Aramco CEO: Widening gap in global energy transition lays bare need for ‘more realistic and robust’ multi-source plan

With a greater impact on certain regions, the energy transition movement continues to make inroads on the global stage, however, the difference between regions in the implementation of the measures required to build a low-carbon and net-zero world is growing, which could lead to a potential North-South transition divide. To tackle this, the CEO of the Saudi oil and gas giant, Saudi Aramco, has called upon world leaders and energy players to devise concrete transition steps in a bid to ensure a just transition and avert a potential energy crisis, as a result of a premature phaseout of fossil fuels.

Amin H. Nasser, Aramco President & CEO, who observes the path to net-zero through the lens of climate goals and ways to achieve them, believes that everyone has “a vested interest” in reaching the Paris Agreement’s goal, but warns that “many shortcomings” surround the current transition approach, which is filled with “unrealistic scenarios and assumptions” that bring to the surface “an equally unrealistic target energy mix and timeline.”

Due to this, Nasser called in a keynote speech on September 18, 2023, at the 24th World Petroleum Congress in Calgary, Canada, for action to avert – what he deemed as – a more serious energy crisis and avoid a North-South transition divide while highlighting the need for “a more realistic and robust transition plan” that would be “multi-source, multi-speed and multi-dimensional,” which “clearly emphasizes the continued deployment of new energy while recognizing the continued need for conventional energy.”

While underlining the risk of a global energy transition divide, Nasser outlined: “While much of the Global North is focusing on environmental sustainability, the priority for many in the Global South is economic survival. Transition planning has not sufficiently recognized this clear need for distinctive solutions, and a widening divide is an inevitable result.”

During the speech, Aramco’s CEO put a greater emphasis on the potential consequences of ignoring energy security and affordability issues, while welcoming growing recognition among world leaders that transition planning required pragmatic and proportionate solutions that reflect different countries’ economic and energy situations.

In an attempt to shed more light on the danger of phasing out conventional energy prematurely, Nasser explained: “The current transition shortcomings are already causing mass confusion across industries that produce and/or rely on energy. Long-term planners and investors do not know which way to turn. It is increasing the risk of acute supply-demand imbalances in conventional energy, and therefore an even more serious energy crisis where countries and people, not just assets, are stranded.”

The World Petroleum Congress, which continues until September 21, 2023, with the theme: ‘Energy Transition: The Path to Net Zero,’ presented Nasser with the Dewhurst Award, which recognizes leaders who have made an exceptional impact on the global oil, gas, and energy industry. Aramco’s CEO is only the 12th recipient of the award in the nearly 90-year history of this event.

While laying out the scale of the energy transition challenge in his latest speech, Nasser stated: “We are talking about the complete transformation of a $100 trillion global economy today. One that is likely to roughly double in size by 2050, with close to an additional two billion energy consumers. In short, the re-invention of our entire energy-based way of life in less than 30 years. Let us be inspired by that, but understand it means making history.”

This builds on the warnings Nasser made in his speech from September 2022, when he highlighted the need for “a much more credible” energy transition plan, as he delivered a keynote speech at the Schlumberger Digital Forum. At the time, Nasser pointed out that “the warning signs in global energy policies were flashing red for almost a decade,” adding that investments in oil and gas decreased from $700 billion to a little over $300 billion, more than 50% between 2014 and 2021. In addition, the Saudi giant’s CEO claimed that greater investment in the oil and gas sector would help ensure energy security in the long term. 

“More recently the talk has shifted to peak oil demand. But this notion is also wilting under scrutiny because it is mostly being driven by policies, rather than the proven combination of markets, competitive economics, and technology,” said Nasser at the 24th World Petroleum Congress.

This is in line with a recent statement from OPEC, which underscored that the assertions about the fossil fuels – coal, oil, and gas – demand peaking before 2030 were not supported by “consistent and data-based forecasts.” The only difference that OPEC sees in the more recent assertions about peak fossil fuels demand is that they are often accompanied by calls to stop investing in new oil and gas projects, which the organization sees as a “dangerous” endeavor.

According to Aramco’s CEO, gas has become “an increasingly important” bridge fuel, especially LNG, while wind and solar combined account for around 5% of the current global energy consumption. On the other hand, Nasser claims that the production costs for green hydrogen range from $200 to $400 per barrel of oil equivalent. He is convinced that this is the reason why commercial offtake agreements are hard to come by.

While emphasizing that green and low-carbon sources such as wind, solar, and hydrogen are considered to be the bedrock of the transition to a more sustainable future, Aramco’s CEO concluded: “These powerful numbers show that phasing out conventional energy prematurely could put energy security and affordability priorities at risk. As the recent energy crisis has shown, compounded by the conflict in Ukraine, the world wobbles if these realities are ignored or wished away. And the public anger we have already seen could ultimately derail climate ambitions and actions themselves.”

Aramco established a $1.5 billion sustainability fund in October 2022 to invest in the technology needed to support a stable and inclusive energy transition. As a result, the fund plans to invest in technologies that support the company’s announced Scope 1 and Scope 2 net-zero 2050 ambition in its wholly owned operational assets, as well as the development of new lower-carbon fuels. However, the initial focus areas will include carbon capture and storage (CCS), greenhouse gas emissions, energy efficiency, nature-based climate solutions, digital sustainability, hydrogen, ammonia, and synthetic fuels.

While elaborating that the CCS could no longer be “the bridesmaid of transition,” as he is adamant this decarbonization tool “is central to our industry’s future, but even more importantly global climate goals,” Nasser calls others to reunite around “a more robust transition, with winds of realism in our sails, reflecting the multi-source, multi-speed, and multi-dimensional approach.”

Nasser, like ADNOC’s CEO, believes the world needs all the energy solutions it can get, including oil, gas, solar, wind, nuclear, and hydrogen to meet growing energy demand, “adjusting the mix as we go according to experience and need.”