RATING
Outlook
Negative
SECTOR
Petroleum and Petroleum Products Merchant Wholesalers
Chief Sustainability Officer
T: N/A
E-mail: N/A
Stock Exchange and Ticker
Saudi Stock Exchange (Tadawul): ARAMCO:AB
Website
Contact
T: N/A
E.mail: international.media@aramco.com
Listing
N/A
Awards
- Sabic (Aramco has 70% stake) awarded by Frost & Sullivan for Sustainability and a Circular Economy in the Plastic Recycling Market with Its TRUCIRCLE™ Portfolio
Revenue
$358B
Market Capitalisation
$2.12T
Employees
68,493
Content source
Aramco Sustainability Report
Evaluation of Aramco
Saudi Aramco is committed to meet the higher oil and gas demands and in parallel is taking initiatives to address the negative effects on the environment and community. A close reading of Aramco’s Sustainability Report reveals shortcomings: Only a few specific numerical targets have been identified and progress towards meeting the Sustainable Development Goals (SDGs) is limited and not convincing as even those that are reported are only based on internal data and not independently verified.
The lack of information can be explained by this being Aramco’s first sustainability report. However, they are reportedly still gathering and analyzing additional KPIs and measuring tools. There are some additional initiatives identified towards 15 of the 17 SDGs (see the Table: UN SDGs Compliance Analysis), but targets and progress only cover five of 17 the SDGs (Table 1: Targets vs Progress Reported).
Aramco seems to be aligning its targets with several industry standards (see Listings, Standards and Frameworks), but information on sustainability awards and industry certificates is limited and not found in sources other than the company’s sustainability report and website.
Furthermore, no third party audits are mentioned in the report to consolidate the reliability of the data presented, which in addition to the lack of certificates, shows either the company’s inability to properly disclose the information or the intention to only disclose the minimum required.
It is a matter of concern that no external audits have been conducted.
Another matter of concern highlighted in the analysis is that Aramco appears to rather invest in offsetting emissions, then in a faster transition towards renewable sources of energy. Projects intended to contribute to sustainable development (e.g. the capture of CO2 in one of their plants in Hawiyah, to pump more oil, as well as similar projects as the Qurayyah Seawater Injection Plant) that were developed several years ago are included in the current sustainability report with no plans of expanding the concepts to other locations.
Sustainability Scorecard
Aramco Company Activity
Saudi Aramco, officially Saudi Arabian Oil Company, is a Saudi Arabian state-owned company, engaged in the exploration, production, transportation, and sale of crude oil and natural gas. As of 2021, it is the third-largest company in the world by revenue.
As of December 31, 2021 its reserves included 253.6 billion barrels of oil, 25.2 billion barrels of NGLs; and 194.5 trillion standard cubic feet of natural gas, as well as 530 reservoirs within 137 fields distributed throughout the Kingdom and its territorial waters.
The Downstream segment focuses on refining, logistics, power generation, and the marketing of crude oil, petroleum and petrochemical products, and related services to international and domestic customers. It also supplies oil products; and trades in refined petroleum and liquid chemical products, and polymers.
In addition, the company develops, manufactures, and markets high-performance rubber; and provides crude oil storage, investment, consulting, oil field, insurance, marketing and sales support, financing, and marine management and transportation services.
The company was founded on May 29, 1933 and is headquartered in Dhahran, Saudi Arabia. It has subsidiary locations in Saudi Arabia, China, Japan, India, the Netherlands, the Republic of Korea, Singapore, the United Arab Emirates, Egypt, the United Kingdom, and the United States.
Aramco Sustainability Activity - As per company declarations
The sustainability report starts with positioning Saudi Aramco in the future where “even with the most aggressive climate models, demand for hydrocarbons, though declining, will continue to play an important role in the energy mix for many years to come.” Furthermore, Saudi Aramco states that in many growing markets there will be a need for hydrocarbons well beyond 2050 and therefore the company’s vision is to be “the world’s pre-eminent integrated energy and chemicals company, operating in a safe, sustainable and reliable manner.
In order to meet the world’s energy needs, the company plans to grow the business, by increasing production and delivering energy and petrochemical materials to support economic and social growth, while leveraging technology and innovation to lower emissions and reduce our climate impact.
