MOSCOW (MRC) -- Spare production capacity has shrunk significantly due to underinvestment, the head of Saudi Aramco said Nov. 9, warning that the potential rebound in jet travel and continued power plant demand for liquid fuels could create a worryingly tight market in 2022, reported S&P Global.
"Unfortunately, there is not enough investment in the sector to increase supplies and maintain that spare capacity," Aramco President and CEO Amin Nasser said at the Nikkei Global Management Forum.
He estimated that global oil demand would surpass pre-pandemic levels of some 100 million b/d next year. Jet fuel demand remains about 3 million-4 million b/d below where it was before the pandemic, and a recovery in air travel would quickly consume the world's spare production capacity, he said.
The current high oil prices reflect the healthy economic recovery, as well as energy switching in the power sector from gas to liquid fuels, which could potentially add 1.5 million b/d of oil demand this winter, Nasser said.
Spare capacity can act as the market's buffer against unexpected disruptions to supply, such as hurricanes, political unrest and security incidents.
With many international oil companies seeking to downsize their oil portfolios and some producing countries struggling to revive upstream investment, Saudi Aramco stands to benefit and gain in market share, as it embarks on raising its crude production capacity from 12 million b/d to a world-leading 13 million b/d by 2027. The company is already the world's largest exporter of crude.
The slower pace of the energy transition in many developing countries means oil will remain a major fuel source for several decades, Nasser said.
"Between now until 2050, there are going to be an estimated 2 billion more energy users in the world and population growth would be led by developing countries, where energy transition will be much slower," Nasser said. "Hence, I expect oil and gas demand will be healthy for many decades to come."
Oil and gas would remain Saudi Aramco's key businesses for a long time, though efforts to reduce carbon footprint will be executed with its combination of strategies including carbon capture, gas to hydrogen, liquid to chemical and more, Nasser said. Saudi Aramco recently set a target of bringing its carbon emissions down to net zero from its operations by 2050.
As MRC informed before, in June 2020, Aramco finalized its USD69 billion acquisition of a 70% stake in Saudi Basic Industries Corp., the Middle East's biggest petrochemical maker. SABIC reported more than a fivefold year-on-year increase in its Q3 net profit to USD1.49 billion thanks to higher average sales prices.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national oil and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco's value has been estimated at up to USD10 trillion in the Financial Times, making it the world"s most valuable company. Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels, and largest daily oil production.