Oil demand may witness long plateau, but no abrupt fall seen: Aramco's CEO Nasser

Global oil demand may witness a long plateau, but it is unlikely to witness an abrupt fall, Saudi Aramco's CEO Amin Nasser said Oct. 21, adding that crude demand would still be hovering above 100 million b/d by 2050.

"Most analysts agree that even when the growth in global oil demand stops, at some point, no abrupt drop in overall demand is anticipated, and that stage is likely to be followed by a long plateau. So more than 100 million b/d would realistically still be required by 2050," Nasser said while speaking at the Singapore International Energy Week.

"Oil demand is at an all-time high. Gas demand has also grown by almost 70% since 2000. So rather than energy transition, we are really talking about energy addition," Nasser added.

He said that although oil demand growth had plateaued in a few mature economies, such as the EU, the US and Japan, those countries still consumed large quantities of oil.

"The global south is likely to see significant growth in oil demand for a long time, as national economies grow and living standards rise, just as developed countries enjoyed for decades," Nasser said.

Expectations from energy transition

Nasser said there was already a sizable gap between prediction and reality, despite billions of dollars being invested in the global energy transition.

"Transition progress is far slower, far less equitable and far more complicated than many expected. The current transition plan continues to ignore this reality, which is why it has failed to deliver in core areas," Nasser said, adding that energy has not been affordable, and energy transition progress was way off the track.

"For example, electricity prices in Europe rose as much as three to five folds in many countries over the past two decades, despite the shift to renewables," Nasser said.

He added that electric vehicles were certainly making progress, but out of almost 1.5 billion vehicles on the road, only 57 million are currently EVs. The low penetration level is mostly limited to the US, China and the more prosperous countries in the EU, driven by policies, subsidies and incentives.

In the rest of the world, particularly in Asia, Africa and Latin America, where a lot of the population and energy demand growth is expected, it is lagging amid affordability and infrastructure concerns, Nasser said.

"Electricity used to charge batteries comes from different energy sources in Asia. Almost 70% of the electricity is still powered by conventional energy, with only 12% by wind and solar," Nasser said.

Optimistic on China

He said China's recent stimulus measures would boost oil demand in Asia's biggest oil-consuming nation.

"We are very bullish about China, and their demand picking up, especially with the big stimulus package coming out from China's central bank. The other thing is, we're seeing more demand for jet fuel and naphtha, especially for liquid-to-chemicals. A lot of it is happening in China, mainly because of the growth in chemical needs. Especially for the transition, for electric vehicles, the solar panels, they need more chemicals," Nasser added.

China's central bank recently introduced an extensive stimulus package to revive relatively weak economic growth. While S&P Global Commodity Insights sees this move as something that can support prices in the near term, the sustainability of the optimism would depend on addressing underlying structural issues, such as weak private consumption and ongoing deflationary pressures.

Nasser said that Aramco also had an ambitious plan to grow its footprint in the country by cooperating with Chinese companies and mega refiners.

"We are investing big time. China has big ambitions [to grow] in the liquid-to-chemical market. Mainly because of the transition and the need for electric vehicles and solar, they need a lot of carbon fiber. They are building a lot of highly complex integrated refineries, with 60%-70% of liquid-to-chemical conversion facility, which is the highest level of complexity in the world. And we are investing in some of these refineries," Nasser said.

Geopolitical concerns

Commenting on how some of the Middle East suppliers were facing rising competition in key markets from Russia and other suppliers, Nasser said it was not a big concern for Aramco.

"We have long-term relationships with Indian customers and Chinese customers. Our reliability speaks for itself. So, because of that relationship and because of our reliability, we are maintaining our customer base. Even with the introduction of Russian crude in India and China, we are maintaining our customer base," he added.

Nasser said that Aramco was well-prepared for any unforeseen geopolitical turmoil.

"We are always having scenarios to respond to any unforeseen events,” he said, adding that supplies to customers were not interrupted even when their facilities were attacked in the past.

“We were able to make our facilities return to normal in two weeks," Nasser said.