Aramco recognizes the need to maintain its position as a leader in upstream carbon intensity with one of the lowest carbon footprints per unit of hydrocarbons produced and ultimately decarbonize their own operations by 2050. This is an important part of the focus on long-term shareholder value creation.
Commitment to this goal was reinforced in October 2021, with the announcement of achieving net-zero Scope 1 and Scope 2 greenhouse gas emissions across wholly-owned operated assets by 2050. This complements the Kingdom of Saudi Arabia’s policies in 2021 when it declared its aim to reach net-zero emissions by 2060,as part of the Saudi Green Initiative (SGI). (Source: Saudi Aramco Sustainability Report 2021)
The focus on meeting the world’s energy needs by increasing production, shows that Saudi Aramco has no immediate plans to transition to invest in renewable sources of energy, nor in green chemistry technologies that will eventually eliminate the use of fossil fuel. It seems the company developed its sustainability goals around its main activities of exploration, production, transportation, and sale of crude oil and natural gas.
The company’s newly published sustainability report (June 2021) highlights four focus areas, and targets and progress have been summarized below, through the lens of Sustainable Development Goals.
- climate change and the energy transition;
- safe operations and people development;
- minimizing environmental impact;
- growing societal value
Certificate & Labels, Standards and Frameworks
- ISO 14001
Aramco in the news: Press Reviews and Social Media
Aramco reportedly expects to increase oil production by 1 million barrels a day by 2027 and boost gas production by 50% by the end of this decade.
Aramco began disclosing its emissions in 2019, but Bloomberg noted that those disclosures do not follow practices used by most international oil companies, leaving out vast amounts of emissions that ought to be on Aramco’s carbon ledger. The world’s most valuable company by market capitalization only discloses Scope 1 and 2 emissions. In 2021, those disclosures totaled 68 million metric tons and are expected to reach 67 million tons in 2035. Aramco’s net zero by 2050 target announced last year is also limited to only Scope 1 and 2 emissions.
As Aramco increases oil and gas production, the company’s emissions will inevitably rise. Despite that, Aramco expects emissions in 2035 to remain at 2021 levels through measures such as building plants that capture and bury carbon emissions. Currently, the company has facilities that can store away 800,000 tons of CO₂ and expects to have the capacity to bury 11 million tons by 2035.
This project is described as having the goals of combat desertification, carbon sequestration and biodiversity restoration through the plantation of 26 species of native trees, adaptive to the challenges of the Kingdom environment. The initiative is intended to yield more than 20 million kilograms of carbon sequestration per year while also increasing shade and evapotranspiration, making the local areas cooler.
To consider water scarcity in the area, Aramco has announced it will use water-saving technologies, based on polymers.
The Mangrove Eco-Park opened on January 11, 2021 is the first facility in the Kingdom dedicated to the preservation of mangrove forests. According to Amin Nasser, Aramco’s President and CEO “Mangroves play an important role in the environment as a line of protection and as a nursery for marine life.”
The project started in 2012 and the 63 square km of the Mangrove Eco-Park have been designed, on one hand to educate the community about mangroves, specifically the environmental and economic benefits and secondly, for Aramco to show their commitment to sustainability and to environmental protection.
Between 1992 and 2017 Saudi Aramco had released 5% of industrial carbon dioxide and methane (40B tones of greenhouse gasses). The company has launched a rebranding campaign in an effort to position the company as an environmental leader. Furthermore, the CEO of Aramceo, Amin Nasser helped found the Oil and Gas Climate Initiative to show the oil industry’s pledge to achieve global zero emissions.
Conversely, Aramco companies together with US oil giants shape the energy debate largely through industrial trade groups such as American Fuel & Petrochemical Manufacturers (AFPM). Motiva Enterprises, through which Saudi Aramco owns several refineries and chemical plants in US, is a member of the AFPM, whose actions defeated Washington State ballot Initiative 1631, a state referendum designed to institute a carbon tax. Additional funds from AFPM were given to Heartland Institute to declare that there is no human cause or evidence for climate change.
