(Bloomberg) -- Buoyed by high oil prices, the bosses of the biggest explorers this week laid out a vision for the energy transition that hinges on more fossil-fuel investment rather than less.

The World Petroleum Congress in Houston, an industry showcase, saw last-minute cancellations due to the omicron variant, but it didn’t stop a steady stream of senior executives hammering on the same point: the world will need us for years to come, so let’s invest and produce, or risk more economically damaging price spikes or even social unrest.

“A halt in investment in oil and gas is misguided,” OPEC Secretary-General Mohammad Barkindo said in recorded presentation to the gathering on Wednesday. Almost $12 trillion in spending is needed between now an 2025 to ensure adequate crude and gas supplies, without which the world will see “long-term scars on energy security, affecting not only producers but also consumers.”

Volatile commodity prices and growing inflation anxiety are recasting the narrative around climate change, just weeks after world leaders hashed out a lackluster deal at the the United Nations Climate Change Conference in Glasgow. 

Natural gas shortages in Europe and Asia, surging fuel prices in the U.S. and concerns over power-grid reliability are forcing governments to confront difficult choices around transitioning to low-carbon energy sources.  

The contradiction is all too apparent in the U.S., where President Joe Biden asked OPEC and its allies to increase crude production just months after enacting a wave of anti-oil policies at home including canceling the Keystone XL pipeline and floating a fracking ban. 

The Biden administration’s plea to OPEC “reveals a fundamental truth that should inform any rationale conversation about the future of energy,” said Chevron CEO Mike Wirth. “Oil and gas continue to play a central role in meeting the world’s energy needs and we play an essential role in delivering them in a lower carbon way.”

$75 Crude

Wirth also called for more “optimism” around the transition away from fossil fuels. “Optimism is the spark of innovation, the catalyst of risk,” he said.

The industry has ample cause for optimism. Even after whipsaw price swings in recent weeks amid omicron’s spread and supply-shortage concerns, international oil prices are up 45% this year at about $75 a barrel. Big Oil is making the most free cash flow since crude traded for more than $100 a barrel seven years ago while the U.S. shale industry is reaping record profits. 

Signs posted outside the convention center in downtown Houston claimed for the city the mantle of “energy transition capital of the world.” But a paramount concern for management teams assembled inside was whether the industry is investing enough in new drilling to meet demand and stabilize prices. 

“Investment is the greatest challenge the oil industry faces today,” said John Hess, CEO at Hess Corp. “Oil and gas are going to be needed for the next 10 to 20 years and lot of it is going to be needed.”

Grim Warning

Saudi Aramco’s CEO warned of “chaos” unless governments stopped discouraging fossil-fuel investments. The Riyadh-based International Energy Forum called on companies to raise spending to $523 billion a year by the end of this decade to forestall an uncontrolled surge in energy prices and economic unrest.

That message is unlikely to go down well with policymakers and environmentalists pushing for a stricter limits on emissions worldwide. But it’s also the new reality as the Northern Hemisphere heads into winter facing the specter of an energy squeeze and record price hikes. 

Focusing purely on supply-side actors won’t arrest climate change, Exxon Mobil Corp. CEO Darren Woods said in his opening speech to the conference’s 5,000 attendees.  

“Narrowly focusing and taking action on one aspect of the challenge could potentially lead to significant unintended consequences,” Woods said. “The best intentions poorly executed can do more harm than good.”

Emission Targets

American companies including Exxon and Chevron are much more focused on cleaning up their own emissions, so-called Scope 1 and 2, rather than those emanating from the use of their products. In contrast to most of their European peers, the U.S. drillers see those Scope 3 emissions, which represent the largest part of oil and gas pollution, as the responsibility of consumers. 

“This is a massive, massive challenge,” said Mark Little, CEO of Calgary-based Suncor Energy Inc.. “And everybody’s trying to solve that on the supply side and the demonization of the producers, but at what point are we going to have the real conversation?”

©2021 Bloomberg L.P.


Saudi Aramco warns of 'social unrest'             


if  ffossil fuels ditched too quickly



Global upstream investment had fallen 50 per cent below

historical norms


Author of the article:
Financial Times
Myles McCormick
Publishing date:Dec 08, 2021 • 
Amin Nasser, chief executive officer of Saudi Arabian Oil Co. (Aramco). 

The chief executive of Saudi Aramco, the world’s largest oil producer, has called on global leaders to continue investing in fossil fuels in the years ahead or run the risk of spiralling inflation and social unrest that would force them to jettison emissions targets.

Speaking at the World Petroleum Congress in Houston, Texas, Amin Nasser said there was an assumption that the world could switch to cleaner fuels “virtually overnight”, but that this was “deeply flawed”.

“I understand that publicly admitting that oil and gas will play an essential and significant role during the transition and beyond will be hard for some,” Nasser told delegates at the WPC, one of the biggest gatherings of oil and gas executives in the world.

“But admitting this reality will be far easier than dealing with energy insecurity, rampant inflation and social unrest as the prices become intolerably high and seeing net zero commitments by countries start to unravel.”

Nasser’s comments come amid growing investor and social pressure for fossil fuel companies to make their operations greener. The International Energy Agency said this year that energy groups must stop all new oil and gas exploration projects if the world is to achieve net zero emissions by 2050.

“The world is facing an ever more chaotic energy transition centred on highly unrealistic scenarios and assumptions about the future of energy,” Nasser said.

Higher fuel prices — which have risen sharply as global economies bounce back from the pandemic — have left governments scrambling as they try to balance pledges to decarbonize with efforts to keep down costs at the petrol pump.

In the U.S., President Joe Biden, who has vowed to lead a shift away from oil, last month announced the country would unleash 50 million barrels of crude from its Strategic Petroleum Reserve as part of a push to bring down prices at the pump.

The oil and gas industry has seized on the rise in prices to stress the dangers to energy security and affordability of switching too rapidly from traditional fuel sources, and the risks of under-investment in fossil fuels was a common theme at the Houston event.

Jeff Miller, chief executive of the oilfield services group Halliburton, told delegates that there had been “significant under-investment” in the sector over the past seven years, which he pinned both on climate pressure and lack of capital availability driven by the industry’s poor returns.

Global upstream investment had fallen 50 per cent below historical norms, he said, with investment in west Africa down as much as 75 per cent.

“We are in fact going into a period of scarcity and I think for the first time in a long time we’ll see a buyer looking for a barrel of oil as opposed to a barrel of oil looking for a buyer,” Miller added.

Nasser said the majority of “key stakeholders” in industry and politics agreed on the risks of under-investment, but were unwilling to say so openly.

“They say so in private,” he said. “They should say the same in public.”

Separately, Aramco announced on Monday a deal to raise US$15.5 billion by selling a minority stake in a newly-formed gas pipeline venture to a consortium of investors led by BlackRock and the investment management arm of the General Organization for Social Insurance, a Saudi government body.

The transaction marks Aramco’s second major pipeline deal this year as it tries to monetize assets to generate cash for the government, its main shareholder.

© 2021 The Financial Times Ltd