Saudi Aramco Company’s Innovation and Technological Performance

Table of Contents

Company Introduction
Products / Services
Technology and R&D
Business Model
Innovation Performance
Conclusion
Reference List

Company Introduction

Saudi Aramco is a large international oil and gas corporation with a long history of business performance globally. The company is characterized by large volumes of production, partnership, global expansion, and investment in the continuous development of technologies that enable it to obtain a worldwide dominance and industry-specific competitive3 advantage. The company was established in 1988 and has become the world’s largest oil and gas company operating in the global market as a leader and regulator of industry trends (Resilience and agility: Saudi Aramco annual report 2020, 2021). The company headquarters are located in Dhahran, Kingdom of Saudi Arabia, and employs over 55,000 workers (Park, 2020). The operations are located both inside the country and in foreign countries, denoting the global presence of Saudi Aramco in the industry. The operational activities are extended abroad through such entry modes as “subsidiaries, acquisition, and joint ventures” (Park, 2020, p. 74). Saudi Aramco’s operation activities include “the whole process of exploration, production, refining, chemicals, distribution and even marketing in the petroleum industry” (Park, 2020, p. 74). The company structure includes several departments, each attributed to its corporate governance approach.

Products / Services

The company cooperates with multiple customers and shareholders to produce and refine crude oil, gas, petroleum, and other products. According to Park (2020), Saudi Aramco “produces 3.4 billion barrels of petroleum and it manages 264 billion barrels of oil reserves and 253 quadrillion SCF of natural gas” annually (p. 74). At present, the company is government-owned, with several external investors involved in the business (Resilience and agility: Saudi Aramco annual report 2020, 2021). The company operates in both upstream and downstream modes; “Aramco’s upstream operations are primarily based in Saudi Arabia, while the downstream business is global” (Resilience and agility: Saudi Aramco annual report 2020, 2021, p. 24). At the upstream level, the company explores, develops, and produces oil and gas; at the downstream level, it involves in “refining and petrochemical manufacturing, supply and trading, distribution and power generation” (Resilience and agility: Saudi Aramco annual report 2020, 2021, p. 26). While the company’s products gain competitive advantage in the market, its services and technologies such as innovative drilling methods and sustainable power generation are also successful globally.

Technology and R&D

In addition, the company possesses a large volume of technological opportunities and scientific developments which allow for incorporating and disseminating innovative solutions and technological tools for the industry. Indeed, the investment into technology is view by the company’s management as a way of long-term value creation. Saudi Aramco continuously invests in scientific collaborations and launches innovative research to advance sustainable energy use (Technology development, 2021). The company undertakes global research centers that work on new technologies aimed at emissions reduction in the car sector through innovative, efficient internal combustion engine technologies (Technology development, 2021). At the operational level, Saudi Aramco uses informational technologies to control and monitor operations globally (Alshathry, 2016). Overall, since the company is a leading global gas and oil producer, technology, both industry-specific and operational, plays a decisive role in its competitive advantage.

The research and Development (R&D) department functions as an in-house segment that prioritizes investment of the company into the development of new innovative solutions for viable and agile advancement. Since the company functions as an engineering enterprise, science and knowledge constitute a significant part of the company’s development. In-house research technologies allow Saudi Aramco to “increase the safety, efficiency, and environmental performance” of operations (Technology development, 2021, para. 2). The In-Kingdom Total Value Add (iktva) program was launched inside the company to initiate economic, technological, developmental, and innovative opportunities for the company by means of investing in research and development (Resilience and agility: Saudi Aramco annual report 2020, 2021). Therefore, science and technology help Saudi Aramco build a competitive advantage and ensure its mission completion by creating value in a highly competitive industry.

Business Model

As it has been mentioned previously, Saudi Aramco’s business model is based on two segments, namely upstream with gas and oil exploration and production and downstream with the refinement and delivery of products globally. In such a manner, the company manages to control its supply within the hydrocarbon chain at the upstream level due to the accessibility of gas and oil in the Kingdom. On the other hand, it can also secure crude oil demand within the downstream side of the business by adjusting the products to the market requirements and meeting shareholder needs (Resilience and agility: Saudi Aramco annual report 2020, 2021). Since Saudi Aramco is “one of the world’s largest integrated energy and chemicals companies,” the enterprise strives to compete at both energy and chemical markets (Resilience and agility: Saudi Aramco annual report 2020, 2021, p. 24). Overall, such a business model allows for the company’s successful competitive performance in the industry.

In essence, Saudi Aramco performs in a vastly competitive environment where the ability to innovate and apply sustainability values predetermines long-term success. The enterprise’s largest competitors outside Saudi Arabia include National Oil Companies (NOCs) and International Oil Companies (IOCs) (Resilience and agility: Saudi Aramco annual report 2020, 2021). Indeed, “NOCs and IOCs, many of which have substantial crude oil reserves and financial resources,” are the rivals that impose a global threat to the enterprise (Resilience and agility: Saudi Aramco annual report 2020, 2021, p. 95). In addition, the downstream refineries located in various countries of the world are also subject to competition due to the geographically shaped networks of imports from other international producers. Thus, “if the operating efficiencies and production costs of Aramco’s refineries are not sufficiently competitive in the geographies they serve, Aramco’s business, financial position and results of operations could be materially and adversely impacted” (Resilience and agility: Saudi Aramco annual report 2020, 2021, p. 95). Thus, Saudi Aramco’s business strategy is based on the enhancement of operational efficiency and production costs through innovation and technologies to maintain a competitive advantage.

From the strategic perspective, the decisions of the company are largely determined by the market forces. The global market during 2020 was severely damaged by the pandemic, which put economic constraints on the company (Resilience and agility: Saudi Aramco annual report 2020, 2021). As a result, the prices for oil and gas decreased, adversely influencing the company’s financial and operational performance. As for the domestic market, the energy and fuel demand inside the country has dropped significantly. The strategy employed by the corporation aims to “maintain its position as the world’s largest crude oil producer by production volume and one of the lowest-cost producers, while providing reliable, low carbon intensity crude oil supply to customers” (Resilience and agility: Saudi Aramco annual report 2020, 2021, p. 30). Other strategic goals include diversification, gas activities expansion, global brand recognition expansion, efficiency and price cycle improvement, and operating “sustainably by leveraging technology and innovation” (Resilience and agility: Saudi Aramco annual report 2020, 2021, p. 29). Thus, innovation performance is an integrative part of the company’s strategy.

Innovation Performance

The company invests in the development of sustainability efforts within the climate change initiatives. Innovative solutions in technologies of fuel production, transportation means, and gas and oil drilling methods are presented and implemented by Saudi Aramco (Technology development, 2021). In particular, within the past decade, the enterprise “has used numerous technological advancements “such as machine learning and predictive analytics to grow our production by almost 2 million barrels of oil per day” (Real energy fuels real innovation, 2021, para. 2). Company-based research hubs are launched to find and implement innovative ways of transforming crude oils into chemicals with maximum efficiency and minimal adverse impact on the environment. In addition, digital solutions are applied at the operational and management levels to control and monitor the operations globally. According to Alshathry (2016), after a cyber-attack on the company, it managed to recover through the use of highly technological digital tools and implemented new protection systems that positively impacted the industry as a whole.

Conclusion

In summation, as the overview of the operations of Saudi Aramco has demonstrated, the integration of technology and innovation into the company’s performance plays a pivotal role in gaining a competitive advantage. It helps to create long-term value, develop agility and resilience, as well as sustainable drive production. In particular, since the efficiency of operations and costs of production predetermine the financial performance of an enterprise, it is possible to compete in these areas only with the help of technological advancement and innovation.