

Viewing our extensive

hydrocarbon reserves, people —

understandably — see oil and

gas deposits. We see something

different.

We see molecules that, with

science and imagination, have

the potential to power every

human endeavor and to create

breakthrough materials that

improve the quality of our lives.

OPERATIONS.

OUR OPERATIONS ARE GLOBAL AND THEY INCLUDE;

EXPLORATION

PRODUCTION

REFINING

CHEMICALS

DISTRIBUTION

AND MARKETING

UP STREAM

EXPLORATION

DISCOVERY &

RECOVERY

• Discovering more hydrocarbon resources and recovering more from these

hydrocarbon resources are the key objectives of our upstream technology strategy.

• Saudi Aramco has been exploring for oil and gas reservoirs since 1982 making it a top

game player in the industry for decades

• Most of this process takes place at the Exploration and Petroleum Engineering Center

(EXPEC).

• Saudi Aramco has got a well skilled workforce consisting of mostly geophysicists and

geologists

All it’s activities of the company are monitored by the;

• Saudi Arabian Ministry of Petroleum and Mineral Resources together with the

• Supreme Council for Petroleum and Minerals.

The above bodies provide the Regulatory Framework in order to provide a comprehensive legal framework that takes into account both the upstream and midstream aspects, as well as development of an effective petroleum revenue management framework

Young geoscientists examine core samples to maximize recovery of oil and gas.

EXPLORATION 2

Continued our research into the usage of autonomous underwater vehicles (AUVs) to conduct

seismic data gathering in shallow waters.

We have developed and deployed more intelligent acquisition and processing methods to improve the clarity and resolution of seismic data. Our seismic acquisition and analysis is being integrated more with electromagnetic and high-resolution gravity sensors, especially for subsalt

imaging and in areas of complex geology.

Reservoir management

The new Exploration Explorer System, launched in 2014, has transformed the way we deal with oil

and gas prospects. It provides a state-of-the-art method to track the phases of decision making.

The system also displays the prospective resources, their types, volumes, locations, and depths in a manner that gives our exploration teams a unified vision of the project.

We commissioned the first successful use of CO2 to replace hydraulic fracturing in a gas well in

the Middle East.

AT THE SHAYBAH FIELDSECOND, DURING 2014, MAJOR CONSTRUCTION OF THE NEW NGL (NATURAL GAS LIQUIDS) RECOVERY PLANT WAS 96% COMPLETE. GAS PRODUCTION WITH THE CONSTRUCTION OF OUR WASIT GAS PLANT, NGL PRODUCTION IS PROJECTED TO BEGIN IN THE SECOND QUARTER OF 2015.. BY JULY 2017, AFTER THE INTRODUCTION OF TWO STEAM TURBINE GENERATORS, THE TOTAL POWER GENERATION CAPACITY AT SHAYBAH WILL EXCEED 1.3 GIGAWATTS. MIDYAN GAS PLANT, THE FADHILI GAS PLANT WILL PROCESS 2.5 BILLION SCFD FROM ONSHORE AND OFFSHORE FIELDS AND IS ON TRACK TO COME ON-STREAM BY 2019.

Crude sample

April 2013, our Manifa crude oil

increment was approaching its full production capacity of 900,000 bpd of

Arabian Heavy crude oil at the end of

2014.

We continued work on two major projects at the

Shaybah field in 2014. First, we are raising oil

production capacity by 250,000 bpd for the

second time, bringing total oil production

capacity to 1 million bpd of Arabian Extra Light

crude oil by April 2016

PRODUCTION

While the company did not originally plan on refining oil, the Saudi

government wished to have only one company dealing with oil

production.

Therefore, on 1 July 1993, the government issued a royal decree

merging Saudi Aramco with Samarec, the country's oil refining

company. The following year, a Saudi Aramco subsidiary acquired a

40% equity interest in Petron Corp., the largest crude oil refiner and

marketer in the Philippines. Since then, Saudi Aramco has taken on the

responsibility of refining oil and distributing it in the country

REFINING Currently, Saudi Aramco's refining capacity is more than 4 million barrels per day (640,000 m3/d)

(International joint and equity ventures: 2,460 Mbbl/d (328,000,000 m3/d),

domestic joint ventures: 1,908 mpbd,

and wholly owned domestic operations: 5395 Mbbl/d (158,200,000 m3/d).)

