“I am not losing any sleep over ‘peak oil demand’ or ‘stranded resources’,” Amin Nasser, the chief executive of Saudi Arabia’s oil giant Saudi Aramco, said in a speech in March last year, arguing that the energy transition is much more complex than simply replacing oil with renewables and electric vehicles (EVs).
A year later, in a rare strongly worded speech at the International Petroleum Week in London this week, Nasser rebuked all those who predict the demise of the oil industry in the near future, saying that views that the world will soon run on anything but oil “are not based on logic and facts, and are formed mostly in response to pressure and hype.”
While most forecasts see peak oil demand at some point in the 2030s, the oil industry still sees itself as being relevant for decades to come, because the world will still need a lot of oil, because huge investments in new production will be needed just to replenish maturing oil fields, and because the road transportation sector is not the primary source of demand for oil.
Even the biggest oil companies recognize that renewables have a bright future in the world’s energy system. In its annual BP Energy Outlook earlier this month, BP said that renewable energy would be the fastest-growing source of energy, penetrating the energy system “more quickly than any fuel in history” to become the largest source of power by 2040.
Despite the forecast that peak oil demand could come in the 2030s, BP noted that under all scenarios oil will continue to play a significant role in the global energy system by 2040. Moreover, “significant levels of investment are required for there to be sufficient supplies of oil to meet demand in 2040,” BP said, adding that “In all scenarios, trillions of dollars of investment in oil is needed.”
Over the past few years, Saudi Aramco’s Nasser has been one of the oil industry’s most vocal defenders of the role that oil will continue to play in powering and developing the world.
Global oil demand will keep rising at least through 2040, and Saudi Arabia sees itself as the oil producer best equipped to continue meeting that demand thanks to its very low production costs, Nasser said earlier this year.
At this week’s event in London, Aramco’s CEO didn’t beat around the bush—he said that meetings at the Davos forum last month “showed me that fewer and fewer of our stakeholders accept logic and facts, least of all from us.”
“[T]here is a worrying and growing belief among policy makers and regulators, investment houses, NGOs, and many others that we are an industry with little or no future,” he noted.
Aramco’s CEO described the current views about the oil industry as “a crisis of perception” with multiple stakeholders.
“And because it threatens our industry’s very relevance, it puts our ability to supply ample, reliable, and affordable energy to billions around the world at risk, which in turn risks their energy security,” Nasser said. Related: Why Oil Tanker Rates Just Doubled
“We need to help our stakeholders realize that all energy sources will be required for decades to come, and that a long-term investment in our industry is both wise and profitable to deliver on that demand growth,” he noted.
Views that oil will soon not be a relevant energy source make the oil industry’s stakeholders “tune out,” Nasser said.
“They are not hearing us when we say that passenger vehicles are only 20% of the world’s oil demand. Or that the remaining 80% is used by sectors like planes, ships, trucks, petrochemicals, and lubes for which there is no alternative yet and where demand for oil is expected to increase substantially,” he added.
Aramco’s CEO pointed to the intermittency of renewables, the huge investments needed in infrastructure to help EV penetration, and that “people gloss over the reality that today, in many countries, more electric vehicles means more coal-powered vehicles,” because “in some of the world’s most populated countries, up to three-quarters of electricity is generated by coal!”
Fact and logic are now more important than ever when it comes to attracting investment, Nasser said.
And he noted: “We should remind stakeholders that oil and gas is responsible for much of today’s economic growth, and indeed future growth. We should also remind them that, despite being a much smaller proportion of the S&P500, energy pays twice the dividends of tech. And we must push back on exaggerated theories like peak oil demand.”
By Tsvetana Paraskova for Oilprice.com
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