Guest post by David Middleton
If Alexandria Occasional Cortex and the rest of the Green New Deal nitwits only had the mental capacity to understand Amin H. Nasser’s 2018 CERA presentation…
“Lifting the hood on the real future facing the petroleum industry”
HOUSTON, Texas, U.S., March 06, 2018
Remarks by Amin H. Nasser, Saudi Aramco President & CEO
Good morning Ladies and Gentlemen, and thank you Dan [Yergin] for that kind introduction.
Like all CEOs, I receive many invitations to address conferences.
Naturally, the first thing I ask is: “How will this help Saudi Aramco?”
The second is: “How will this help our industry?”
And the third is: “Will Dan Yergin be involved?!”
So CERA Week in Houston really hits the trifecta!!!
Future Role of Oil
Let me now turn to the energy transition underway.
I am increasingly worried that it is being portrayed in ways that seriously threaten future energy security and the transition itself.
In particular, the future role of oil is widely misunderstood, and I want to tell the real, compelling story today.
Future Role of Oil: Transport
The hot topic in energy transition is the future role of oil in transport.
At the heart of it is the light duty road passenger vehicles segment that accounts for about 20% of global oil demand today.
Many wrongly believe that it is a simple matter of electric vehicles quickly and smoothly replacing the internal combustion engine.
Nor is it an “either/or” future, but far more complex.
Summary of Real Energy Transition
My friends, this is the complex reality of the energy transition:
- alternatives will not be ready to shoulder the burden of supplying adequate and affordable energy for some time;
- penetration by alternatives will vary greatly between the developing and developed world;
- there will be fierce competition among various technologies.
- By contrast, there will be continued healthy demand for oil in most existing sectors;
- investment in R&D and innovation by individual companies will further lighten the carbon footprint of proven energy sources and technologies, boosted by collaborative efforts such as the 1 billion dollars of climate-related investments through the Oil and Gas Climate Initiative;
- and we will see many non-combustible and new uses of oil.
In other words, I am not losing any sleep over ‘peak oil demandʼ or ‘stranded resourcesʼ.
Oil and gas will continue to play a major role in a world where all energy sources will be required for the foreseeable future.
Call to Action: Getting the Industry Ready for that Future
But is the world ready for continued growth in oil and gas demand?
Frankly, that readiness is weakening day by day – fueled by irrational hopes of rapid switching, and a lack of realism about the valuable, long-term contribution our industry will make.
So as an industry, we need to move people from fasting on hope to feasting on reality.
We need to massively raise our game, and make a compelling case about oil’s true role in the energy transition.
In particular, I believe we need bold action now in four key areas to ensure that those growing calls on our industry continue to be met.
First, we need to expand exploration.
Last year, only 7 billion barrels equivalent of oil and gas combined were discovered, which is among the lowest on record.
Second, we must not only meet the growth in oil demand but also offset a large natural decline in developed oil fields.
Even conservative estimates suggest about 20 million barrels per day of new capacity is required over the next five years.
Third, our industry needs more than 20 trillion dollars over the next quarter century to meet rising demand for oil and gas (including in ageing infrastructure).
That is virtually the size of the U.S. economy!
And we have already lost 1 trillion dollars of investments since the downturn.
This staggering amount will only come if investors are convinced that oil will be allowed to compete on a level playing field, that oil is worth so much more, and that oil is here for the foreseeable future.
That is why we must push back on the idea that the world can do without proven and reliable sources.
We must challenge mistaken assumptions about the speed with which alternatives will penetrate markets.
And leave people in no doubt that misplaced notions of ‘peak oil demandʼ and ‘stranded resourcesʼ are direct threats to an orderly energy transition and energy security.
We also need an environment that encourages long-term investments, as we are seeing here in the United States, and in Saudi Arabia with our ambitious Vision 2030.
Fourth, we need to intensify our efforts to both enhance current technologies as well as create new, game-changing ones.
That requires us to devote more resources to longer term research, particularly low-to-no carbon products.
