Saudi Aramco: Last Man Standing in the Oil Era

The Covid-19 pandemic has afflicted civil aviation with the most serious crisis it has ever known, prompting Airbus to announce a futuristic project dubbed ZEROe: the deployment in 2035 of the first “zero emission” aircraft. In a video posted in September 2020, the European firm unveiled three different types of hydrogen-powered aircraft, among them a flying wing capable of carrying up to 200 passengers. Technological progress raises hopes of reducing the carbon footprint of air carriers, but “green hydrogen,” obtained by splitting water molecules with electrolysis powered by sustainable energy sources is still considered too expensive to be commercially viable. Actually, the real situation is not so clear-cut.

Oil remains indispensable for industries that are especially difficult to decarbonise, first the shipping industry, mining, and the steel, plastics and cement industries. According to the projections of BP, the British hydrocarbon giant which has promised to reduce its production of oil and gas by 40% between now and the end of the decade, the world’s oil consumption may still be somewhere between 30 and 95 million barrels per diem in 2050. The Organisation of the Petroleum Exporting Countries (OPEC) expects to see a world production of 109 million barrels per diem in 2045.

Saudi Arabia, world’s number one crude oil exporter sees in this slow decarbonisation of the globalised economy an opportunity to go on deriving profit from its oil revenue: “We are aware that sustainable energy solutions are essential for a faster and smoother worldwide energy transition… But realistically, this will take some time, for in many areas there are not many alternatives to oil” was the declaration made in March 2021 by Amin Nasser, the head of Saudi Aramco. The oil giant, regarded as Saudi Arabia’s cash cow, provides a tenth of the world’s production and looks forward to supplying the energy needs of China for the next fifty years.

Saudi Aramco has the advantage of exploiting oil deposits relatively close to the surface and therefore has the world’s lowest production costs, half those of Russia and nearly three times less than the cost of US shale oil. This competitiveness has been enhanced by the decline in shipping costs over the past few decades, securing Riyadh’s capacity to export a “low cost” crude oil… to the detriment of the environment. Indeed oil production is responsible for one fourth of the CO2 emitted by the world’s sea trade.

Cleaner contamination

Saudi Arabia highlights another argument in favour of its role as an indispensable player in these final stages of the oil era: after Denmark, it produces the world’s “cleanest” petroleum. This “low-carbon” rhetoric is based on a scientific study co-financed by Saudi Aramco and published in 2018 by the US magazine Science, analysing the emissions of 8966 active oil deposits in 90 different countries, i.e., 98% of world production. The article concludes that the extraction, treatment and transport of a barrel of Saudi petrol to its refinery give off 27 kilograms of CO2, the world’s second-lowest figure. Thus, the company can claim that the use of low-carbon crude oil will make it possible to economise at least 18 gigatons (Gt) of CO2 equivalent by the end of the century. Now this figure is scarcely a drop in the bucket compared with worldwide energy-linked emissions of CO2: nearly 600 Gt since the year 2000.

“It is understandable that Saudi Aramco should want to publicise these figures. They give it a good image and enable it to claim that if you use Saudi oil you emit less carbon than if you use oil from anywhere else,” Jim Krane observes. He is an energy specialist with the Baker Institute at Rice University in Texas.

By hiding behind this “best of the worst,” Saudi Aramco avoids the issue of reducing the total volume of greenhouse gas emissions and not simply having cleaner pollution. An attitude which is simply shocking: “Persevering in the tactic of the last man standing to go to the end of the end of the petro-industrial civilisation is a heresy. We are exploding planetary limits, playing with fire. The time has come to grasp what is at stake here which is nothing less than the habitability of our planet” says Arthur Keller, an expert in the systemic vulnerability of modern societies, in energetic and environmental constraints and strategies of resilience. And he adds, “The egotistic and obstinate profiteering of the Gulf countries is all the more surprising as that is a region which has everything to lose, considering how hard it will be hit by climate breakdown”. Indeed, there are scientific studies which show that the Arabo-Persian Gulf area could become partly uninhabitable after 2070, especially during the summer months.

