Bottom of the Barrel-Saudi Aramco and Global Climate Action

The Baker Institute for Public Policy is a Rice University (https://www.rice.edu/) affiliated think tank. Founded in 1993, it is named for James A. Baker, III, former United States Secretary of State, Secretary of the Treasury, and White House Chief of Staff.

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Working Paper
The Bottom of the Barrel: Saudi Aramco and Global Climate Action
Jim Krane, Ph.D.
Wallace S. Wilson Fellow for Energy Studies
© 2021 by Rice University’s Baker Institute for Public Policy
This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. Wherever feasible, papers are reviewed by outside experts before they are released. However, the research and views expressed in this paper are those of the individual researcher(s) and do not necessarily represent the views of the Baker Institute. This paper is a work in progress and has not been submitted for editorial review.
ABSTRACT
For Saudi Arabia’s absolute monarchy, climate action represents a combined threat and opportunity in retaining the oil rents that underpin domestic political institutions and the kingdom’s international influence. Saudi Aramco, the largest source of greenhouse gas-emitting fossil fuel among all firms worldwide, is exposed to numerous risks around continued use of fossil fuels. However, Aramco is also the producer with the world’s lowest cost basis and lowest intensity of greenhouse gas emissions per barrel produced.
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These attributes suggest that oil from the kingdom should retain a prominent role in oil markets, particularly under climate constraints. While Saudi Aramco’s April 2019 bond prospectus outlines steps the company is taking to ensure that it continues marketing oil far into the future, this paper argues that Aramco’s quest to remain the “last man standing” in global oil depends not just on its substantial cost advantages. Declining social acceptance of fossil fuel combustion suggests that Aramco’s pursuit of carbon competitiveness will assume growing importance.
INTRODUCTION1
$$In a world beset by intensifying climate change mainly produced by combustion of fossil fuel, Saudi Arabia is ground zero. The firm accountable for the single largest contribution to that warming is the kingdom’s national oil company, Saudi Aramco. Oil and gas produced by Aramco was responsible for roughly 4.8% of global emissions in 2018 and about 4.3% of total atmospheric accumulations since 1965, the largest share of any single firm.2 At the same time, the kingdom’s intense summer climate faces the potential of being warmed into intolerability by century’s end.3 Despite the implied climate damage to its homeland, Saudi Aramco is moving to expand, streamline and protect its system of oil monetization, so that the Saudi NOC can produce and market the kingdom’s prodigious below-ground reserves “for generations to come,” as its prospectus states.
This working paper was first presented at the Gulf Research Meeting, University of Cambridge, July 2019, and forms the basis for a chapter in the forthcoming edited volume “Domestic Policy Making and Governance in Saudi Arabia” edited by Mark C. Thompson and Neil Quilliam, to be published in summer 2021 on IB Tauris-Bloomsbury.

Free full text source: https://www.bakerinstitute.org/research/bottom-barrel-saudi-aramco-and-global-climate-action/
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