Home Economy Saudi Aramco Chief Warns of Looming Oil Shortage

Saudi Aramco Chief Warns of Looming Oil Shortage

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                Saudi Aramco Chief Warns of Looming Oil Shortage

Saudi Arabian Oil Co. Chief Executive Officer Amin Nasser warns that there is a tremendous oil shortage looming because if a recent $1 trillion plunge in crude production investment since 2014.

“The large new production capacity and investment we will need in the future are lagging, and in fact missing in many cases,” Nasser said, Bloomberg reported. “While the short-term market is pointing to a surplus of oil, the supply required in the coming years is falling behind,” he said.

He predicted that 20 million barrels a day in future production capacity was required to meet demand growth and offset natural field declines, the Financial Times reported,

“That is a lot of production capacity, and the investments we now see coming back — which are mostly smaller and shorter term — are not going to be enough to get us there,” he said at the Columbia University Energy Summit in New York.

This, he said, would lead to a “shortfall” that would emerge after a time lag and “whose duration is difficult to estimate.”

Many indicators are pointing to a more balanced market, Nasser said. The combined inventories of countries in the Organization for Economic Cooperation and Development are flattening and poised to drop, among other signs that the market is tightening, he said.

Saudi Arabia, the Organization of Petroleum Exporting Countries’ biggest producer, is cutting output as it leads efforts to eliminate a global crude glut and bolster prices. The country produced almost 10 million barrels a day in March, it reported to OPEC. All the country’s oil was pumped by Saudi Aramco, as the company is known.

Aramco, which has agreed to pay Royal Dutch Shell Plc $2.2 billion to break up a 19-year refining partnership known as Motiva Enterprises LLC, is discussing several refining and marketing joint ventures in Southeast Asia, such as Indonesia, Nasser said.

With about 60 percent to 70 percent of its exports going to Asia, it’s very much focused on growth in this area, which includes looking for investments within China’s downstream sector. The company is also evaluating opportunities in the U.S. as part of its plan to increase its global refining and marketing capacity to between 8 million and 10 million barrels a day.

"The future market situation will be increasingly on firmer grounds, though volatility could continue until the rebalancing takes firmer hold and inventory withdrawals assume a more consistent trend," he said.

In both 2018 and 2019, Aramco expects demand to continue to grow, and Nasser said he expects the growth will continue into the years ahead, Reuters reported.

"I believe that peak demand is not in sight," he said, when asked whether the market was approaching peak demand.

Nasser's warning came just a day after a similar caution flag to the crude market.

The International Energy Agency expects growth in the global demand for crude oil to slow for a second consecutive year in 2017. The Paris-based agency expects growth of 1.3 million barrels a day this year, compared with 1.4 million barrels previously forecast, due to stalled demand in the U.S., Middle East, Russia and India, the Associated Press reported.

(Newsmax wires services contributed to this report).

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