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Highlights

Blames oil, gas 'shaming', transition 'sandcastles' for energy crisis

Reiterates concern over lack of global upstream investment

Capping energy bills, taxes only short-term solutions: CEO

An end to Russia's war in Ukraine would do little to reverse rising energy costs, Saudi Aramco's CEO said Sept. 20, pointing the "shaming" of investment in the oil and gas sector and poorly thought out energy transition policies as the root causes of the current global energy crisis being felt most acutely in Europe.

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Global oil and gas investments slumped by more than half between 2014 and 2021, from $700 billion to a little over $300 billion, Amin Nasser told a conference in Switzerland, adding that a recent uptick in spending this year is "too little, too late."

"Because when you shame oil and gas investors, dismantle oil- and coal-fired power plants, fail to diversify energy supplies (especially gas), oppose LNG receiving terminals, and reject nuclear power, your transition plan had better be right," Nasser said. "Instead, as this crisis has shown, the plan was just a chain of sandcastles that waves of reality have washed away and billions around the world now face the energy access and cost of living consequences that are likely to be severe and prolonged."

Saudi Arabia's state oil giant Aramco has been flagging the potential for higher oil prices due to falling oil and gas sector spending for years.

But Nasser's warnings are some of the strongest yet over a lack of global oil supply capacity due to a pull-back in upstream investment as government and policymakers roll out energy transition plans to slash carbon emissions. In December 2021, Nasser warned the world was facing more "chaotic, highly unrealistic scenarios about the energy transition that are clouding the future," and said alternative, renewable and low carbon energies are "nowhere near ready" to replace oil and gas.

Physical Brent crude prices remain over $90/b after surging to almost $140/b in March amid fears of supply shortages in the wake of Russia's of invasion of Ukraine on Feb 24. Before the war, Russia was supplying about 30% of Europe's oil and about 40% of its gas.

Platts, part of S&P Global Commodity Insights, assessed the Dated Brent benchmark at $91.02/b on Sept. 16, about 15% higher year on year.

Global supply

Following the invasion of Ukraine, Russian gas flows to Europe have dwindled and the country's oil exports have come under Western sanctions.

The resulting price swing has focused attention on Middle East producers such as Saudi Arabia and the UAE, which hold nearly all of the world's remaining spare capacity.

Saudi Aramco, which produces and sells oil on behalf of the Saudi state, is currently working to raise its production capacity to 13 million b/d by 2027.

The company, the world's largest exporter of crude, is expected to bring in capacity additions in increments, raising its sustainable capacity to 12.3 million b/d by 2025.

The company's current production capacity is around 12 million b/d, but S&P Global estimates it closer to 11.5 million b/d.

"These are the real causes of this state of energy insecurity: under-investment in oil and gas; alternatives not ready; and no back-up plan," Nasser told the conference. "But you would not know that from the response so far."

Nasser also cautioned against buyers placing high expectations on producers to accelerate investments in conventional oil and gas to yield short-term results.

"Diverting attention from the real causes by questioning our industry's morality does nothing to solve the problem," he said.

He highlighted pressing concerns such as a lack of investment in low-carbon intensive gas, contingency planning and an increase in coal consumption as Europe looks to the dirty fuel to plug shortfalls in Russian gas supply.

"Meanwhile, oil inventories are low, and effective global spare capacity is now about one and a half percent of global demand," Nasser said.