This figure is set to increase as more projects go on.

Saudi Aramco is pressing ahead with the 0.4 mb/d Jazan refinery, which will take total Saudi refining capacity from 2.91 mb/d in 2015 to 3.3 mb/d by the end of 2018,

REFINERIES(Some)

Jeddah Refinery (60,000 bbl/d (9,500 m3/d) nominal capacity)

Ras Tanura Refinery

Riyadh Refinery

Yanbu Refinery

Refining capacity (in thousands of barrels per day)

Wholly

owned

domestic

1,006

Domestic joint ventures 1,905

Worldwide 5,375

International joint ventures 2,464

Saudi

Aramco share 3,104

The Saudi Aramco Total Refining and Petrochemical

Company (SATORP), our joint venture with France’s

Total in Jubail on the east coast of Saudi Arabia, is

one of the largest, most complex refineries in the

world. It is capable of fully converting 400,000 bpd

of Arabian Heavy crude oil into low-sulfur gasoline,

diesel, and jet fuel that meet the highest standards

and specifications in the United States.

S-OIL, comprising 31.9 million shares. S-OIL is South

Korea’s third largest refiner.

REFINING .1

CHEMICALS

Saudi Aramco's downstream operations are shifting its

emphasis to integrate refineries with petrochemical

facilities in production of chemically refined products

such as naphtha, butane, and propane. .

Their first venture into it is with Petro Rabigh, which is a

joint venture with Sumitomo Chemical Co. that began

in 2005 on the coast of the Red Sea

The investment in the Fujian Refinery and

Petrochemical Company with Sinopec and ExxonMobi

There are also plans to construct a new project in

Yunnan province with CNPC. Fujian Refining &

Petrochemical Company(FREP), is our joint venture with Fujian Petrochemical Company Limited, ExxonMobil,

China Petroleum and Petrochemical Company Limited

(Sinopec), and the Fujian provincial government. FREP

is a key element in our Asia chemicals strategy.

Petro Rabigh integrates chemicals production with

refining, realizing additional value from our resource base.

below: The purchase of a majority stake in South Korea’s

S-OIL achieves stronger integration of our global

downstream assets.

DISTRIBUTION

Saudi Aramco has deployed several tankers to ship crude oil, refined oil and gas to

various countries.

It has created a subsidiary company, Vela International Marine, to handle shipping to

North America, Europe and Asia.

Other distributors like;

MARKETING ‘’We believe that large, integrated energy and chemicals companies

can build and sustain a dynamic and profitable downstream business

that yields returns across the entire hydrocarbon value chain. In 2014,

we made significant strides toward accomplishing this goal.’’

o Forging ties with china and japan

o Partnership

o Collaborations with North America, Europe and Asia

o Investments in market venture . Ie, , Vela International Marine

o Conferencing; Navigating the various transitional phase(s) that the

world is facing globally in the sector. Sept 26-28 OPEC’s international

energy forum in Algeria. Plans of putting a cap on oil prices in the

near-term.

o Forecasting future market demands for oil and gas globally.

o Cooperative engagement – suppliers and Saudi Aramco

o strategizing to partner with local downstream-integrated players to

secure market outlets in these non-OECD markets.

ON THE LOGISTICAL FRONT, OUR EXTENSIVE DISTRIBUTION NETWORK IS CONTINUOUSLY

UPGRADED TO SERVE CUSTOMERS.

FROM A COST, RELIABILITY, AND EFFICIENCY STANDPOINT, PIPELINES ARE A PREFERRED

METHOD OF TRANSPORTING OUR ENERGY TO OUR PROCESSING PLANTS, REFINERIES, AND

MAJOR DISTRIBUTION POINTS.

In 2014, we continued our efforts to turn around the performance of Motiva Enterprises,

a Houston-based refining and marketing joint venture between Saudi Refining, Inc. (a

Saudi Aramco subsidiary), and a Shell Oil affiliate. This effort was carried out in collaboration with our Shell Oil partner to enhance refinery processes to upgrade

performance and better position the company to capture market opportunities.

