The Hard Truths About Our Future Energy from Saudi Aramco.

• In a recent address, Saudi Aramco's CEO harshly criticized the near-term prospects of various energy transformation programs.
• To secure future energy security, the largest oil firm in the world said again that the world needs spend massively on fossil fuels.
• Recent investments, Nasser argued, were too little, too late, and too short-term. This suggests that much more work is required.

CEO of Saudi Aramco, the world's largest oil firm and crude oil exporter, says policymakers should look beyond this winter and avoid vilifying the oil and gas industry to prevent the next energy crisis.

In response to Europe's energy crisis, Amin Nasser argued that hasty measures would do nothing to improve the continent's long-term energy security or supply.

Aramco's CEO claims that the energy crisis has been going on for a while and predates the Russian invasion of Ukraine. Speaking at the Schlumberger Digital Forum 2022 in Switzerland, Nasser attributed the current energy instability situation to years of underinvestment, a lack of a backup plan, and alternatives not ready to step up and replace conventional energy.

He emphasized that despite the crisis, they would not be shifting their global climate targets. A more credible energy transition plan is needed, one that acknowledges the necessity for a "supply of plentiful and affordable conventional energy" in the long run.

Nasser of Aramco echoed Saudi Arabia's long-held belief that the world will need oil and gas for the foreseeable future and that more investment in the industry is required to keep supply steady amid declining output from maturing wells and even more investment to boost production capacity to meet the world's energy needs.

The average annual decline in oil production worldwide is roughly 6%, while in some older fields, it was above 20% in 2017. "At these levels, it takes a lot of capital just to maintain production, and even more to increase capacity," Nasser added.

Fossil fuels still meet more than 80% of the world's energy needs, and as demand is only predicted to climb at least through the end of this decade, a lack of investment in oil and gas supplies will remain a significant issue.

Aramco and others in the sector have warned for years that underinvestment will plague global energy markets. Still, policymakers in prosperous economies have rejected these warnings in favor of renewables and unrealistic energy transition plans, as Nasser argues.

From 2014 to 2021, oil and gas investment dropped by more than half, according to Nasser, who added, "The increases this year are too little, too late, and too short-term."

As a result of people mistaking them for reality, "unrealistic scenarios and incorrect assumptions have damaged the energy transition plan," he said.

Because, as Nasser put it, "your transition plan had better be perfect when you shame oil and gas investors, remove oil- and coal-fired power facilities, fail to diversify energy supplies (particularly gas), oppose LNG receiving ports, and reject nuclear power."

In contrast, the current situation has revealed that the plan was nothing more than a series of sandcastles that the ocean waves of reality have swept away. And billions worldwide will have to deal with the likely severe and protracted effects on energy access and cost of living," he warned.

Without addressing the root of the problem—planning for an energy transition without first securing energy supply—emergency Europe's measures to combat the crisis will only provide temporary relief for consumers and businesses.

Aramco's Nasser put it this way: "Diverting attention from the fundamental causes by questioning the morality of our industry accomplishes nothing to solve the problem."

He also noted that the EU's plan to raise $140 billion (140 billion euros) to soften the impact of the energy crisis on European citizens and the economy is a stopgap measure at best.

"Consumers might benefit temporarily from freezing or capping their energy bills, but this does little to address the root problems and is hence not a sustainable solution. And taxing corporations at a time when increased output is desired is counterproductive", as Nasser pointed out.

While he did advocate for increased funding for oil and gas exploration, he was careful to note that "spending in conventional sources does not mean that alternative energy sources and technologies should be neglected."

Now is the time to increase spending on the oil and gas industry, especially on infrastructure development. And if nothing else, this crisis has shown us how much we need a solid energy transition strategy.

Compiled by Tsvetana Paraskova for Oilprice.com