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At CERAWeek, Saudi Aramco CEO says energy transition is 'visibly failing'

by SuperiorInvest

To some, it was as if the oil executive had blurted out the quiet part.

“We should abandon the fantasy of phasing out oil and gas,” said Amin Nasser, head of by far the world's largest oil producer, Saudi Aramco.

The energy transition was “visibly failing”, he added, and said predictions about an imminent peak in oil and gas demand were flatly wrong. The room, filled with fossil fuel industry representatives at a conference in Houston, greeted the statement with applause.

Nasser's comments spoke to sharply divergent views on the role fossil fuels will play in the global economy over the coming decades. The burning of fossil fuels is the main driver of climate change.

The oil industry maintains that its products, specifically oil and natural gas, will play a dominant role in the coming decades. And with that in mind they are investing in new developments, particularly in gas.

On the other hand, the International Energy Agency, considered a leading authority on that issue, projects that oil and gas demand will peak in 2030 as sales of renewable energy and electric vehicles grow exponentially, driven by incentives and subsidies. Just a few months ago, at the largest annual climate summit, negotiators from nearly every nation in the world agreed to transition “away from fossil fuels.”

In an interview with the Times last year, Fatih Birol, executive director of the IEA, said he thought people like Nasser were not seeing the full picture. “I have a gentle suggestion for oil executives, they only talk to each other,” he said. “They should talk to the automakers, to the heat pump industry, to the renewable energy industry, to investors, and see what they think the future of energy will be like.”

However, Nasser, in his speech in Texas this week, suggested that the IEA was the one that misread the markets by focusing too much on rich countries and ignoring the huge increase in energy demand expected in countries in Asia and Africa that are just beginning to grow. industrialize.

His response was, essentially, to ask if the IEA thought oil and gas companies were wasting their money by collectively investing trillions of dollars in increasing exploration, drilling and infrastructure. “Peak oil and gas is unlikely to arrive anytime soon, let alone 2030,” Nasser said, speaking at the CERAWeek by S&P Global conference. “It seems like no one is going all-in on it.”

While speaking less directly at the conference, the CEOs of Shell, Exxon Mobil and Brazil's state oil company, Petrobras, echoed Nasser's points. In an interview with the Times earlier this month, Petrobras CEO Jean Paul Prates said he saw an increase in Brazil's oil production in the coming decades.

Shell CEO Wael Sawan said his predictions depended on rapid growth in Asian markets. That same analysis supports projections made last year by OPEC, the global oil cartel, that oil demand would not peak until 2045 at the earliest.

The White House sides with the IEA

“The head of Saudi Aramco said he thought the demand estimates from the IEA and others were wrong,” John Podesta, President Biden's senior adviser for international climate policy, told reporters Tuesday. “We don't believe it. “We believe there is a great demand for electrification.”

Even as electrification takes off in some sectors of the U.S. economy, U.S. exports of crude oil and liquefied natural gas hit record levels in 2023. Wind and solar power currently supply less than 4 percent of the world's energy. An even smaller percentage of vehicles produced are partially or fully electric.

Natural gas in particular has seen immense growth and is being incorporated more widely than ever into the global energy trade. Fracking techniques have paved the way for the United States to become the world leader in gas production.

Traditional oil producers in the Persian Gulf – including Saudi Aramco – are also making large-scale forays into gas production, none more so than Qatar's national oil and gas company, QatarEnergy. Their plans would allow them to surpass the United States in production shortly after 2030. At a recent press conference, QatarEnergy CEO Saad al-Kaabi told reporters that “we still think there is a great future for gas during at least 50 more years. “

Even if oil demand begins to stagnate, companies will still need to make investments to avoid a decline in existing oil fields, said Patrick Pouyanné, CEO of TotalEnergies.

Without those investments, he argued, the energy markets that determine the prices people pay for all kinds of basic needs would begin to fluctuate wildly. Like other oil executives, he didn't see renewable energy and transportation electrification growing fast enough to replace existing demand for fossil fuels, much less in countries with rapidly growing populations and fuel-dependent industries. fossils.

“The natural decline of oil fields is about 4 percent annually, so we will need to continue investing in oil and gas fields” to maintain current production levels, he said. “Otherwise the price will go up and people will get very angry.”

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