Calls to shut down investment in hydrocarbons could cause “chaos” in the energy industry and policies alone will not be enough to aid the global energy transition, Saudi Aramco’s chief executive Amin Nasser said on Monday.
Referencing the debate around peak oil demand, Mr Nasser said there was a growing discrepancy between “facts on the ground” and policies.
“A policy will not help you to transition … it will set the rules. But at the end of the day, if technological readiness is not there, or competitiveness is not available, it won’t happen,” he said at the World Energy Congress in Rotterdam.
Mr Nasser’s remarks come at a time when Opec and the International Energy Agency have been increasingly at odds over their differing assumptions regarding peak oil and scenarios for demand growth.
The Paris agency has said that the rising share of solar and wind in electricity generation as well as growing electric vehicle sales would result in oil and gas demand plateauing before 2030.
Opec has contested the agency’s data and criticised the watchdog for jeopardising energy security by urging countries to halt investments in new oil and gas projects.
The Aramco chief reiterated that a “one-size-fits-all” approach would not work for the energy transition, adding that energy affordability should be a significant concern for governments and politicians.
The war in Ukraine pushed natural gas prices to highs in 2022, prompting many countries in Europe and Asia to increase their reliance on highly polluting coal.
“You need oil, natural gas and alternatives. If you don’t have enough resources, prices will shoot [up] and you will end up using more coal,” Mr Nasser said.
The quicker adoption of renewable energy in the Global North was mainly due to government incentives that have encouraged consumers to shift to cleaner forms of energy, he said.
“These incentives are not available in the Global South, with the exception of China.”
Earlier this year, Aramco, the world’s largest oil exporting company, scrapped plans to enhance production capacity to 13 million barrels per day by 2027, from 12 million bpd.
Analysts said escalating costs, ample spare capacity and weakening demand for crude amid the adoption of renewable energy and electric vehicles may have influenced the company’s decision.
Aramco has been looking to expand its presence in liquefied natural gas and hydrogen to reduce its reliance on crude exports alone.
Mr Nasser said that more innovation and technology would be required to bring down the cost of hydrogen, which is expected to be a critical fuel of the future.
“An offtake agreement for $200 or $400 per barrel of oil equivalent [for blue hydrogen and green hydrogen is] very expensive … but this is the technology that is available today … this is how much it will cost you to get a decent return on your investment,” he added.
World Energy Council chief executive Angela Wilkinson said the world needs to rid itself of the “moon shot mentality” and approach energy transition realistically.
“We can either engage with the reality of energy transitions, or we can keep going with the global moon shot language,” she said.
The term originates from the goal set by former US president John F Kennedy in 1961 to land a man on the moon and return him safely to Earth.
“Transition is a process. It's not a destination. We talk about it as though it's the end of something. It's a step along the way to whatever comes next, and there's no one size fits all,” Ms Wilkinson said.
