The world’s top energy exporters Russia, Saudi Arabia and Qatar put a splash of pragmatism on energy transition aims, saying that reduced oil and gas investment would only increase prices.
The world will be relying on oil and gas “for decades to come” and failure to invest will only lead to higher commodities prices, Russian Deputy Prime Minister Alexander Novak said at Russia’s showcase economic forum in St. Petersburg. Producers aren’t planning to scale back investments, he said, stressing the need to act responsibly while also developing non-carbon sources.
The comments were a response to International Energy Agency Executive Director Faith Birol, who earlier this month said that investments in new oil, gas and coal projects would need to be halted to reach net zero carbon emission by 2050.
Major international oil and gas companies such as Total, BP and Royal Dutch Shell are diverting annual investment streams to renewable energies as governments increasingly battle global warming. Meanwhile, in the United States, ExxonMobil expects to lose a third board seat to an activist hedge fund, Engine No 1.
Change is certainly in the air. Some of it is no doubt related to the global nature of the pandemic, which has spurred governments and investors to be more conscious of factors beyond profit. Yet those notions bear long-term character. And the likes of Shell and Total are a slightly different species than national oil producers.
Oil prices are currently at their highest level in over a year. Saudi Arabia and Qatar, who are partners with Russia in OPEC +, are managing current return in oil prices by gradually letting supply back onto the market. As for the immediate future, it would be premature to talk about oil prices overheating before seeing higher demand, Russia’s RIA News quoted Abdulaziz bin Salman Al Saud, Minister of Energy of the Kingdom of Saudi Arabia as saying.
The Saudi minister agreed with principles of the energy transition but found that “the devil is in the details.”
Saad Sherida Al-Kaabi, Minister of State for Energy Affairs of the State of Qatar, stressed the need to produce in a more environmentally sensitive way. That includes monitoring methane emission and using carbon capture. Yet Al-Kaabi stressed caution on depriving the sector of investment.
In some ways, the different approaches of international oil majors and national oil producers such as OPEC+ nations makes sense. These exporting nations are in control of oil, which is much cheaper to produce. As a result, OPEC nations are able to occupy the swing producer role and help manage price volatility.
So for an international producer – which sees higher production costs or more risky exploration costs – it’s less of a jump to exit less profitable fields and switch to renewables.
On the surface, big oil-producing nations aren’t really sweating the transition yet.
On the other hand, Russia’s economic forum has always been teaming with oil and gas executives, officials, and investors from all over the world – with or without sanctions. But this year, hardly any executives from the industry participated in any panels at all.