MARKETING.1

Enabling opportunities

downstream

Aramco Trading Company, our wholly owned subsidiary, was

specifically established to maximize downstream integration and

generate further value by optimizing our growing global

downstream presence.

One area where we have integrated our operations from

production to customer is in China’s Fujian Province and the

eastern part of Guangdong Province. This is home to our marketing

venture, Sinopec Sen Mei (Fujian) Petroleum Co. Ltd. (SSPC).

Having a network of 942 retail sites and 14 distribution terminals,

SSPC sells wholesale and retail motor gasoline, diesel, and illuminating kerosene.

Aramco Trading achieved a new milestone in 2014 when it began

officially marketing paraxylene from SATORP and polyolefins,

polymers, and monoethylene glycol from Petro Rabigh.

MARKETING 1.1

Our crude oil and natural gas liquids (NGL) export terminals supply energy

to consumers around the world. This interconnected network of oil and gas

processing plants, refineries, pipelines, bulk plants, air refueling sites, and

terminals is monitored and controlled from the Operations Coordination

Center in Dhahran, ensuring responsiveness and reliability.

Distribution network, The network now extends nearly

20,000 km, roughly equal to traveling from Riyadh to New

York City and back again. Five marine ports load millions

of barrels of oil and refined products each day onto ships

destined for terminals in the world’s three major energy

markets: Asia, North America, and Europe.

MARKETING 1.2 Safe, reliable delivery to our customers

ENERGY STRATEGIES

Maximizing the Impact of Our energy Resources

Improving production and Performance

Generating Breakthroughs across the Value

Chain

Enabling a Sustainable Future for Saudi the

Kingdom

Energizing People and Ideas

Sustainable development for our Citizens

GLOBAL MARKETING

CHALLENGES

Low global prices for oil

Aramco computers were attacked by a

virus on 15 August 2012 the attack was part

of Iran's retaliation for the U.S. involvement in

Stuxnet.

Globally competition from other OECs

There are limited growth opportunities to

companies available in the downstream

sector.

The challenges of increasing production

and addressing unemployment

Bottlenecks in transport and export facilities

CULTURAL FACTORS

AND BARRIERS

Decree from the in-Kingdom Total Value add (IKTVA) a

Program which is designed to drive domestic value creation

and maximize long-term economic growth and

diversification to support a rapidly changing Saudi

economy.

Dry lands research and exploration.(Collaboration with Tittori

University)

Operational hazards e.g.. Fire, harsh hot climate..

Inaccurate data for planning, engineering and

maintenance processes.

WE CONTINUOUSLY STRIVE TO LEVERAGE OUR

INTELLECTUAL PROPERTY (IP) PORTFOLIO, PRACTICES,

AND PROCESSES TO POSITION SAUDI ARAMCO

AS A GLOBAL TECHNOLOGY LEADER.

WE PURSUE PATENTS IN AREAS WHERE IP PROTECTION

PROVIDES A COMPETITIVE ADVANTAGE, GLOBAL

RECOGNITION, STRATEGIC POSITIONING, AND

PRODUCT DIFFERENTIATION.

Our research and development

activities focus on applying our

expertise and ingenuity to generate

innovative ideas that will make our

resources more accessible, useful,

sustainable, and competitive. To achieve this goal, we foster a

culture of innovation and

exploration.

At Saudi Aramco, we believe technology leadership drives

continued and future success in the

energy sector and is essential to

achieving our aspirations to help solve

global energy challenges and

stimulate the local knowledge

economy.

Performance areas (research and

developments. R&D)

GRANTED 99 PATENTS BY THE UNITED STATES

PATENT AND TRADEMARK OFFICE.

154 NEW PATENT APPLICATIONS WERE FILED.

Over the past few years, we have created a global research network with the establishment of research facilities in targeted innovation hubs in the United States, Europe, and Asia.

Introduction of a balanced portfolio of technically feasible and commercially viable technology options. Upstream, we are actively working on technologies that enable greater efficiency in resource discovery and recovery. Downstream research domains seek to develop and implement process improvements and production efficiencies that support our growing petrochemicals business as well as new production and refining efficiencies to reduce costs and support higher value product yields.

