Trillions of dollars in potential investments in the oil and gas industry could be jeopardized by “misguided” projections about so-called “peak demand” for energy and could end up putting the world’s energy security at risk, said Saudi Arabia Minister for Energy, Industry and Mineral Resources Khalid Al-Falih during Houston’s CERAWeek by IHS Markit 2017.
Reduced investment “driven by such theories amount to nothing less than compromising the world’s energy security by squandering staggering quantities of our planet’s energy endowment,” Al-Falih said.
The minister added during his prepared remarks that his biggest concern is the “lagging progress of long-cycle development projects, which are needed to provide the ‘baseload’ of future global supplies.”
The investment policy of the Middle Eastern kingdom, the largest oil producer in the world with over 10.4 million barrels per day (bpd), is to keep an eye on the longer-term tendencies of the market and to continue developing its industry, infrastructure and talent, he said.
Al-Falih welcomed the changes in the world’s energy mix stemming from lower costs and the growing performance of alternative energy solutions such as renewables and electric vehicles, which have changed the global energy mix. But he warned about dismissing the complexity of the phenomena because the thirst for energy — and therefore oil — remains “unsatiable.”
The need to supply that future demand is one reason Saudi Arabia welcomes the renewed interest of investors in the emerging industry of US shale oil “regardless of what you might hear.”
Al-Falih said earlier this year that the Organization of the Oil Producing Countries (OPEC) had little to worry about from the recovery of US shale oil production because it was unlikely to increase substantially in the near future, arguing, as quoted by the Financial Times, that “what has been tapped recently is the most prolific areas … as demand rises they will go to the more expensive, more difficult, less prolific areas in the shale and they will find that they need higher prices.”
Despite a long period of low oil prices in recent years, Saudi Arabia, which produces close to a third of OPEC’s output and about a fifth of the world’s oil supply, has kept spending capital, keeping its drilling rigs near all-time records and maintaining its maximum sustainable capacity for oil, while also working to double its natural gas capacity and building its downstream portfolio, the minister said.
“The more of us who embrace this approach of continuing to prudently invest across the petroleum value chain regardless of short-term volatility, the better equipped we will be, individually and collectively, to survive the inevitable market cycles in the long run,” Al-Falih said. He also highlighted the importance of investment regarding the environmental impact of the industry, which will make the sector “more acceptable” in a time of technological changes and growing concerns about climate change.
The minister also praised OPEC for its recent agreement to cut production, which has led to a recovery of oil prices, and also the collaboration of major non-OPEC countries. “All of us realize that such an expanded network of producers with a larger share of global production is the only way to achieve a constructive, stable market for all.”