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Why Innovation Matters (Especially In Uncertain Times) Innovation can be challenging in times of turmoil, but experience shows that it can improve sustainability, increase safety and unlock stranded assets

By Khalid Al-Qahtani

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This is a time of global uncertainty, with a conflict in Europe, rising costs of living, energy market disruption, and a lingering pandemic dominating the headlines. Yet, climate change and the sustainability imperative remain urgent challenges.

Research has found that an increase in geopolitical risk has a negative impact on private-sector innovation. Companies file fewer patents, and those patents have less value. In March 2022, the US Federal Reserve's Geopolitical Risk Index reached its highest level for two decades, which means the impact on innovation could be significant.

However, the challenges we face today mean that organizations in every sector need to not only sustain innovation through times of uncertainty, but elevate it further. We must go beyond the traditional view of corporate innovation, often focused on saving time and money, and look for ways to create an innovative culture that can tackle issues from sustainability to safety.

Tackling what matters

Climate change is a pressing issue facing the entire world today: no organization should allow itself to be distracted from innovation in this area. Research suggests that around 30% of the required abatement of greenhouse gas emissions will come from technologies that are not yet mature- and another 15% will require technologies that are still under research or development. Carbon capture and storage is one such example, which is why my company, Aramco, plans to become a global leader in this field.

But while new technologies are vital, we can also make progress by finding new ways to apply what we already have. For example, a recent Aramco project converted pumps for transferring diesel fuel to allow them to transfer crude. This gave new life to assets that were no longer used, reflecting our circular economy thinking.

But sustainability is not the only pressing need. In parallel, innovation that improves safety in the oil and gas industry is important. One Aramco project uses machine learning to monitor gas pipelines and predict when hydrates will build up. These are ice-like, solid masses that can slow gas flow or block pipes entirely. A typical facility might experience one or two per year, and they cause lost revenue and, in extreme cases, ruptured pipes.

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Driving increased value

It is understandable that global uncertainty makes organizations more cautious about innovation. But research shows that high-growth companies are aggressive in this. It's how they create value. Indeed, the consultancy BCG, which voted Aramco "Most Innovative Company in the Middle East and Africa 2020," has found that its top 50 most innovative companies outperformed the MSCI World Index by 3 percentage points per year in shareholder return.

Of course, there are plenty of examples of Aramco's innovation projects that have generated revenue or avoided costs, but they often have another objective too. One example concerns gas flaring, which is necessary at certain plants for releasing potentially dangerous pressure build-ups. Aramco has one of the lowest levels of flaring in the industry, but we want to recover that gas, where possible, and reuse it.

We therefore developed a way to use gas "sweetening" as a cost-effective alternative. Sweetening uses high pressure liquid to remove hydrogen sulfide and carbon dioxide from gases so they can be transported. It turns out that it can also be used to recover flare gas— reducing emissions and saving almost US$80 million per plant.

Building an innovation ecosystem

No organization would turn down the opportunity to cut costs, even in a time of uncertainty, but it isn't always easy to predict the results of an innovation project. That is why it is vital to develop an innovation culture, to benefit from ideas as they emerge. It is an approach Aramco has been pursuing for more than 20 years- and in 2021, 77% of staff participated in innovation projects.

It is no coincidence that Aramco was awarded 864 US patents in 2021, the company's highest total in one year and the highest in the oil and gas sector. In total, our Innovation Program saw more than 18,000 ideas implemented, resulting in $650 million in savings last year.

It takes time to build a program like this, but any organization can start to engage their staff in innovation. An innovation culture demands commitment, but once established, the benefits keep flowing. New ideas are always welcome, and in times of uncertainty, they are more vital than ever.

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Khalid Al-Qahtani

Chief Engineer and Corporate Innovation Board Chairman, Aramco

Khalid Y. Al Qahtani serves as the Chief Engineer in Saudi Aramco. He joined the company in 1999, after earning a B.S. degree in Chemical Engineering at King Fahd University of Petroleum & Minerals in 1999.

He later earned a PhD in Chemical Engineering at the University of Waterloo in Canada in 2009. Throughout his career, he covered different leadership roles, in Upstream, Downstream and Technical Services Business Lines. After a decade as an engineer in a variety of functions, he was named the General Supervisor for Upstream Process Engineering, and later in the year joined Petrorabigh JV to lead the Process and Operation Engineering Division. In 2016, Mr. Al Qahtani was named Coordinator for Facilities Planning for Refining and Chemical Facilities, and a year later took on the Coordinator role for Gas Facilities Planning.

In 2018, he became the Manager of Process & Control Systems Department and then moved to lead the Project Management Office before his appointment as the Chief Engineer. He is currently leading different corporate programs and committees, including Board of Engineers, Specialist Development Program, and the Innovation and knowledge Management Boards. Mr. Al Qahtani completed a number of leadership programs including Financial and Risk Management Program and an Executive Program at Wharton School of Business at the University of Pennsylvania

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