Performance areas c’tnd

Upstream technology ,Here are some

upstream technology highlights from our

work in 2014 to increase recovery rates for oil, part of our strategy to ensure the long-

term sustainability.

Injecting CO2 into reservoirs for

enhanced oil recovery and

sequestration could potentially boost

recovery rates and reduce emissions.

The use of surfactant/polymer

formulations in injected water can help

recover tertiary oil (oil not produced under natural reservoir pressure or

through water injection) more efficiently.

Smart Water Flooding has the potential to

optimize water properties in our carbonate

reservoirs to increase recovery. ( In 2014, a

Smart Water Flood demonstration project at

North ‘Uthmaniyah resulted in a successful

comprehensive formation evaluation at the first

observation well of the field pilot.)

Intelligent Systems Team Creative solutions for real-world problems…

Performance areas/strategy c’tnd

the 11 members of the Intelligent Systems Team in our R&D Center at King Abdullah University of Science and Technology

(KAUST) dared to chart new territory.

So

much

more!!!

(VISIONARY CONCEPT)

TO DELIVER ON OUR ASPIRATIONS FOR THE

FUTURE, WE ARE DEVELOPING INCREASINGLY

SOPHISTICATED UPSTREAM OPERATIONS,

EXPANDING OUR DOWNSTREAM BUSINESS,

AND PURSUING EVER MORE AMBITIOUS

TECHNOLOGICAL INNOVATIONS.

SUMMARY

The immense challenges in transforming Uganda’s economy doesn’t mean there won’t be change in the country. Structural reforms outlined in Vision 2020 are much needed to shift the economy to a more sustainable path and even if only a small part of Vision 2020 is being implemented, the Ugandan economy will look very different in 2020 than it does now. The key question is whether these changes will have a substantial impact on oil policy and the evolution of the energy sector. As discussed above, in spite of expectations of a diminished role, the Uganda energy sector (and particularly the oil and gas sector) remains key to a smooth transition to the vibrant economy envisioned and will continue to play a vital role in the country’s future.

Furthermore, the overall direction of National oil and gas oil policy in terms of its production and investment policy, maintaining spare capacity, integrating down the value chain through investing in refining and petrochemicals, increasing the role of gas in the energy mix, introducing efficiency measures and deploying renewables in the power mix to free crude oil for exports are not likely to change in the next few years as has been confirmed by the UNOC. In fact, one could argue that the Ugandan energy sector would benefit from a more integrated energy policy that takes a holistic view about the energy challenges facing the Country. But the Ugandan energy sector will not be immune from the changes in other parts of the economy as the recent restructuring of the energy ministry, the recent increase in energy price, the emphasis on local content policies, The restructuring and reorganization of such a vital sector and the acceleration of some policies may bring benefits and achieve efficiency gains, but they will also generate uncertainties and risks, which need to be carefully assessed and managed so policymakers don’t end up killing the goose that’s yet to lays golden eggs.

LESSONS FOR UGANDA’S NASCENT INDUSTRY

The government and the national oil company should design Programs to drive domestic value creation and maximize long-term economic growth and diversification to support a rapidly changing Ugandan economy.

Uganda’s government should strategize to create value in every aspect of our Oil businesses, maximizing long-term economic growth and diversification. Through the UNOC Total Value Addition Programs by taking action to drive additional domestic value creation to support a rapidly changing Uganda and foster future prosperity.

Local content is a formal requirement to development as will be required across Uganda’s domestic and international supply chain. This should be Uganda’s long-term strategy

Putting in place mechanisms to ensure transparency not only in Revenue Management, but also in aspects of Efficient Management of natural resources, which are the source of the revenues

Government should play parliament a great oversight role and therefore to ensure that proper allocation, utilization and accountability are done to obtain improved social outcomes.

UNOC Should connect people ideas and energy to realize the full potential of our resources, maximizing the value inherent in every hydrocarbon molecule we produce to advance human progress and promote prosperity.

THANK YOU

FOR YOUR ATTENTION