US backs Opec calls for more oil, gas investment

The US' top energy envoy Amos Hochstein today supported calls for investment in oil and gas to increase globally alongside spending on the transition to a lower-carbon energy system.

"We hope this happens around the world," Hochstein told the Adipec conference in Abu Dhabi. "Increased investment in production, investment in refining capacity and… at the same time additional investment in the [energy] transition."

After weeks of tense exchanges between the US and Opec linchpin Saudi Arabia over the wider Opec+ group's decision to lower crude output quotas, Hochstein's comments put Washington on the same page as Opec, which has long called for increased oil and gas investment. UAE energy minister Suhail al-Mazrouei told the Adipec conference today higher oil and gas spending will help the world navigate the energy transition and reduce the risk of today's supply crunch being experienced in the future.

Al-Mazrouei was at pains to stress that increased oil and gas spending is not just an issue for Opec+ producers. "We in the UAE, as well as our fellow producers in Opec+, are keen on supplying the world with the [oil] requirements it needs. But, at the same time, we are not the only producers," he said. "Others also need to do their part in investing and encouraging investments."

Opec+ — which groups Opec countries with 10 non-Opec producers led by Russia — is doing its part when it comes to investing in hydrocarbons, al-Mazrouei said. Saudi Arabia and the UAE, in particular, are pursuing aggressive upstream expansions that should deliver close to 2mn b/d of additional crude capacity before the end of the decade.

Prior to Russia's invasion of Ukraine, many governments in Europe and the US were pushing for a more urgent commitment to move away from fossil fuels. But Hochstein today insisted that energy investment is needed across the board. Spending on fossil fuels and cleaner energies is "not contradictory", he said. "They are just two different timelines," he said. "It may be that our climate goals are met by 2035 or 2050. But to get to those goals, we had to invest yesterday."

The Opec+ group's decision earlier this month to lower its collective crude output target by 2mn b/d from November was met with heavy criticism from Washington, with US president Joe Biden describing the cut as short-sighted at a time when consumers are struggling with high energy prices.

"The price of energy is a critical piece for global economic growth, because so much of what we do is dependent on that," Hochstein said today, adding that a prolonged period of higher oil prices could hamper economic growth prospects. "Energy has to be priced in a way that allows for economic growth," he said. "If not, they will accelerate the economic downturn, which ultimately is the one thing that will be terrible for energy demand itself."

By Nader Itayim and Bachar Halabi