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Aramco Strategy: Lemonade from Lemons
Posted on November 30th, 2016 by Ken Klapproth in Chemicals Industry News and Analysis
All products have a lifecycle – including obsolescence. But when public opinion and worldwide regulatory pressure has market demand for your cash crop showing signs of waning, do you close up shop or get creative?
When you’re Saudi Aramco – the world’s most valuable company sitting on the world’s largest crude oil reserves producing the largest daily oil output – the ramifications of this question take on a whole new scale. According to a recent article in the Wall Street Journal, Aramco’s strategic goal is to shift its focus from raw material to higher value added petrochemicals. In effect, Aramco is making lemonade from lemons, generating higher profit margins on products integral to a broader range of industries.
Affirmed in his keynote speech at the 11th GPCA forum in Dubai, Abdulaziz Judaimi, Business Line Head of Downstream for Aramco, petrochemicals are a key part of the company’s diversified growth strategy. Judaimi explained, “Clearly, there will continue to be opportunities to invest in the large-scale integrated base petrochemicals projects, underpinned by advantaged feedstocks, which have defined the development of our region’s chemical industry.”
The four strategic tenants described by Judaimi included:
- Refining-petrochemical integration
- Differentiated commodities and specialty chemicals
- Innovation and technology
- Developing a highly skilled workforce
With such an emphasis on production of higher value petrochemicals, you may wonder how tar-like crude pumped from the ground becomes the plastic for your automotive dashboard or the polymer in your chewing gum? For the mere investment of the next 4 minutes of your life, the answer – or at least an overview – conveniently awaits an informative video from the Fuse School:
Part of the Chemistry Journey project, the Fuse School has a complete video series for chemical education that can be found here.
It will be fascinating to witness Aramco’s transformation over the coming years. Beyond the technical complexities of petrochemical production, the company will also need to solve the business challenges of raising capital and public financial governance. With more than 260 billion barrels of oil reserves, they certainly don’t have to worry about raw material.
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All opinions shared in this post are the author’s own.
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