Switching oil for cleaner fuels will be a “long and complex” transition meaning demand for crude to meet the world’s growing energy needs will remain robust, the chief executive of Saudi Aramco said on Thursday.
According to prepared remarks, Amin Nasser, the head of Saudi Arabia’s state energy giant, said:
It is why I believe ‘peak oil demand’ is not in sight for at least the next few decades, and why the notion of ‘stranded resources’ is not one I recognise.
A rising number of energy market observers have said an end to growth in global consumption of oil could come by 2040 should governments aggressively pursue policies that reduce emissions and favour lower intensity fuels.
But others, including the International Energy Agency and the Saudi government, dispute this claim saying there will be a greater demand for cheap oil from emerging economies even if developed countries push back.
“Despite the progress being made, alternatives still face multiple challenges,” said Mr Nasser, speaking at an energy conference in Paris, the city where in December 2015 190 countries adopted a landmark climate pact. “We should all anticipate a long and complex energy transition.”
As the world’s largest exporter of oil, a resource on which the kingdom’s entire economy rests, Saudi Arabia benefits from greater global dependency on oil. Saudi Arabia is producing just under 10m barrels a day.
Higher crude prices would also generate a greater valuation for Saudi Aramco, the world’s largest oil producing company, in its planned 2018 public offering. Some, however, have said the listing a recognition by the Saudi government to monetise the country’s oil assets before they lose value.
Mr Nasser said 30m b/d of oil production capacity needs to be developed over the next five years to meet oil demand requirements. Long-term investment into oil is lacking, he said.
“Incremental, short-term, and lower capital investment projects are just not going to cut it,” he said, signaling the resurgence of the US shale industry is insufficient to meet future needs.
“This presents a grave and growing threat to world energy security.”
Mr Nasser said despite talk of excess oil supplies today, supply and demand are closer to converging. “The market is moving toward rebalancing,” he said. “I see the oil market pointing upward and expect it to continue improving.”