Lastly, money from AFPM has been distributed to other groups (American Legislative Exchange Council, the Competitive Enterprise Institute, and the American Energy Alliance) that have lobbied against renewable energy policies.
Aramco is a major board member to the American Petroleum Institute, a powerful lobbying group with influence in Washington DC.
Notably, Aramco hired in 2019, through its Motive subsidiaries a lobbying firm (Nickles Group) to influence regulatory policy. Despite all the lobbying, the company’s fears about a shift away from oil was reflected in 2019 in its first-ever bond sale used to fund the acquisition of the Saudi Arabian plastics and chemical firm, Sabic. The company announced in March 2019 that with the acquisition of Sabic, Aramco is planning to utilize non-carbon-intensive products for its petroleum wealth.
Highlights from Aramco Sustainability Report
Achievements
- In 2021, Scope 1 emissions increased by 4% following the start up of the Fadhili Gas plant.
- In 2021 decrease of 14% in Scope 2 emissions due to a shift in consumption of electricity from third-party to company-owned power generation.In 2021, Aramco, via its subsidiary, Saudi Aramco Power Company joined a consortium led by ACWA Power to develop the 1.5 GW Sudair solar plant or 70% of the renewable energy in Saudi Arabia. The first phase of the project is expected to begin producing electricity during the second half of 2022.In January 2021, Mangrove Eco-Park opened, the first facility in Saudi Arabia dedicated to the preservation of old growth mangrove forests. The 63 km2 Mangrove Eco-Park protects one of the last naturally occurring mangrove forests in the Eastern Province of Saudi Arabia and features the longest mangrove boardwalk in the country
- Saudi Aramco has now two projects completed to provide de-salinized water to their plants (Qurayyah Seawater Injection Plant and Khurais Increment Project), yet there is a slight increase in freshwater consumption in 2021 by 1 million cubic meters, indicating that the goal of using de-salinized water has not been attained
- In 2021, sustainability-related R&D was $315M, (52% of total 2021 R&D)
- Altamayyuz Academy, founded in 2021, is an initiative of Aramco to partner with the world’s leading investment banks, accounting firms and the Technical & Vocational Training Corporation (TVTC) to create an academy to educate the Kingdom’s future finance leaders;
- In 2021 the Namaat Program’s industrial investment added 22 new MOUs and one joint venture, focusing on building capacity in four key sectors: sustainability, technology, industrial & energy services, and advanced materials;
- In 2021, the iktva program achieved 59% local content in Aramco’s supply chain, an increase of 35% since 2015
- To date, iktva has contributed an estimated $100 billion to Saudi Arabia’s economy;
- In 2021, the number of serious accidents in blackspots decreased by 68% as a result of Traffic Safety Signature Programs, which provided engineering and enforcement recommendations;
- In 2021,the US-based refinery business Motiva’s Terminals & Pipelines was recognized, seventh time, by the International Liquid Terminals Association (ILTA) with the organization’s 2021 Safety Excellence Award.
Weaknesses and Setbacks
- Aramco relates biodiversity and human rights with the material issue, with various KPIs that need to be measured and the company claims in their sustainability report that in order to ensure the quality and integrity of the data captured, they are applying rather a phased approach and therefore no publicly reported KPIs are available for 2021;
- Aramco does not provide info on Scope 3 emissions, generated when customers burn the oil and gas extracted by the company and are likely to exceed 1.6 billion tons, according to a Bloomberg Opinion estimate. If correct, that amounts to more than 3% of global annual greenhouse gas emissions;
- Furthermore, the company also leaves out emissions from assets in which it shares ownership which means that emissions from many chemicals and refining plants — some of them among the world’s largest — are not counted and those could add up to tens of millions of metric tons of CO₂-equivalent in Scope 1 and 2 emissions, according to Bloomberg calculations.
