Remarks by Mr. Nasir K. Al-Naimi, EVP Upstream at the Baker Hughes Annual General Meeting 2023

Good afternoon ladies and gentlemen.

It is an honor to be back in beautiful Florence. I have had the pleasure of attending this event twice in the past. Once in-person here in the heart of Tuscany, and then two years ago addressing a virtual audience.

And given the constantly evolving nature of our industry, to me, this event has always been a moment to pause, take a deep breath, and reflect on what this relentless, fast-paced change means.

So, to Lorenzo and the entire team at Baker Hughes, thank you for gathering such a talented group of leaders to discuss what lies ahead.

And this brings me to my remarks today.

I would like to talk about dominos.

No, not the Domino Theory, as I like to avoid politics.

Not the tile-based game either, which I understand first appeared right here in Italy.

What I want to discuss is the domino effect.

In particular, the series of recent chain reactions that are having a massive impact on our industry.

When this domino effect started is difficult to pinpoint exactly.

But, in our view, it began when unrealistic scenarios and impracticable transition policies led some people to think that oil and gas must be replaced as we move to a lower-carbon world.

In turn, these overly optimistic beliefs have fueled chronic underinvestment in our industry, with investments scaling back from over $700 billion in 2014 to about $300 billion in 2021.

Now, some blame today's supply issues and price volatility on the conflict in Ukraine.

But the reality is that the energy market was stretched thin beforehand.

As much of the world economy came out of lockdowns last year, oil and gas demand came roaring back, because alternatives were not yet ready to shoulder the significant burden of demand.

Meanwhile, oil supply capacity expansion was lagging, due to those lower investments.

Amidst this supply and demand rollercoaster, many say that the oil and gas sector is in terminal decline – a “sunset industry”.

This misperception has unfortunately led to challenges for our industry, with labor, staffing and supply chain issues creeping up across the globe.

These items have potentially serious implications, something I will come back to.

But the overall challenge we all face is how to stop these dominos from continuing to fall.

And instead focus our efforts on this event's theme of “balance and momentum”.

So how will we do it?

To begin, I believe we need to take every opportunity as an industry to shatter the misleading narrative that oil and gas can be quickly and easily replaced in the global energy transition.

Or that conventional sources have no role in a net-zero world.

Fossil or conventional fuels still supplied more than 82% of the world's energy in 2021, and while modern renewables (excluding hydroelectricity) are growing fast, they are still supplying less than 7% of total global primary energy supplies.

By comparison, oil supplies more than 30% of the world's energy, and gas more than 24%.

Also, the reality is that a transition plan that may work in a high income country may not work in poorer regions. So, transition is going to happen at different speeds in different parts of the world, depending on their stages of development.

Poverty is another key factor we must keep in mind. For the 2.6 billion people who still do not have access to clean cooking for example.

Or the three quarters of a billion people who lack electricity.

Furthermore, affordability is a major hurdle. Last year, McKinsey estimated that a net-zero world will cost 275 trillion dollars by 2050, with each country having its own priorities and unique situations.

This ultimately means one single path will not work.

So, I believe there is an urgent need to re-evaluate the situation, and develop transition plans that are more realistic, acknowledging the need for ample, reliable and affordable energy, of course alongside climate protection efforts.

Both are doable. They do not have to compete with one another.

As for what individual companies need to do, I am not going to attempt to speak for others.

But I can tell you what Aramco is doing to maintain global energy “balance and momentum”.

We are increasing our maximum sustainable capacity from 12 million barrels per day to 13 by 2027, helping to ensure a reliable supply of energy is available for the world.

We are working to increase our gas production by more than 50% by the end of this decade, including 630,000 barrels per day of gas liquids and condensates from the unconventional Jafurah field.

We are reinventing upstream, making exploration, drilling and production more fit-for-purpose for tomorrow's world – smarter, safer, more efficient, and above all, more sustainable.

Fueled by our 2050 net-zero ambition, we are committed to maintaining our position as one of the lowest carbon intensity suppliers of energy in the world.

Just last month, Aramco President & CEO Amin Nasser stated that just as important as the on-going energy transition, is the materials transition.

We are strengthening our focus on the materials transition at Aramco, as this is a central part of achieving our net zero ambition.

As such, we have an ambitious growth plan in chemicals, aiming to convert 4 million barrels per day of liquids into chemicals by 2030.

This opens the door and possibilities to a new era of end-products from what our Upstream organizations produce, something we are truly excited about.

Beside our 2050 net zero aspiration, we have set concrete interim targets to move toward our goal. It includes further reducing our upstream carbon intensity by at least 15% by 2035, against our 2018 baseline.

Additionally, Aramco continues to make investments in areas such as cleaner conventional engines, carbon capture, utilization and storage, as well as hydrogen and renewables.

And we are putting technology at the forefront of our future, harnessing the power of AI, robotics, supercomputing and the latest digital technologies.

In fact, our various venture capital technology and sustainability funds now have at least 3.5 billion dollars to help address complex climate challenges.

As Aramco moves forward in a world where oil and gas will still play a prominent and parallel role in the energy future, we will of course continue to rely on oilfield service companies such as Baker Hughes.

Our path of growth, sustainability and innovation cannot occur in a silo… in fact, we embrace the opportunity for our trusted partners to join us on this journey, making the dominos sturdier and more secure.

I am encouraged when I meet with partners who are coming forward with their own breakthrough technologies, and are targeting their own low-carbon, climate and sustainability goals.

And while our relationship with service companies remains strong, there are challenges that require attention.

Earlier, I mentioned staffing. Top talent is critical to our joint future.

But a labor shortage is growing across the globe in many sectors, and while some businesses can reduce their hours to compensate, our industry does not have that option.

Good hands and minds are leaving at an alarming rate. Many have found different employment through the pandemic, have taken on early retirement, or are choosing not to enter our industry altogether.

That's why regularly reinforcing the important role oil and gas plays in any viable energy future – and the wonderful opportunities available for talented people – is so vital.

If we do not, this could potentially lead to increased number of safety risks, lower efficiency and lower reliability for our industry.

But I am encouraged by recent conversations regarding staffing. And I know that by working together with the great minds in this room, we can solve the pressing talent crunch.

Another critical component of our joint success is the importance of nearshoring and localization of supply chains.

For Aramco, longstanding localization efforts by our company and partners, like those in this room, have resulted in the development of a more resilient, efficient, and world-class in-Kingdom supply chain.

This has been a significant factor in our ability to maintain business continuity and ensure a constant supply of energy to the world, even during times of crisis, such as COVID, and the 2019 attack on our processing facilities.

By working with our partners, we have been able to adapt successfully in the face of unanticipated shocks, through the ability to avoid disruption and quicken recovery.

Keeping supply chains close at hand is essential for this level of rapid reaction, essentially stopping the dominos from continuing to fall should the first few topple over.

In fact, running parallel to the Baker Hughes AGM this week, Aramco is proudly hosting our annual IKTVA Forum back in the Kingdom, highlighting the great work being done by all of our partners, including Baker Hughes, in this area.

Ladies and gentlemen, working together, we can persuade the world to adopt a more resilient global energy transition, resulting in a more affordable, secure, and sustainable energy future.

However, given the history of our many past accomplishments, underpinned by the strong partnerships our industry has forged, I am hopeful and optimistic for our joint future.

And by working together, we can maintain the crucial balance and positive momentum this conference so aptly emphasizes. 

Thank you again to Lorenzo and Baker Hughes for having me join today.

Grazie.