MOSCOW (MRC) -- The world is facing a major oil supply crunch as most companies are afraid to invest in the sector as they face green energy pressures, the head of Saudi Aramco told Reuters, adding it cannot expand production capacity any faster than promised, said Reuters.
Amin Nasser, head of the world's largest oil producer, said on Monday he was sticking to the target of expanding capacity to 13 MM barrels per day from the current 12 MM by 2027, despite calls to do it faster. "The world is running with less than 2% of spare capacity. Before COVID the aviation industry was consuming 2.5 MM bpd more than today. If the aviation industry picks up speed, you are going to have a major problem," Nasser told Reuters on the sidelines of the World Economic Forum in Davos.
"What happened in Russia-Ukraine masked what would have happened. We were going through an energy crisis because of a lack of investment. And it started to bite following the pandemic," he added. Nasser said COVID restrictions in China would not last long and global oil demand would therefore resume its growth.
Saudi Arabia is currently producing 10.5 MM bpd, or every tenth barrel in the world, and will likely raise output to 11 MM bpd later this year when a broader pact between OPEC and allies such as Russia expires. Riyadh has faced calls from the West to raise output more quickly and expand capacity faster to help combat the energy crisis.
"If we could do it (expand capacity) before 2027 we would have done it. This is what we tell policymakers. It takes time". Nasser also said dialogue between the oil industry and policymakers over the transition from fossil fuels to energy which does not result in carbon emissions has been problematic.
"I don't think there is a lot of constructive dialogue going on. In certain areas we are not brought to the table. We were not invited to COP in Glasgow," he said referring the last year's U.N. climate conference in Glasgow, Scotland.He also said last year's message from the International Energy Agency that world oil demand was set to fall and no new investment in fossil fuel was needed had a profound impact. "We need a more constructive dialogue. They say we don't need you by 2030, so why would you go and build a project that takes 6-7 years. Your shareholder will not allow you to do it".
The energy transition process was therefore often proving chaotic and disruptive, he said. "There is no good plan... When you don't have plan B ready, don't demonise plan A," he said. "The pressure and the rhetoric is -- don't invest, you will have stranded assets. It makes difficult for CEOs to make investments." So-called stranded asset theory is the notion that significant oil and gas reserves are left unused because they are longer required.
Nasser said missteps during the global energy transition would only encourage greater use of coal by many Asian countries. "For policymakers in those countries the priority is to put food on the table for their people. If coal can do it half the price they will do it with coal". He said Aramco, where Saudi Arabia is the main shareholder, was different as it was investing in both fossil fuel and energy transition.
As per MRC, Saudi Aramco posted a record first-quarter net profit of riyal (SR) 148bn (USD39.5bn), up by about 82% year on year, thanks for strong crude oil prices and sales volumes, as well as improved downstream margins.
The energy giant’s total hydrocarbon production in the first three months of the year stood at 13m boe/day (barrels of oil equivalent per day), Saudi Aramco said in a statement on 15 May. Capital expenditure in January-March 2022 was USD7.6bn, it said.
As per MRC, Aramco is exploring further collaboration with Thailand’s national oil company PTT, as it expands its downstream presence in Asia. The two companies signed a memorandum of understanding at a ceremony in Bangkok on May 11. The companies aim to strengthen cooperation across crude oil sourcing and the marketing of refining and petrochemical products and LNG. Other potential areas of activity include blue and green hydrogen and various clean energy initiatives.
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.