Targets vs Progress Reported
| Target | Results reported |
|---|---|
| Reduce upstream carbon intensity by at least 15% by 2035 | Carbon capture, utilization and storage (CCUS) - Key assets and storage capacity identified: Wasit, Fadhili & Khursaniyah; - Joint feasibility studies conducted; - Memorandum of Understanding (MOUs) in place with international partners; - As of 2021, achieved an average thermal efficiency of 70.8% due to conversion of energy released from the combustion of fuel into power and steam. |
| Develop CCUS capacity to capture up to 11 MMt CO2e by 2035 | - The CO2 EOR Demonstration Project has a capture capacity of 800,000 tons of CO2 per year; - The captured CO2 (in the plants in Hawiyah) is piped 85 kilometers and pumped into a mature area of an oil field (Uthmaniyah oil reservoir) to enhance oil recovery (EOR) and sequester CO2; - Since the initial injection of CO2 in 2015, the company has doubled oil production rates which implies a more efficient extraction system. |
| Reduce the net Scope 1 and Scope GHG emissions from both the Upstream and Downstream businesses by 52 MMt CO2 by 2035 | - 308 energy initiatives implemented; - Supplying 11.85 mboed energy savings; Equivalent to 1.26 MMtCO2 reduction; - 2021 30% share in 1.5 GW Sudair solar PV project; - Investment in 12 GW of solar PV and wind projects; - 2022 evaluation of share in 2.3 GW of new projects; - In 2021, 300 energy initiatives implemented in, in-Kingdom facilities, resulting in 11.85 mboed of energy savings, (=1.26M tons of CO2 emission reduction) |
| Near zero upstream methane intensity by 2030 (OGCI commitment) | - Current upstream methane intensity of 0.05% |
| Zero Routine Flaring by 2030 (commitment to World Bank) | - Maintained a flare volume of < 1% of total raw gas production since 2012 |
| Target production of up to 11 million tons per annum (MMTPA) of blue ammonia by 2030 | - In 2021, Aramco signed a MOU with Japan’s largest refiner, ENEOS, to consider development of a CO2 -free hydrogen and ammonia supply chain through a year-long feasibility study; - The CO2 captured during the process of converting of hydrocarbons to hydrogen and then to ammonia, was used in methanol production at SABIC’s Ibn-Sina facility, as well as in the Enhanced Oil Recovery demonstration project - this shows feasibility even though results are still scarce |
| Net positive impact on biodiversity through mitigation and compensation | - In March 2021 was approved the company’s first Biodiversity Protection Policy; - Aramco’s priorities for species conservation include top 20 species that have received the highest score from being endangered, few individual left and if it’s unique both globally and within the Kingdom; - As of 2021, 977 km2 of Aramco land has been designated a protected area, comprising 10 Biodiversity Protection Areas, marking a start; - 30% of all of Saudi Arabia’s terrestrial mammal species have been recorded within the company’s Abha protected area |
| Plant 300 MM mangroves by 2035 in KSA and 350 outside KSA | - In 2021 alone, they planted 7 million mangrove seedlings |
| Help farmers produce 800 tons annually of renowned Khawlani coffee beans by 2022 | - Expanded coffee production to Jazan, Aseer, Al-Fifa, Al-Eydabi, Al-Ardhah, Al-Raith, Haroob; - 1000 local coffee farmers; - 200,000 seedlings and the use of a smart & modern irrigation system |
| 150 tons of honey annually by 2022 | - Currently produce 120 tons of honey; - Al-Bahah, one of the region’s cities, is home to more than 3,000 beekeepers |
| Zero target fatalities | - One fatality recorded in 2021 consisted in a death and a full investigation started to identify root causes, spread the lessons throughout our organization and developed action plans to avoid recurrence of such incidents; - 11 Tier 1 process safety incidents occurred during 2021 compared to 9 in 2020, none resulted in operational interruption or loss of life and most of them were minor in nature with 3 resulting in injuries |
| Zero tolerance for unethical behavior | - In 2021, 539 allegations (2020: 619) were recorded, 33 of these cases were investigated for breach of the Aramco Code of Conduct. Allegations had spiked; - The overall trend points to a consistent increase (versus 2019: 507) in the allegations received through the hotline, partly driven by management’s message of zero tolerance for unethical behavior and insistence for all to report on incidents, Aramco states |
| Double the number of female employees in-Kingdom and with 10% of in-Kingdom leadership positions to be held by women, by 2030 | - 5.6% women employed (4.9% in 2019 as the base year); - 3.1% women in leadership positions (2.1% in 2019 as the base year) |