Towards a production record

According to The Carbon Tracker, a think-tank which analyses the impact of climate change on the finance markets and fossil fuel investments, the main oil and gas companies quoted on stock-exchanges will have to reduce their production by one third between now and 2040 to respect the Paris Agreement (2016), aimed inter alia at keeping temperatures from rising more than 1.5° Celsius by the end of the century compared with pre-industrial levels.

Saudi Aramco, responsible for 4.8% of the world’s emissions of CO2: since 1965 and world’s biggest public polluter, does not subscribe to this approach. On the contrary, the company wants to increase its production to 213 million barrels of oil per diem, i.e., one million more than its previous production record, set in April 2020. Its goal is to increase its share of the market as against its Western competitors, obliged by the pressure of public opinion to decrease their production. Unless its decision makers decide to follow the example of Occidental Petroleum, a US company that declared having exported to India in January two million barrels of oil 100% carbon-neutral—a world premiere. This pompous announcement actually disguises the purchase of carbon credits to compensate for the million tons of carbon rejected in the atmosphere. A practice which is criticised not only because of the lack of transparency involved in this compensation method but also because it fosters the idea of “cleaner pollution”.

Yet in the opinion of Arthur Keller, Saudi Arabia is one of the few countries that have in their possession a “very powerful lever” capable of steering the international dialogue towards an in-depth transformation of the economic system and way of life which would attenuate the pressure exerted on the planet by human activities: “Ideally—but the level of ideological conviction required is such that I’m day-dreaming—a consortium of oil-exporting countries could send a powerful signal to the rest of the world by declaring: ‘We are going to supply the oil necessary to ensure the transition towards a civilization as decarbonized and as deplastified as possible. Preferential rates will be granted to countries committed to ambitious programs of societal transformation’” is the expert’s suggestion.

Lack of transparency

Despite its desperate efforts to pass itself off as a respectable player in the energy transition, Saudi Aramco has a hard time putting into practice the commitment to transparency advertised with the initial public offering of 1.5% of its shares. The company’s carbon footprint vaunted in the prospectus which accompanied that stock market listing was actually underestimated by as much as 50% since it failed to take into account the emissions of many refineries and petrochemical plants. While the firm has acknowledged its mistake, it still refuses to include the factories held in joint venture in its carbon assessment. “Environmental regulations are not very strict yet, and for an entity like Aramco which provides the life-blood of Saudi Arabia, we cannot afford to impose rules that are overly strict,” says Saleh Al-Omar, a Saudi businessman who holds shares in the petroleum giant.

Saudi Aramco is also one of the last big oil companies listed on the stock exchange that refuses to reveal its Scope 3¹ emissions when its end customers use its fuels. These generally represent over 80% of the total emissions of an oil company. Bloomberg has estimated that in the case of Saudi Aramco, they amount to 4% of all planetary emissions. However, the Gulf petroleum companies are not the only ones guilty of this lack of transparency. It is only this year that the US ExxonMobil company has made public for the first time figures concerning its Scope 3 emissions.

While the practices of these oil companies deprive governments and industrialists of essential data for “greening” their carbon footprint, the issue also affects public health. According to the US Environmental Protection Agency (EPA), the oil and gas industry is “the largest industrial source of emissions of volatile organic compounds”, including toxic atmospheric pollutants, suspected of causing cancers and respiratory diseases.

In Saudi Arabia, the vicious repression carried out by Crown Prince Mohamed Ben Salman of any and every dissenting voice deprives Saudi citizens of the possibility of calling Saudi Aramco to account. Moreover, the strict control of public debate by all the governments of the region curtails public opinion’s awareness of the long-term impact of the oil industry.

According to a study carried out by the Boston Consulting Group (BCG), although environmental awareness is increasing, “a large share” of the population remains “ill-informed”. Nearly half the young people between 18 and 24 declare either having never heard the expression “carbon footprint” or not being sure what it means. An ignorance which spares the Saudi decision makers from tackling the thorny debate over the human cost inherent in that decision to be “the last man standing” in the oil era.