Oil industry faces ‘crisis of perception,’ says Saudi Aramco chief

DUBAI: The oil industry faces a “crisis of perception” among its stakeholders that puts at risk its ability to supply energy to billions of customers, according to Amin Nasser, the chief executive of Saudi Aramco.

In a hard-hitting speech at the International Petroleum Week gathering of energy professionals in London on Tuesday, Nasser responded to critics who say that the oil industry is on the decline, and that petrol-burning motor cars will soon be replaced by electric vehicles.

“There is a worrying and growing belief among policy makers and regulators, investment houses, NGOs, and many others that we are an industry with little or no future,” he said, in a transcript of the speech released in advance. 

Nasser cited a recent survey that revealed that the energy sector faces “greater reputational challenges” than any other.

He told of two encounters at the World Economic Forum annual meeting in Davos last month where senior figures in the financial industry had attacked the oil industry.

“One senior financial figure I spoke to confidently predicted the end of our industry in about five years. Another was slightly less pessimistic — but he speculated that most vehicles on the road would be electric in five to 10 years, when today they account for less than half a percent,” Nasser said.

“In other words, important stakeholders believe that the entire world will soon run on anything … but oil! These views are not based on logic and facts, and are formed mostly in response to pressure and hype … My encounters in Davos showed me that fewer and fewer of our stakeholders accept logic and facts, least of all from us,” he said.

But these critical views were “sincerely held,” he said, showing that stakeholders were “clearly tuning out.”

Nasser highlighted statistics showing that passenger vehicles only account for 20 percent of the world’s oil demand, and that there were as yet no alternative sources of fuel for aircraft, ships, trucks, as well as the petrochemical and lubricants industries, where demand for oil is expected to rise substantially.

He also pointed to the “intermittent nature” of renewable sources, and the disruption to infrastructure that would be needed, especially in under-developed countries, for a switch to renewable energy sources.

“And people gloss over the reality that today, in many countries, more electric vehicles means more coal-powered vehicles. In fact, in some of the world’s most populated countries, up to three-quarters of electricity is generated by coal,” he told the audience.

The speech came a day after US President Donald Trump had complained about the price of crude oil, blaming the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is a leading member.

But Nasser warned of the consequences if crude supply were to fall substantially. “Only recently, we saw what a supply deficit of a couple of million barrels per day can do to the oil market. Imagine what 20 million barrels fewer per day would do — which would be the shortfall in five years if investments stopped today.

“And the impact would be even more profound for economies, societies, and people if demand continues to grow over the next five years, as we expect. Ironically, higher oil prices would cause much less pain to us than most,” he added.

Nasser outlined five areas where the oil industry required “urgent, collective effort” to counter the perceptions crisis.

These include showing that the industry understands the concerns and is willing to act on them, for example in the development of cleaner fuels; demonstrating that Big Oil is tackling environmental, social and governance issues; emphasizing the technological advances the industry drives, especially in energy efficiency; pushing back on the criticisms that oil is a bad financial investment and that demand for it will soon peak; and by highlighting the “inspirational” aspects of the industry, like its ability to improve living standards.

“Our industry has made a pivotal and sustained contribution to the global economy and people’s lives, around the world, day after day for over a century. Two billion more people today have access to ample, affordable, and reliable sources of energy than even just a generation ago,” he said.