$1 trillion investments lost in ongoing global oil industry downturn
A whooping sum of $1trillion in investments is estimated to have been lost by crude oil investors in the current downturn that has gripped the industry, Amin Nasser, president and chief executive officer of Saudi Aramco, is quoted by Bloomberg to have said Monday.
A deeply uncertain oil supplies outlook has gripped the world for months and Nasser described it as “increasingly worrying”, especially in the face of fewer new deposits being discovered. Some estimates suggest that at least 20 million barrels a day of new output is needed over the next five years to offset oil demand and the natural decline in developed fields, he is quoted to have said at conference in Instable, Turkey.
Nasser spoke as he unfolded an ambitious plan by the state oil company, Aramco, to invest more than $300 billion over the next decade to maintain its spare oil-production capacity and explore for more natural gas.
The company already has in place plans to embark on what could be the world’s biggest initial public offering. State run and known formally as Saudi Arabian Oil Co., the world’s biggest oil exporter, boosted production to an annual record last year before the kingdom led the Organization of Petroleum Exporting Countries and other producers to curb output to stem a global glut.
Aramco is also at the heart of the nation’s long-term strategy to wean its economy off oil. The government plans to sell about 5 percent of the company in 2018 in what could be a record IPO.
“There seems to be a growing belief that the world can prematurely disengage from proven and reliable energy sources like oil and gas, on the mistaken assumption that alternatives will be rapidly deployed,” Nasser said in a speech. The petroleum industry will be at the heart of global energy for years, and the transition to use of alternatives will be “long and complex,’ he said.
Current oil prices won’t affect the company’s decision for a planned share sale, Nasser told reporters at the conference. Brent crude, the international benchmark, has slid 19 percent this year and was 45 cents lower at $46.26 a barrel at 12:14 p.m. in London Monday.
“Financial investors are shying away from making much needed large investments in oil exploration, long-term development, and the related infrastructure,” Nasser said in his speech, putting part of the blame on what he said were “misleading arguments about peak oil demand and stranded resources.”
The volume of conventional oil discovered around the world over the past four years, for example, is down more than 50 percent from the previous four years, he said.
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“Investments in smaller increments such as shale oil will just not cut it. Yet without those higher investment levels, the energy transition — and therefore energy security — may be fatally compromised.”
According to Nasser, Aramco plans to spend $300 billion on projects over the next 10 years to maintain its spare oil production capacity, the biggest by far in OPEC, and boost exploration and output of conventional and unconventional gas.
“Three hundred billion dollars over 10 years is a strong statement for Saudi Aramco, especially against the backdrop of the current oil environment which has strained the Saudi budget,” said Will Hares, an energy analyst at Bloomberg Intelligence in London. “This may form a response to its concerns of a long-term supply deficit resulting from under-investment in the industry since 2014.”
Aramco’s capital investment programme last year was its biggest ever, he said, without specifying what it spent. The company is looking to invest in new offshore oil projects, pending approval by the board, and it isn’t planning to increase production capacity with new projects but rather to maintain current oil output, he said.