Oil industry faces ‘crisis of perception,’ says Saudi Aramco chief

Saudi Aramco CEO Amin Nasser, pictured in this file photo, said the energy sector faces ‘greater reputational challenges’ than any other. Reuters
Updated 26 February 2019

Oil industry faces ‘crisis of perception,’ says Saudi Aramco chief

  • Amin Nasser responds to critics who say industry is on the decline
  • Warns of the consequences if crude supply were to fall substantially

DUBAI: The oil industry faces a “crisis of perception” among its stakeholders that puts at risk its ability to supply energy to billions of customers, according to Amin Nasser, the chief executive of Saudi Aramco.

In a hard-hitting speech at the International Petroleum Week gathering of energy professionals in London on Tuesday, Nasser responded to critics who say that the oil industry is on the decline, and that petrol-burning motor cars will soon be replaced by electric vehicles.

“There 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 said, in a transcript of the speech released in advance. 

Nasser cited a recent survey that revealed that the energy sector faces “greater reputational challenges” than any other.

He told of two encounters at the World Economic Forum annual meeting in Davos last month where senior figures in the financial industry had attacked the oil industry.

“One senior financial figure I spoke to confidently predicted the end of our industry in about five years. Another was slightly less pessimistic — but he speculated that most vehicles on the road would be electric in five to 10 years, when today they account for less than half a percent,” Nasser said.

“In other words, important stakeholders believe that the entire world will soon run on anything … but oil! These views are not based on logic and facts, and are formed mostly in response to pressure and hype … My encounters in Davos showed me that fewer and fewer of our stakeholders accept logic and facts, least of all from us,” he said.

But these critical views were “sincerely held,” he said, showing that stakeholders were “clearly tuning out.”

Nasser highlighted statistics showing that passenger vehicles only account for 20 percent of the world’s oil demand, and that there were as yet no alternative sources of fuel for aircraft, ships, trucks, as well as the petrochemical and lubricants industries, where demand for oil is expected to rise substantially.

He also pointed to the “intermittent nature” of renewable sources, and the disruption to infrastructure that would be needed, especially in under-developed countries, for a switch to renewable energy sources.

“And people gloss over the reality that today, in many countries, more electric vehicles means more coal-powered vehicles. In fact, in some of the world’s most populated countries, up to three-quarters of electricity is generated by coal,” he told the audience.

The speech came a day after US President Donald Trump had complained about the price of crude oil, blaming the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is a leading member.

But Nasser warned of the consequences if crude supply were to fall substantially. “Only recently, we saw what a supply deficit of a couple of million barrels per day can do to the oil market. Imagine what 20 million barrels fewer per day would do — which would be the shortfall in five years if investments stopped today.

“And the impact would be even more profound for economies, societies, and people if demand continues to grow over the next five years, as we expect. Ironically, higher oil prices would cause much less pain to us than most,” he added.

Nasser outlined five areas where the oil industry required “urgent, collective effort” to counter the perceptions crisis.

These include showing that the industry understands the concerns and is willing to act on them, for example in the development of cleaner fuels; demonstrating that Big Oil is tackling environmental, social and governance issues; emphasizing the technological advances the industry drives, especially in energy efficiency; pushing back on the criticisms that oil is a bad financial investment and that demand for it will soon peak; and by highlighting the “inspirational” aspects of the industry, like its ability to improve living standards.

“Our industry has made a pivotal and sustained contribution to the global economy and people’s lives, around the world, day after day for over a century. Two billion more people today have access to ample, affordable, and reliable sources of energy than even just a generation ago,” he said. 

Saudi energy giant to invest $3bn in Bangladesh’s power sector

Updated 22 October 2019

Saudi energy giant to invest $3bn in Bangladesh’s power sector

  • Experts say deal will usher in more economic and development opportunities for the country

DHAKA: Saudi Arabia’s energy giant, ACWA power, will set up an LNG-based 3,600 MW plant in Bangladesh after an agreement was signed in Dhaka on Thursday.

The MoU was signed by ACWA Chairman Mohammed Abunayyan and officials from the Bangladesh Power Development Board (BPDB), officials told Arab News on Monday.

According to the agreement, ACWA will invest $3 billion in Bangladesh’s energy development sector, of which $2.5 billion will be used to build the power plant while the rest will be spent on an LNG terminal to facilitate fuel supply to the plant. Under the deal, ACWA will also set up a 2 MW solar power plant.

In recent months, both countries have engaged in a series of discussions for investment opportunities in Bangladesh’s industry and energy sectors. 

During the Saudi-Bangladesh investment cooperation meeting in March this year, Dhaka proposed a $35 billion investment plan to a high-powered Saudi delegation led by Majed bin Abdullah Al-Qasabi, the Saudi commerce and investment minister, and Mohammed bin Mezyed Al-Tuwaijri, the Saudi economy and planning minister.

However, officials in Dhaka said that this was the first investment deal to be signed between the two countries.

“We have just inked the MoU for building the LNG-based power plant. Now, ACWA will conduct a feasibility study regarding the location of the plant, which is expected to be completed in the next six months,” Khaled Mahmood, chairman of BPDB, told Arab News.

He added that there are several locations in Moheshkhali, Chottogram and the Mongla port area for the proposed power plant.

“We need to find a suitable location where the drift of the river will be suitable for establishing the LNG plant and we need to also consider the suitability of establishing the transmission lines,” Mahmood said.

“It will be either a JV (Joint Venture) or an IPP (Independent Power Producer) mode of investment, which is yet to be determined. But, we are expecting that in next year the investment will start coming here,” Mahmood said.

BPDB expects to complete the set-up process of the power plant within 36 to 42 months.

“We are in close contact with ACWA and focusing on the successful completion of the project within the shortest possible time,” he said.

Abunayyan said that he was optimistic about the new investment deal.

“Bangladesh has been a model for the Muslim world in economic progress. This is our beginning, and our journey and our relationship will last for a long time,” Abunayyan told a gathering after the MoU signing ceremony.

Economists and experts in Bangladesh also welcomed the ACWA investment in the energy development sector.

“This sort of huge and long-term capital investment will create a lot of employment opportunities. On the other hand, it will facilitate other trade negotiations with the Middle Eastern countries, too,” Dr. Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told Arab News.

She added that Bangladesh needs to weigh the pros and cons before finalizing such contracts so that the country can earn the “maximum benefits” from the investment.

“It will also expedite other big investments in Bangladesh from different countries,” she said.

Another energy economist, Dr. Asadujjaman, said that Bangladesh needs to exercise caution while conducting the feasibility study for such a huge investment.

“We need to address the environmental aspects, opportunity costs and other economic perspectives while working with this type of big investment. Considering the present situation, the country also needs to focus on producing more solar energy,” Dr. Asadujjaman told Arab News.