MGT 540: Strategic Entrepreneurship- Final Project

MGT 540: Strategic Entrepreneurship- Final Project

Selected Title: Aging Workforce at Saudi Aramco. To Develop Solutions in Organisation Business Model for Resolving the Problem

Group Members:

Date of Submission: 26th July 2022

Executive Summary

In this project, the aging workforce which is a major problem currently affecting Saudi Aramco organisation has been considered for evaluation. This is with appropriate recommendations being generated for resolving the problem. The current business model is anchored on operations pursued to extract, drain and filter fossil fuels both onshore and offshore in crude oils and natural gases. To achieve this, part of the core resources in their business model is the application of highly qualified human resources. Hence, the organisation is prompted buy the need for coming up with sustainable approaches for harnessing labour force inclusion particularly the mature-age employees. Globally, owing to the organisation success, it is ranked as the best organisation leading in oil and gas industry with an enormous investment in the oil and gas production in the form of crude oil and also natural gas liquids.

In this project, by using primary and secondary research approaches, stratregies which represent sustainable solutions has been recommended. The primary data has adopted the use of interviews for collection of data. This is with secondary research approach used in sourcing essential data for the sake of ghaining information from documentation and sources on trends of workfoce in Saudi Aramco and their operations. These are essential to minimise the implication of the challenges encountered by Saudi Aramco and making sure their business model is appropriate by leveraging on the experience offered by the elderly workforce. Current business model by the organisation is influenced by the motivation and remuneratiuon approaches which is evieenced in ARAMCO operations in this project. At the end, a set of recommendations have been generated for Saudi Aramco management of their current gaining workforce. These include consultancy services from the aged retired employees. Flexible working hours, recruitment and attractive incentives approaches for both workforce and young employees.

Table of Contents

1.0 Introduction. 3

1.1 Oil Industry and Aging Workforce. 3

1.2 Saudi Aramco Organisation Background. 3

1.2.1 Main Figures of Saudi Aramco. 3

1.2.2 Human Resources Demand in Saudi Aramco. 5

1.2.3 Research Scope. 6

2.0 Evidence-Based Data Collection (Secondary and Primary Data) Processes followed. 7

2.1 Research Design (Primary and Secondary Data) 7

2.2 Research Strategy. 8

2.3 Data Collection and Sampling. 8

2.4 Method used in Data Analysis. 8

3.0 Literature Review.. 8

3.1 Background of the Aging workforce. 8

3.2 Implication of the Aging Workforce. 9

4.0 Findings in the Project Research. 10

5.0 Data Analysis. 11

5.1 Current Saudi Aramco Business Model 11

6.0 Conclusions, Recommendations and Strategy Implementation. 16

6.1 Conclusions 16

6.2 Recommendations. 16

6.1 Implementing the Strategy. 16

References. 18

1.0 Introduction

In the highly competitive business environment, leveraging on highly skilled employees is essential for organisations success. This is affirmed in Collins (2021) by leveraging on resource-based view model noted that HR managers assist in building a solid competitive advantage by embrace on personnel management policies. Despite of the existence of multiple factors impacting on the human resources issues which include less graduates in area of geology and petroleum engineering and immense retirement level of aging workforce, in this project, the aging workforce issue is used. In this project, it focuses on evaluating the retirement scope as a result of aging workforce from the factor analysis through a target of the Saudi Aramco which is a public sector organisation in Saudi Arabia (KSA).

1.1 Oil Industry and Aging Workforce

In different reports, the issue of labour force has remain a major issue in the current oil and gas industry globally. To affirm this, (2022) report noted that in 2020/2021, there had a slashing of the overall workforce with 20%. This is with majority of the employees being unwilling to return back to their job positions. Further, to complex the issue, Reuters (2021) noted that 43% of the employees are interested with leaving the energy sector altogether in the period of 5 years. In the modern global business environment characterised with demand for innovativeness, immense competitiveness and consumer-driven economy, having highly experienced human capital ought to be prioritised.

Considering the regional context in Middle East where Saudi Aramco is located, the main challenge relate to having aging workforce as an acute phenomenon. For instance, in Bahrain, Nakibullah (2018) report note that the oil and gas industry contributing to 13% of country GDP with an interest of increased oil and gas production with upto 70,0000 barrels daily in future. Nevertheless, owing to the challenge of aging workforce, the country has been fearing on their sustainability since their employees average at 50 years old. Overall, in Middle East region, there has been recorded an all time high labour shortage currently standing at 40% specifically those working as petroleum engineers and the geologists. Additionally, in United Arab Emirates (UAE) which is similarly a Middle East country, Deloitte (2020) report found out that approximately 50% of the industry employees are expected to retire in coming 5 to 7 years.

