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Years of underinvestment in oil and gas production is the leading cause of today’s energy crisis, and when the global economy rebounds from the current slowdown, the little spare oil production capacity that’s left will be wiped out, Saudi Aramco’s chief executive Amin Nasser said on Tuesday.
“Many of us have been insisting for years that if investments in oil and gas continued to fall, global supply growth would lag behind demand, impacting markets, the global economy, and people’s lives,” the CEO of the world’s largest oil company and top oil exporter said at the Schlumberger Digital Forum 2022 in Switzerland today.
Investment in oil and gas more than halved between 2014 and 2021, Nasser said, adding that “The increases this year are too little, too late, too short-term.”
Back in 2014, annual investment in oil and gas was $700 billion, which dropped to just over $300 billion last year, Aramco’s top executive said.
“These are the real causes of this state of energy insecurity: under-investment in oil and gas; alternatives not ready; and no back-up plan. But you would not know that from the response so far,” he added, reiterating a long-held view of Saudi Arabia that underinvestment in previous years will come back to bite energy supply.
“Even with strong economic headwinds, global oil demand is still fairly healthy today,” Nasser said.
“But when the global economy recovers, we can expect demand to rebound further, eliminating the little spare oil production capacity out there. And by the time the world wakes up to these blind spots, it may be too late to change course,” he added.
“That is why I am seriously concerned.”
Saudi Aramco called once again for more investment in oil and gas, especially capacity development.
“And at least this crisis has finally convinced people that we need a more credible energy transition plan,” Aramco’s CEO added.
Saudi Arabia has plans to boost its production capacity to 13 million barrels per day (bpd) by 2027, from around 12 million bpd now, but not much further above that. The Kingdom is one of just two major oil producers believed to hold some additional spare capacity now. The other producer is fellow OPEC member the United Arab Emirates (UAE).
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.