Investment in renewables and lower carbon energies needs to scale up alongside fossil fuels for the foreseeable future as the world is not yet ready to "unplug" from oil and gas, the heads of Saudi state-controlled Aramco and TotalEnergies said today.
Speaking at the Future Investment Initiative (FII) summit in Riyadh, Aramco chief executive Amin Nasser TotalEnergies said Saudi Arabia is planning for 50pc of energy in the power grid to come from renewables by 2030, and it will invest in "green hydrogen, blue hydrogen, for e-fuels and carbon capture and storage" (CCS), but "the reality we are seeing today is that [oil] demand growth is still significant."
Global oil demand will be around 103mn bl in the second half of this year, Nasser said, and he noted that with demand from the aviation sector still at 90-95pc of what it was before the Covid-19 pandemic, "there is still huge room to grow."
Opec in its latestWorld Oil Outlook earlier this month said it sees oil demand continuing to grow over the coming two decades, reaching 116mn b/d in 2045.
"So demand is strong," Nasser said. "And for that, you need to make sure you have adequate, reliable, available and affordable sources of energy. And this is why were are investing to bring additional oil and gas, while at the same time, investing in the new [energies], such as renewables, green and blue hydrogen."
Aramco plans to raise its sustainable crude production capacity to 13mn b/d by 2027 from around 12mn b/d today. Saudi Arabia is among just a handful of countries, including fellow Opec members the UAE and Kuwait, still investing heavily in the upstream.
Nasser said the narrative around the energy transition is being framed through the developed world and not the so-called global south, from where the majority of the growth in energy demand will come in the coming decades.
"Today, the energy transition does not really serve the priorities and the needs of the global south," he said. "80pc of what we produce today of energy goes to the global south… And by 2050, 90pc will go to the global south."
He said the world needs to put the "needs and priorities" of the global south first, specifically when it comes to the issue of security and affordability of energy that he said will get worse in the short- to mid-term without additional investment in traditional energies.
"When you talk about emissions, if we don't solve affordability and security… you can reduce it in a part of the world which consumes 10-20pc of global energy, but if for the 80-90pc of consumers [alternative energies] are not affordable, they will go to whatever is affordable," he said. "One size fits all is not acceptable."
All about the pace
TotalEnergies' chief executive Patrick Pouyanne also underlined the need for continued investment in upstream oil and gas, at least until the world has significantly scaled up capacity for alternatives.
"We want to move to a new system which, in fact, today, only makes up 15pc, more or less, of [the global energy mix]," Pouyanne said. "We cannot unplug system A [a hydrocarbons baseload] as some people would like, because we make CO2 emissions. Why? [Because] we did not yet build the [alternative] system B."
Pouyanne said the priority should be to build and invest more, and faster, in ‘system B' because the world can only shift when there is enough lower carbon energy capacity. In the meantime it is imperative "we continue to invest in system A" he said.
"If we do not invest, then prices will go up," he said. "People will be confused… It is a complex matter. And when they see the price going up, they will think it is down to CO2 taxation, or it's because of the transition. It will be a mess. And so then, we have a reaction against the transition.
"It is a matter of purchasing power, even in the developed countries," he said. "That is what is fundamental."