1.2 Saudi Aramco Organisation Background

1.2.1 Main Figures of Saudi Aramco

Saudi Aramco is a Saudi Arabia based organisation operating in the oil and gas industry (Saudi Aramco, 2022). Since 1938, the orgaisation has actively been involved in onshore and offshore processing of oil and gas. The organisation is public owned and by 2019 prior the emergence of COVID-19 pandemic, their IPO had raised approximately $30 billion. In this regard, the organisation in 2020 was positioned as the largest in terms of revenues accrued and the largest integrated energy and chemicals organisation. Further, in Washington Post (2022) report, Saudi Aramco is noted to be directly controlling upwards of 300 billion barrels of oil and gas. Also, Ahmed et al. (2018) noted that the strategic location of Saudi Aramco as opposed to the rest of oil and gas organisations globally. A summary of the key figures of Saudi Aramco is as illustrated in table 1;

Table 1: Saudi Aramco Main figures

FactorsExplanationKey Figures
Oil Reserves and Production LevelsCrude oil recovered & Condensated reserves (Barrels)260 billion
Crude oil production (daily)9 million barrels
Gas production level (every year)3.3 billion barrels
Gas reserves and production levelGas reserves270 trillion cubic feet
Production of gases (daily average)9 billion cubic feet
Production of gas (annually)4 trillion cubic feet
Natural gas liquidProduction of the NGL daily2 million barrels
Annual production of the NGL403 million barrels
Discovery/inventionOverall number of oil fieldsArabiyah, Rabib and Niyashin
Total gas fields12
Wells of exploringExploring different oil reserves15
Gas exploring process400
Developing oils80
Developing gases120
WorkoversOil workovers20
Gas workovers132
Water workovers70

 Today, comparing Saudi Arabia and other countries, the capacity of Saudi Aramco in oil and gas production is evidenced from its competitiveness as opposed to their competitors (see figure 2);

List of countries by oil production - Wikipedia

Figure 2: Top oil production nations in world

Today, Saudi Aramco employees workforce of upwards of 70,000 where 70% of the employees are Saudi citizens with 30% being expatriates. They operate from their Dahram Saudi Arabia with their operations being located both in Saudi Arabia, Middle East and internationally. As a result, their distributiuon networks are appropriately and effectively reached out in the entire Arabia region. A summary of the organisation performance is as shown in table 2;

Table 2: Saudi Aramco Organisation Performance

Key FiguresValues
Net income$39.5 billion (Q1 2021: $21.7 billion)
Cash flow from operating activities$38.2 billion (Q1 2021: $26.5 billion)
Q4 2021 dividend$18.8 billion paid in the first quarter
Profit increase82% year-on-year (YoY)
Saudi Aramco position globally5th Largest Public Company Globally

Internationally, Saudi Aramco possess immense joint ventures in refinery and marketing in various nations and continents which include USA, China, Phillipines, Korean republic, Europeans, North America and Far East (PARK, 2020). To ship oil for entire clients, Saudi Aramco is normally found operating fleet of superm takers. This is with their latest agreement being with a Dutch organisation to explore, refine and product natural gas which cover upwards of 300,000 square kilomerts costing approximately $4 billion in overall costs.

1.2.2 Human Resources Demand in Saudi Aramco

As aforestated, Saudi Aramco is an international oil and gas organisation integrated holistically. The organisation is mandated with the need to explore, produce, refine, allocate, transport and marketing of the oil and gas products. For achieving the immense issues linked with broad forms of operations where the organisation operate, a substantial investment in human capital particularly in their upstream is essential. This is to drill and refine oil and gas as part of their active operations. Nevertheless, as earlier aforestated, engineering and geologists departments in the organisation operations has been in a decline and also significantly aging. Considering the more than 700,000 employees in Saudi Aramco, the classification of their age is as illustrated in figure 3;

Figure 3: Saudi Aramco Employees Age Classification

1.2.3 Research Scope

The purpose of this assessment was to identify a problem, evaluate it and later provide appropriate insights in form of recommendations for managing the problem. This is since 22% of the 70,000 employees are aged more than 50 years. Despite of the fact that the noted problem being an international phenomenon and unspecific to Saudi Aramco, it is significantly instrumental for the organisation survival in the current highly competitive business environment and particularly after the emergence of COVID-19 pandemic. Hence, it is appropriate to put into account of the problem as having a significant implication to the  aging workforce problem.

The timeline which would be followed is as illustrated in table 3;

Table 3: Project Timeline…

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