Saudi Aramco: Biased ESG Policies Will Undermine Energy Security

Environmental, Social, and Governance (ESG) investment, if outright biased against the oil and gas industry, is a threat to energy affordability and energy security, the chief executive of the world’s largest oil firm, Saudi Aramco, said this weekend.

“As far as the future of capital markets is concerned, ESG is clearly a rising trend. And in my view, an increased emphasis on ESG is a move in the right direction,” the Saudi oil giant’s president and CEO Amin Nasser said at the Saudi Capital Markets Forum 2023 on Sunday.

“However, if ESG-driven policies are implemented with an automatic bias against any and all conventional energy projects, the resulting underinvestment will have serious implications. For the global economy. For energy affordability. And for energy security,” Aramco’s top executive added.

The cost of capital for the oil and gas sector has increased due to higher perceived risks, which in turn are driven by ESG policies, Nasser said. 

The executive stressed once again the underinvestment in oil and gas in recent years, citing figures that upstream investment was some $400 billion last year, less than half of the peak in 2014. 

“The primary reason: pressure from multiple directions to discontinue all new investments in oil and gas. Pressure based on what I strongly believe are flawed assumptions and arguments.”

Nasser criticized the advocates of the energy transition narrative, saying that they are offering unrealistic views on how the global energy systems can be easily upgraded and replace oil and gas.

“Proponents of the popular energy transition narrative paint a picture of a utopian world where alternatives are ready to replace oil and gas almost overnight,” he said.

The energy crisis in Europe has shown that alternative energy supply is “not ready to shoulder the heavy burden of global demand,” Nasser added.

That’s not the first time that Aramco’s top executive has warned that underinvestment in oil and gas was the primary reason for the energy crisis last year.    

The energy crisis, while intensified by the Russian invasion of Ukraine, didn’t start with the war, according to Aramco’s top executive. Years of underinvestment, a lack of a backup plan, and alternatives not ready to step up and replace conventional energy are the real causes of this state of energy insecurity today, Nasser said in September 2022.\

By Tsvetana Paraskova for Oilprice.com

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