LONDON - Hundreds of fossil fuel protestors—reportedly joined by activist Greta Thunberg —banged drums and chanted at executives at an energy conference at the InterContinental London Park Lane hotel. Inside, Aramco president and CEO Amin Nasser campaigned for a more realistic energy transition.
Unlike the more subdued protests at last year’s Energy Intelligence Forum here, activists on Oct. 17 prevented some speakers, including Shell CEO Wael Sawan, from entering the venue. At one point, conference organizers urged attendees to remain seated if the building was infiltrated.
R. Blair Thomas, chairman and CEO of EIG, said Thunberg had yelled at him.
On stage early Oct. 17 at the conference, aptly titled Energy in a Divided World, Nasser appeared nonplussed by the raucous display outside. He fielded questions on OPEC and Saudi Arabia’s production cuts; expressed hopes for an inclusive COP28 in the United Arab Emirates (UAE); and rebutted assertions by the International Energy Agency (IEA) that further upstream investments are unneeded.
Repeatedly, Nasser returned to the need for upstream investment, saying that energy transition advocates who are bent on defunding oil and gas production risk creating an energy affordability crisis that will lead to increased coal consumption.
Thomas echoed the sentiment later in the day, saying that upstream energy was “starved” of capital.
Nasser said Aramco is working on clean energy projects as part of the energy transition, including renewables and hydrogen. However, despite global renewable investments the IEA projected would reach $1.38 trillion last year, Nasser noted that from 2010 to 2023, oil demand grew by 17%, gas by 22% and coal by 13%.
“These are realities. This is what we have today,” he said.
He said that while the IEA has said it sees no need for new greenfield upstream investments, the same agency is projecting demand of 103 MMbbl/d in the second half of the year and even higher demand in 2024.
“We don't think or believe that the renewables [are] yet ready to shoulder the heavy burden of the global demand that we are seeing right now,” he said. “And all you have to look is to see what is happening on the second half of this year where the demand is 103 million barrels on our industry to deliver.”
The uptick in projected oil demand comes even as China shows signs of economic headwinds and the aviation industry still at 90% to 95% of its pre-COVID-19 levels, he said.
“So we have huge investment to grow our oil business to meet the decline rates and expand our capacity further, and also grow our gas to eliminate liquids burning in the kingdom and avail more blue hydrogens to the market.”
Nasser said continued investment is needed just to keep pace with annual oil volumes decline, which average 5% to 7% per year.
“So in a hundred-million-barrel system, you’re talking about five to seven million barrels just to meet your current production,” he said. “You need also to invest to bring additional capacity … You need to bring additional increments, you need fresh increments of oil production to come. That is just to manage the current decline.”
As a result, Aramco is investing in oil projects even as it plows money into renewables and hydrogen.
With about 75% of the company’s production going to Asia, he also noted stark differences between the “global south” and its energy transition priorities. The average per capital income in the global south is $7,000 compared, in the northern hemisphere, to $50,000 to $55,000.
The south, with different aspirations, must be treated differently, he said. Touching on the trilemma theme from 2022’s forum, Nasser said without accommodating the needs of affordability and security for countries in the southern hemisphere, “you cannot achieve sustainability.”
“So that's why we are seeing more coal, the highest coal right now in terms of demand, 8.3 billion tons,” he said.
Investment is still needed, he said—particularly as the energy transition’s most vocal voices seem to lack that global perspective.
“We need to do things in parallel, invest in conventional energy while decarbonizing conventional energy by building carbon capture and storage and making it more efficient,” Nasser said. “We need to build the new [energy system], which is solar, wind, hydrogen and other alternatives. That is a must.
“But they need to go in parallel and we need to adjust the mix as we go forward, modernizing our conventional energy as we build more of the new.”
Failing to do so and asking producers to slow or shut down their current capacity expansions to meet decline rates would create an affordability issue.
“And you will see more coal production and people will utilize, especially in the global south, whatever meets their needs,” he said. “So we will be seeing … multi-speed [energy transition] … depending on the economic maturity of different countries around the world.”
Aramco’s production cut rationale
At a recent energy conference, an India energy minister warned that oil prices of more than $80/bbl would cause demand destruction, an Energy Intelligence moderator noted in her conversation with Nasser.
The comment came in the wake of OPEC’s decision to lower production and voluntary cuts of 1 MMbbl/d by Saudi Arabia through its national oil company, Aramco—the third-largest company in the world by market capitalization.
Nasser said Aramco was meeting its contractual obligations while implementing cuts for multiple strategic reasons.
Saudi Arabia is currently producing about 9 MMbbl/d. Nasser said the company’s current capacity is 12 MMbbl/d, although industry analysts have long mused about how long the company could sustain that level of production. Aramco is expanding capacity and expects to have 13 MMbbl/d capacity by 2027.
Nasser suggested the “idled” 3 MMbbl/d of production is essentially being held in reserve in case of a natural or geopolitical calamity.
“It helps us to give us added flexibility and reliability,” he said, adding that the spare capacity is readily available. He pointed out that production is being tamped down by compressors, chokes and other methods and not mothballed.
