‘The world consumes oil but is not ready to invest in it’
A recent report of the International Energy Agency (IEA) suggests that the world may need no new investments in oil and gas if it sticks to a net-zero emission strategy by 2050. Oil majors counter that such an approach can lead to an acute shortage of fossil fuels once existing fields are depleted.
Saudi Arabia and Russia will continue to invest in oil and gas despite the growing push against fossil fuels and investment in new supply, says OilPrice.com adding that the debate about emissions reduction and the future of oil companies has moved to a whole new level since the IEA published its bombshell report last month. According to the document, no new investment in oil and gas will be required if the world aims to reach net-zero emissions by 2050.
Some international oil majors commented on the report acknowledging that they have a role to play in the energy transition. For example, head of BP Bernard Looney stated that forecasts of much lower investments in oil and gas were “in many ways consistent with our approach — to reduce our oil and gas production by 40% in the next decade”, while CEO of Eni Claudio Descalzi commented that “we are now at a historic turning point, where each of us needs to play an active role”.
However, leaders of OPEC+ disagree with the IEA’s suggestions, as they believe that the world will still need fossil fuel resources for decades. Saudi Minister of Energy Prince Abdulaziz bin Salman slammed the report in no uncertain terms. “Why should I take it seriously?” he said adding that Saudi Arabia was producing oil and gas at low cost as well as renewables. Russia’s Deputy Prime Minister Alexander Novak noted a “simplistic approach” of the IEA report and ensured that Russia would continue to invest in oil, gas and coal alongside investments in renewables. “There is no doubt we need to move in the green energy and toward the green agenda, as there is demand for it in society, but we need to be clear what resources this can be done with, who is going to pay for it, what technologies and opportunities we have available to us, including in order to resolve outstanding problems that still await their solutions,” said Novak in an interview with CNBC on the sidelines of the St Petersburg International Economic Forum.
Some analysts and top executives of oil companies also warn that operational oilfields mature, so chronic underinvestment in oil and gas supply may lead to a supply crunch followed by a spike in oil prices. According to CEO of Russia’s largest oil producer Rosneft Igor Sechin, the world runs the risk of facing an acute deficit of oil and gas. “The world consumes oil but is not ready to invest in it,” he said pointing out that such underinvestment was setting the stage for a severe deficit in supply. Sechin warned against a rushed transition without considering the economic efficiency of green energy and said that the world should be “avoiding placing focus only on the alternative generation”.