Aramco CEO Warns of Global Oil Shortage Due to Insufficient Investment, Reports Reuters

By Alessandra Galloni and Dmitry Zhdannikov

DAVOS – The global oil supply is facing a significant crunch as many companies hesitate to invest in the sector due to increasing pressures for green energy, according to the CEO of Saudi Aramco, who emphasized that it cannot accelerate its production capacity expansion beyond its commitments.

Amin Nasser, the head of the world’s largest oil producer, confirmed on Monday that he remains committed to the plan of expanding production capacity from 12 million barrels per day (bpd) to 13 million bpd by 2027, despite suggestions to expedite the process.

"The world is currently operating with less than 2% spare capacity. Before the pandemic, the aviation sector consumed 2.5 million bpd more than it does now. A resurgence in that sector could create significant challenges," Nasser stated during the World Economic Forum in Davos.

He noted that the situation stemming from the Russia-Ukraine conflict obscured the ongoing energy crisis, which has been exacerbated by a lack of investment that became apparent following the pandemic.

Nasser expressed confidence that China’s COVID restrictions would not persist much longer and that global oil demand would begin to rise again.

Saudi Arabia is currently producing around 10.5 million bpd, representing one-tenth of the world’s oil supply, and is expected to increase production to 11 million bpd later this year as an agreement with OPEC and its allies, including Russia, comes to an end.

Riyadh has received pressure from Western nations to accelerate its output and increase capacity to help alleviate the energy crisis.

"If we were able to expand capacity before 2027, we would have done so. This is what we communicate to policymakers. The process takes time," he explained.

CHAOTIC TRANSITION

Nasser further discussed the ongoing dialogue between the oil industry and policymakers regarding the transition from fossil fuels to sustainable energy, noting that the conversation has often been problematic.

"I don’t believe that constructive dialogue is occurring. In some instances, we are excluded from the discussions. For example, we were not invited to last year’s U.N. climate conference in Glasgow," he remarked.

He highlighted that last year’s International Energy Agency message, suggesting a decline in global oil demand and a lack of need for new fossil fuel investments, significantly influenced the industry.

"There needs to be a more constructive dialogue. When they claim that we won’t need oil by 2030, it discourages investments in long-term projects that typically require six to seven years to develop," he said.

The energy transition process has proven to be chaotic and disruptive, as Nasser pointed out.

"There isn’t a coherent plan in place. If there’s no viable plan B, we shouldn’t demonize plan A. The current pressure and rhetoric discourage investments, leading to the fear of stranded assets," he noted, referring to the theory that considerable oil and gas reserves may remain untapped due to a reduced demand.

Nasser cautioned that any missteps during the global energy transition could lead to an increased reliance on coal, especially in many Asian countries.

"For policymakers in those nations, the primary concern is ensuring food security for their populations. If coal can offer energy at half the price, they will opt for coal," he stated.

He added that Aramco, with Saudi Arabia as its principal shareholder, distinguishes itself by investing in both fossil fuels and energy transition initiatives.

"Our approach sets us apart from others, but the scale of our contributions is still insufficient to ensure global energy security," he concluded.