Aramco: Peak oil demand fears overblown

Bloomberg

Saudi Arabia’s oil company isn’t afraid of electric vehicles. As it prepares to sell a stake in the company to investors, the CEO reassured a Houston audience that the need
for petroleum isn’t going away any time soon.
“I am not losing any sleep over ‘peak oil demand’ or ‘stranded resources,”‘ Saudi Aramco Chief Executive Officer Amin Nasser said at the CERAWeek by IHS Markit conference. “We must push back on the idea that the world can do without proven and reliable sources” of energy, he told the gathering. “Oil and gas will continue to play a major role in a world where all energy sources will be required for the foreseeable future.”
Aramco, with an estimated 260 billion barrels of oil reserves, is the centerpiece of Saudi Arabia’s mission to re-invent itself as a diversified economic powerhouse. The government plans this year to sell about 5 percent of the company, known officially as Saudi Arabian Oil Co., in what could be a record public offering.
Nasser largely avoided talking about the IPO, saying only that it would happen “where and when” the Saudi government decides. Unlike in prior speeches, where he’s repeatedly said the IPO would happen by the end of 2018, Nasser gave no time frame.
Khalid Al-Falih, the Saudi oil minister, has softened his language on timing, saying in January that “he hoped” that 2018 would be a right time for the IPO. Nasser and Aramco officials later declined to answer questions about the IPO’s timing.
Meanwhile, a growing body of research is painting a bearish picture for oil beyond the next 20 years as more environmentally friendly vehicles hit roads across the globe. Rapid adoption of electric vehicles could mean oil demand peaks by the 2030s, according to Bank of America Corp. and BP Plc, a prospect that’s likely to worry institutional investors in the energy industry.
But Nasser criticised “irrational hopes of rapid switching” and said electric vehicles won’t deliver quick and cheap reductions in carbon emissions until the power that fuels them is clean. Future transportation will not be a matter of “either/or” between internal combustion engines or electric vehicles, he said, pointing to alternatives that include hydrogen-fueled cars and plug-in hybrids.
The challenges for large-scale use of transportation alternatives are affordability and infrastructure, he said. Observers are glossing over the difficulty governments will have subsidising huge fleets of electric vehicles, according to Nasser.
He called on the industry to expand exploration, push to offset natural declines in producing fields and spend more than $20 trillion dollars in the next 25 years to meet rising demand.
“Battery electric vehicles will grow and have a welcome role to play in global mobility,” Nasser said. “But given the competition and complexity of the transition, their impact on the 20 percent oil demand should not be exaggerated.”
He also pointed to the increased demand for oil outside of transportation, which makes up 20 percent of consumption, including its use in petrochemicals and air transport.

Russia’s Sibur targets Aramco venture
LONDON / Reuters

Russian petrochemical group Sibur is in talks with Saudi Aramco to set up a venture to produce synthetic rubber, its chief said in a move highlighting growing cooperation between OPEC leader Saudi Arabia and Russia, the biggest non-OPEC oil exporter.
Russia and Saudi have forged closer ties in the past two years as part of efforts to prop up oil prices by curbing output. The deal between OPEC and Russia has opened the door to political dialogue and has also encouraged talks on bro-ader bilateral investment in the energy sector. “The Saudi-Russian dialogue has probably accelerated the project, even though we started discussion some four years ago,” Sibur head of management board Dmitry Konov told reporters. The two companies signed a cooperation memorandum last year when Saudi King Salman visited Russia but so far have not disclosed project details.
Konov said Sibur was looking to export its synthetic rubber technology because of low feedstock availability in Russia and low domestic demand growth. Good feedstock availability in Saudi Arabia and growing Asian markets could make the project attractive, Konov said.