Investment shortfall threatens ‘vital’ oil, says Aramco CEO

Investment shortfall threatens ‘vital’ oil, says Aramco CEO
Amin Nasser, chief executive of Saudi Aramco, speaks at the World Petroleum Congress in Istanbul on Monday. (AN photo)
Updated 11 July 2017

Investment shortfall threatens ‘vital’ oil, says Aramco CEO

Investment shortfall threatens ‘vital’ oil, says Aramco CEO

DUBAI: Oil will remain a vital source of energy for the world, but falling investment threatens future supply, according to Amin Nasser, chief executive of Saudi Aramco.
In a keynote address on the opening day of the World Petroleum Congress in Istanbul, Turkey, Nasser said that $1 trillion had been lost in investment because of the downturn in oil prices that began in 2014, and that this shortfall could endanger energy supply while alternative sources are developed.
“Conservative estimates suggest we need about 20 million additional barrels per day over the next five years to counter the effects of growing demand and the natural decline of developed fields,” he said.
He also confirmed that Aramco is to invest $300 billion over the next decade “to reinforce our pre-eminent position in oil, maintain our spare oil production capacity, and pursue a large exploration and production program centered on conventional and unconventional gas resources.”
The volume of conventional oil discovered around the world halved over the past four years, compared to the previous four, Nasser said, “leading to an investment shortfall and the start of a cycle that may inhibit a future energy transition.”
Aramco, which is on track for the biggest flotation of shares in history in late 2018, produced a record 10.5 million barrels of oil per day in 2016, according to its annual review published last week, before a Saudi-led initiative persuaded some members of the Organization of the Petroleum Exporting Countries (OPEC) to limit production because of the falling oil price.
Nasser said that, in addition to supply, Aramco intended to focus on cost structure, portfolio integration and emissions reduction.
“Portfolio integration is also important, as Saudi Aramco emerges as the world’s largest and most integrated energy producer. The company has identified refining and chemicals, among other areas, as key drivers of long-term value and growth,” he said.
He emphasized Aramco’s commitment to the Paris climate agreement, which the US has exited. “We aim to double our natural gas production to 23 billion standard cubic feet per day over the coming decade, and raise the share of gas in the Kingdom’s utilities to about 70 percent, the highest of any G-20 nation,” Nasser said.
“We have collaborated with many oil and gas companies to promote low-emission solutions, to include our commitment to the Oil and Gas Climate Initiative’s $1 billion investment fund to develop and rapidly deploy those technologies,” he added.
Nasser also said that Aramco is prioritizing the direct conversion of oil to petrochemicals as a major part of its long-term strategic focus. The company is also investing in solar energy and it has launched a phased program to build an initial renewable capacity of 9.5 gigawatts (GW) by 2023.
He said, however, that the global oil industry must adopt a future strategy calculated for the energy transformation.
“Industry leaders and policymakers must develop an aligned and compelling narrative to attract the level of investments we need. Part of that effort will be transforming our own business model to ensure that oil and gas are not just proven, reliable energy sources, but are as clean and affordable as possible, without compromising the world’s energy security,” he said.
His comments were echoed by industry analysts. Robin Mills, chief executive of the UAE-based consultancy Qamar Energy, said: “We should see those comments as part of the ongoing debate about peak oil demand, and when will oil demand start falling. Some people don’t believe it will anytime soon.
“Electric cars are such a small part of the market that they do not make much difference to demand. But who knows where they will be in a few years’ time? I think that demand for oil will keep growing and will continue to do so for a long time but at a slower pace.”