Learning from the Saudi Arabian model: Innovating through energy transition

Remarks by Stephen D. Pryor
President, ExxonMobil Chemical Company
Global Competitiveness Forum 2010
Riyadh, Saudi Arabia
January 24, 2010

It is a pleasure to join this year’s Global Competitiveness Forum to discuss the transition in the world’s energy mix.  To make this transition in a manner that is truly cost-effective and sustainable, we will need to confront two great and interrelated challenges. 

First, we must meet the growing demand for energy. By 2030, almost 35 percent more energy will be needed than in 2005, driven by population growth and economic development. This growing demand will require us to develop all economically viable sources of energy — including hydrocarbons, nuclear, and renewables. 

The second great challenge is to move toward a more sustainable and less carbon-intensive future.  By 2030, energy-related CO₂ emissions are likely to be 25 percent higher than in 2005.

The key to addressing both of these great energy-related challenges is one and the same: innovation. 

We will need innovations that expand all economic energy sources, improve energy efficiency, and mitigate emissions through the use of new technologies.

We will also need government policies that encourage market-driven, long-term oriented solutions to our energy challenges. 

Importantly, we need leadership from both business and government — leadership that reflects a balanced approach to sustainability.

As the World Energy Council said in a 2007 report, “Sustainable development is not only about the environment.  Policies which fail to contribute to economic and social development will themselves prove unsustainable.”

What I want to talk about is the essential role the chemical industry plays — and must play — in sustainable development and the energy transition.  Modern chemistry does this by providing products which transform everyday life, improve energy efficiency, and reduce greenhouse gas emissions. 

It is fitting that we are discussing these issues in the Kingdom of Saudi Arabia.  It is here in Saudi Arabia that we can see how innovative business models under a consistent policy framework have unleashed economic growth and reshaped the global energy and petrochemical industries — industries with which I have been associated for more than 35 years.

For more than a century, the chemical industry has been led by companies that relentlessly pursue innovation in advantaged feedstocks, in more efficient manufacturing processes and in high-performance products. 

Of course, people often don’t realize the many ways the products of modern chemistry help them.  Modern chemistry helps keep people safe, healthy, warm, cool, fed, in motion, and connected.  In fact, the chemical industry’s products are an essential part of nearly every facet of the modern economy.  Today, this $3 trillion a year industry touches 96 percent of all manufactured goods.  

The products of modern chemistry are also an essential part of our efforts to move toward a more sustainable energy future.

A recent study by McKinsey & Company revealed that for every unit of carbon dioxide emitted by the chemical industry over the product lifecycle, two units of carbon dioxide are saved through the use of our products.  The net effect is that the world’s greenhouse gas emissions are 8 to 13 percent lower today than they would be without the use of chemical products. 

At this conference, you can see some of the innovative products of modern chemistry in ExxonMobil’s energy efficiency car on display at the entrance to the Forum.  These include light-weight plastic parts, which reduce vehicle weight by 10 percent; synthetic lubricants which reduce engine friction; and state-of-the-art innerliners for tires, which improve air retention and reduce weight.

If just one-third of the U.S. auto fleet used these products  they would reduce fuel consumption and greenhouse gas emissions equivalent to taking 8 million cars off the road.  In fact, ExxonMobil and our partner SABIC are evaluating projects to produce some of these innovative products at our existing Saudi joint ventures, in support of the Kingdom’s industrial development strategy.

Though few realize it, even alternative energy relies on the products of modern chemistry.  For instance, ExxonMobil has developed synthetic fluids for the wind and nuclear industries, adhesives for solar panels and lithium-ion battery separator films for hybrid and electric vehicles.

Simply put, the relentless innovation of the chemical industry has helped drive the world’s transition to a more sustainable energy future.  And I believe that if we put the right policies in place around the world, this extraordinary industry will continue to contribute and speed the energy transition in the decades to come.

As I noted earlier, one of the most important models to learn from is right here in the Kingdom of Saudi Arabia.

In the 1970s, Saudi Arabia’s leaders saw an opportunity to enter the global chemical business in a way that would leverage the nation’s hydrocarbons, diversify the economy, and create thousands of new jobs for engineers and technicians, led by a new generation of managerial talent.

The nation’s leaders recognized that Saudi Arabia had tremendous competitive advantages on which to build: an abundant supply of low cost chemical feedstock and energy, as well as a favorable location for serving the growing markets of both Asia and Europe.  

To achieve their vision, Saudi Arabia’s leaders took a series of bold and innovative steps.  The first was the creation of the Kingdom-wide Master Gas System which harnessed this resource for petrochemical and industrial development. 

Second, the nation’s leaders created the Royal Commission for Jubail and Yanbu to construct infrastructure, utilities and services for these two new industrial cities — projects which at the time were among the largest engineering endeavors in history. 

Saudi Arabia’s leaders then created SABIC in 1976 to spearhead industrial development.  SABIC, in turn, formed joint ventures with leading international companies to build world-class petrochemical facilities with state-of-the-art technology. 

In the intervening years, Saudi Arabia has built on these strong foundations — cultivating partnerships, expanding facilities, introducing new technologies and opening the industry to local investors.  And over this entire period, they have stood as staunch advocates for free trade, foreign direct investment and respect for contracts.

The result is that in just three decades, Saudi Arabia has become one of the leading players in the global petrochemical industry.

The Kingdom’s petrochemical model has been emulated throughout the region.  The Middle East is emerging as the epicenter of the global petrochemicals trade — accounting for 25 percent of the world’s net exports of the three highest volume petrochemicals. 

We project that within 10 years world trade in these products will double, and the Middle East will account for 75 percent of world exports, with Saudi Arabia maintaining its leading position.

The rise of Saudi Arabia’s petrochemical industry is a towering achievement that has changed the face of the industry and delivered economic, social, and environmental benefits.  It is a lesson for the world on how long-term oriented, market-based policies can hasten the energy transition while enriching the lives of people everywhere. 

In closing, meeting the two great energy challenges of our time will not be easy.  We must find ways to meet the world’s growing energy needs and speed the transition to more sustainable energy solutions.

We can do it, if we develop all economically viable energy sources, improve energy efficiency, and mitigate emissions through the use of new technologies.  These efforts will require a steadfast commitment to both innovation and sound energy policies, across the ups and downs of business cycles and political change.  And, continuing innovation in the chemical industry will be essential to building a more sustainable future.

Thank you.