“If we need to ramp up, and we have done it previously, we can do it in a couple of weeks,” he said. The spare capacity gives “us the flexibility, the reliability. It has a strategic component. It helps us also to manage volatility in the market.”
By contrast, he pointed to the gas markets lacking similar wiggle room and thus in a much more precarious position.
“Look what's happening with gas today. You don't have that spare capacity. Any problems, even strikes, administrations, shut down of plants—gas prices will shoot [up] the minute that spare capacity is eroded,” he said. “Any small volatility in the market will push the prices high.”
Still, Nasser said world demand is 102 MMbbl/d and that Aramco has approximately 3 MMbbl of spare capacity to address any unforeseen event.
“As you start to erode that, there will be a concern,” he said.
Aramco wants to be an ‘LNG player’
Aramco’s oil and renewables investments have recently been augmented by expansion into several downstream areas, with the plan to covert more of its liquids production—4 MMbbl—to chemicals by 2030.
Aramco is also looking at additional investments “currently in the pipeline to be one of the leading players in LNG in the market,” Nasser said.
The aim is to be more profitable, efficient and diverse, Nasser said.
In September, the company signed an agreement to acquire a minority stake in LNG company MidOcean Energy, managed by EIG, for $500 million. Additional investments, particularly in petrochemicals, are likely, Nasser said.
Nasser said Aramco is investing in gas for two primary reasons: its own utility needs and production of hydrogen, although the latter remains hampered by a lack of offtake agreements that have plagued most of the nascent industry.
By 2030, the company wants to produce green hydrogen and e-fuels and plans to build one of the world’s biggest carbon capture and storage (CCS) projects.
“So we are for all of the above, but at the same time you need to develop the markets and the infrastructure that will cater for all of this,” he said.
The company is expanding and producing oil and gas production while meeting its obligation to reduce emissions and produce hydrocarbons in a sustainable way.
Still, efforts to produce hydrogen or to expand into CCS have been met with skepticism, moderator Amena Bakr, the chief OPEC correspondent for Energy Intelligence, noted.
“Mr. Nasser, we're in London here and some of the prevailing voices outside think that all of this is just a smokescreen to just produce more oil and gas. How do you bridge this communication gap?”
Nasser ticked off Aramco’s CCS plans but said, ultimately, more oil and gas production is simply a function of demand.
“You're not producing oil and gas if the demand isn’t there,” he said. “Second, as I said, renewable is not ready.”
Upstream best suited for transition
After 27 previous U.N. climate conferences, referred to as COPs, upstream producers have been invited to COP28 in the UAE.
Nasser said his hopes for the summit are for participants to find a path to an orderly, balanced and just energy transition.
Nasser also said the dialogue needs to shift from shutting down conventional energy production and instead target CO2, methane and other greenhouse-gas emissions.
“The idea is we need to reduce the emissions, build more of the carbon capture and storage, create more efficient production systems that will help us to reduce our emissions,” he said.
More incentives need to be aimed at conventional energy producers to develop CCS. And COP28 participants need to recognize that the upstream sector, which has so far been left out of the summits, is best suited to address the transition, Nasser argued.
“The industry is the only one capable of executing these megaprojects in an accelerated way,” he said.
“They have the resources, they have the talent, the manpower, they do have the plans, the ability to transition in a way that is realistic in terms of meeting their needs,” he added. “That dialogue didn't happen over the years.”
The upstream oil and gas industry understands what is needed to accomplish such large-scale projects.
“When we do a project, we do preliminary engineering and we tell you the cost plus or minus 50%,” He said. “Then we will do engineering. It takes you two to three years to do engineering to bring the cost to plus or minus 10%. And before you go to final investment decision, you need to make sure the project is commercial.
“So the industry understands what it takes to deliver.”
He said putting forth aspirations and goals—without much allocation of resources, formulation of plans or providing funding and incentives has been the approach so far.
He also stressed that COP28 should recognize that one size doesn’t fit all.
Differences between the global north and the south—where 2.3 billion people cook with polluted fuel and up to 800 million don’t have access to electricity—illustrates an unmet need.
The global south needs support from rich nations, he said. The West has been able to create momentum in solar, wind and other alternatives thanks to government incentives.
“The global south cannot afford” such inducements, he said. “So the incentives need to be also coming from somewhere else.”
2023-09-20 - LNG developer NextDecade Corp. has secured debt financing to support construction of the company’s Rio Grande LNG export project in South Texas.
2023-11-28 - Petrobras plans to invest $102 billion between 2024-2028 under its new strategic plan, up 31% compared to their 2023-2027 plan, aiming to achieve production of 3.2 MMboe/d by the end of the five-year timeframe.
2023-11-07 - Tellurian Inc., which is still eyeing development of the Driftwood LNG export project in Louisiana, issued a frank warning to investors in its third quarter 2023 financial filing “about our ability to continue as a going concern.”
2023-11-14 - San Diego-based Sempra expects to announce a final investment decision (FID) for its Cameron LNG Phase 2 project in 2024, according to Justin Bird, the CEO of Sempra affiliate Sempra Infrastructure.
2023-11-01 - Chevron’s $53 billion acquisition of Hess Corp. will concentrate the California major even further in upstream oil and gas production—the part of its portfolio where Chevron sees the most future upside.