And it means regulators must be policy holistic and technology agnostic – let the market decide.
Basically it boils down to this…
Neither regulatory malfeasance, nor greenie-weenie unicorn wishes nor dimwitted fossil fuel divestment protests will bring down the oil industry or fossil fuels in general. The world will need petroleum, natural gas and coal well-into the 21st century. Misguided efforts to deny access to capital and resources now, will only increase the cost to energy consumers later.
On another note, DeGolyer and MacNaughton (D&M) recently completed their comprehensive audit of Saudi Aramco’s proved oil & gas reserves and actually increased them…
Wednesday 1440/5/3 – 2019/01/09
Independent certification of the Kingdom’s oil and gas reserves within the Saudi Aramco’s concession area results in upward revision of the Kingdom’s overall reserves, and confirms highest standard of governance
Riyadh, January 9, 2019, SPA — Today, the Ministry of Energy, Industry and Mineral Resources of Saudi Arabia has announced an upward revision to the Kingdom’s proven oil and gas reserves, following an independent certification of oil and gas reserves in Saudi Aramco’s concession area conducted by leading consultants DeGolyer and MacNaughton (D&M).
The Kingdom previously announced that oil and gas reserves as of 31 December 2017 were 266.3 billion barrels of oil and 307.9 trillion standard cubic feet of gas respectively. Of these, the estimated proven oil and gas reserves in Saudi Aramco’s concession area were 260.9 billion barrels of oil and 302.3 trillion standard cubic feet of gas. Following the certification, Saudi Aramco’s concession area oil reserves at year-end 2017 would have been 2.2 billion barrels higher or 263.1 billion barrels of oil and 319.5 trillion standard cubic feet of gas.
In addition to Saudi Aramco concession area reserves, the Kingdom also owns half of the oil reserves in the Partitioned Zone jointly owned by Saudi Arabia and the State of Kuwait. The Kingdom’s share of the Partitioned Zone oil reserves (onshore and offshore combined) is 5.4 billion barrels and the corresponding gas reserves is 5.6 TCF.
So, including the D&M revision of oil reserves in the Saudi Aramco’s concession area, the Kingdom’s total proven oil and gas reserves as of year-end 2017 would have been about 268.5 billion barrels of oil and 325.1 trillion standard cubic feet of gas, respectively.
D&M is one of the most highly respected independent consulting firms engaged in resource and reserve evaluation. All publicly traded oil companies are required to have their proved reserves audited by companies like D&M.
On another Aramco note, they expect to pump the last barrel of crude oil ever produced on Earth…
Saudi Arabia: We’ll Pump The World’s Very Last Barrel Of Oil
By Tsvetana Paraskova – Jan 23, 2019, 6:00 PM CST
Saudi Arabia isn’t buying the peak oil demand narrative.
OPEC’s largest producer continues to expect global oil demand to keep rising at least by 2040 and sees itself as the oil producer best equipped to continue meeting that demand, thanks to its very low production costs.
Saudi Arabia will be the one to pump the last barrel of oil in the world, but it doesn’t see the ‘last barrel of oil’ being pumped for decades and decades to come.
“I don’t see peak [oil] demand happening in 10 years or even by 2040,” Amin Nasser, president and chief executive officer of Saudi oil giant Saudi Aramco told CNN Business’ Emerging Markets Editor John Defterios on the sidelines of the World Economic Forum in Davos this week.
“There will continue to be growth in oil demand … We are the lowest cost producer and the last barrel will come from the region,” Nasser told CNN.
Saudi Aramco’s cost of production is just $4 a barrel, al-Falih later said in a news conference, as carried by Reuters.
Saudi Arabia may need oil prices higher than $80 a barrel to balance its budget because most of the income comes from oil. Yet, the Kingdom has what is probably the world’s lowest cost of pumping one barrel of oil.
While Mr Nasser may not be “losing any sleep over ‘peak oil demandʼ or ‘stranded resourcesʼ”, he might want to do something about that G&A problem… $4/bbl lifting cost and $76/bbl overhead… 😉