The current global energy transition plan is failing to deliver, state-controlled Saudi Aramco's chief executive Amin Nasser said today, urging to utilise conventional hydrocarbons in tandem with developing cleaner and lower carbon resources.
"The current transition is flawed," Nasser said at the Future Investment Initiative (FII) forum in Riyadh, adding that it is "not delivering".
The existing renewable and fossil fuel substitutes are currently unable to fully meet the world's growing energy requirements, he said. "We need to work in parallel until alternatives are ready to shoulder a bigger piece of the growing energy demand in the future," Nasser said, adding that concerns over affordability, availability and energy security are otherwise pushing consumers back to coal.
The Aramco chief also endorsed decarbonising existing resources through carbon capture and sequestration, supporting energy companies as part of the transition solution and accepting the varying ability of countries to adapt to decarbonisation.
"The problem is that we are looking at it as if we are living in a bubble. We are looking at it from a western point of view, and the rest of the world needs to adapt. No, it's not going to work like that," he said. "One-size-fits-all does not work."
Saudi officials have repeatedly championed a dual approach to energy transition that still employs fossil fuels, which would require further investment in global crude oil capacity.
"We're not really investing enough," Nasser restated today, "Today there is a lockdown in China, there is a looming recession, and the aviation industry is still 30pc below pre-Covid[-19] levels. If you add all of these things, and look at the level of investment we are doing today, it's not sufficient to meet the expectation in the mid and long term."
He assessed that current planned global fossil fuel investment stands at around $300bn-400bn, which is not only nominally well down on the $700bn spent in the upstream in 2014, but down by even more in real terms because of strong inflation.
The IEA's net zero emissions 2050 scenario showed in May 2021 that no new oil and gas fields should be approved for development beyond commitments made by 2021, if the world is to achieve net zero CO2 emissions by 2050.
Saudi Arabia itself aims to increase its crude capacity from above 12mn b/d at present to 13.4-13.5mn b/d by 2027, including its portion of the offshore Neutral Zone shared with neighbouring Kuwait.
Aramco is working within the confines of the 'circular carbon economy' (CCE) framework to meet its carbon reduction goals, Nasser said, which includes the development of carbon emission reduction technology and hydrogen development.
The company today announced a $1.5bn sustainability fund looking at global investment in breakthrough energy transition technology. It joins other Aramco funds — of $1bn, 500mn and $200mn — but compares with Aramco's capital expenditure (capex) guidance of $40-50bn this year.
Nasser stressed that purchase markets for blue hydrogen — produced from natural gas through steam methane reforming — have emerged in Japan and South Korea, but that hydrogen costs overall still run near $250-300/bl of oil equivalent (boe).
"It's still picking up in Europe and other parts of the world, but it's going to take time for the market to pick up because everyone is looking at technology and the costs to come down," he said, noting the potential conflict with the producer perspective. "For companies like Aramco, we need an offtake agreement for these projects, because these are costly projects and without an offtake agreement you cannot grow that market big time."
