Saudi Aramco at CERA Week
CERA Week, one of the world’s biggest energy conferences, was held in Houston, Texas in March. It brought together CEOs & leaders from oil and gas companies, as well as ministers & other energy executives. The conference theme was “Multidimensional Energy Transition: Markets, climate, technology and geopolitics” and it is certainly an interesting time in the global energy industry - progress towards renewable energy is strong in developed countries, electric vehicles are beginning to eat into market share, oil and gas price shocks from the Russian invasion of Ukraine have subsided but energy security concerns remain.
While there will have been many people at the conference working hard to accelerate the energy transition through their work in governments and clean energy companies, it was also an opportunity for the heads of major oil and gas companies to set out their view of the energy landscape, and to anyone interested on how these key players are approaching the transition their positions were illuminating.
Take the speech by the head of Saudi Aramco, Amin Nasser. I would suggest you read in full - you can read it here.
We went through it, and have picked out a few key passages.
“…despite the world investing more than $9.5 trillion on energy transition over the past two decades, alternatives have been unable to displace hydrocarbons at scale. Today, wind and solar combined, supply under 4% of world energy.”
Michael Liebreich calls this the “The Primary Energy fallacy”. The “World Energy” that Nasser talks about is all the energy we use to “do things” today. But hydrocarbons are very innefficient. If you replace a petrol car with an EV, doing the same thing (like driving to work) uses less energy, and many electrified greener solutions have similar savings, meaning we don’t have to replace 100% of the primary energy we use today. 2/3rds of it is wasted right now. Pretending renewables are a tiny share of energy use and that they will never be scaled, also ignores the fact that they are scaling exponentially.
“…absolute demand for hydrocarbons has grown by almost 100 million barrels per day of oil equivalent over the same period. Indeed, global oil demand is expected to reach an all-time high in the second half of this year.”
Indeed, this is one of the reasons why demand destruction is one of the most important goals of the transition. It is urgenty needed - as we set out in this recent blog.
“And there is significant demand growth potential in developing countries, where oil consumption currently ranges from less than 1 to just below 2 barrels per person per year. This compares with 9 barrels for the EU and 22 barrels for the U.S. It is an important reason why some are predicting growth through 2045.”
This may be true, but it is hard to read this without also remembering that Saudi Aramco “is driving a huge global investment plan to create demand for its oil and gas in developing countries” according to an undercover investigation undertaken by the Centre for Climate Reporting and Channel 4 News. The emission trajectories of developing countries will make or break the Paris climate targets, and more support is needed for them to leapfrog emitting technologies. The Saudi Arabian “oil demand sustainability programme (ODSP)” will not help with that effort, to put it mildly.
“peak oil and gas is unlikely for some time to come, let alone 2030.”
Nasser means peak demand here, not peak supply, which has wrongly been predicted to be imminent many times. Peak demand depends on our willingness to choose alternatives, something Aramco have an incentive for us not to do, in any case, the IEA disagree. Nasser continued -
“A transition strategy re-set is urgently needed – and my proposal is this.
We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately, reflecting realistic demand assumptions.
We should ramp up our efforts to reduce carbon emissions, aggressively improve efficiency, and introduce lower carbon solutions.
And we should phase in new energy sources and technologies when they are genuinely ready, economically competitive, and with the right infrastructure, adjusting all of the above as needed, as we go.”
Arguing against phasing out fossil fuels whilst simultaneously calling for ramping up reducing carbon emissions may seem like two fundamentally contradictory statements, but among the oil & gas majors it is an argument they are not alone in making. It is hard not to be extremely cynical about it.
Their proposal appears to continue burning oil and gas for as long as they can, while providing lip service to the need for lower carbon solutions that should only be employed at some conveniently far-off time when they are economically competitive. This ignores the fact that, for example, Solar is already the cheapest form of energy ever and that if we continue to burn fossil fuels we will continue to emit greenhouse gases, unless they can be removed through carbon capture (something Nasser doesn’t mention once).