Saudi energy minister Abdulaziz bin Salman on Oct. 5, 2022.
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Saudi’s state-controlled oil giant Aramco suspended its capacity expansion plans because of the green transition, Energy Minister Abdulaziz bin Salman said Monday, stressing that the future of energy security lies with renewables.
“I think we postponed this [Aramco capacity] investment simply because … we’re transitioning. And transitioning means that even our oil company, which used to be an oil company, became a hydrocarbon company. Now it’s becoming an energy company,” the Saudi prince said during a question and answer panel at the International Petroleum Technology Conference in Dhahran, noting that Aramco has investments in oil, gas, petrochemicals and renewables.
On Jan. 30, the Saudi energy ministry surprised the markets with a directive instructing the Saudi majority-owned Aramco, which went public in 2019, to stop plans to increase its maximum crude production capacity from 12 million barrels per day to 13 million barrels per day by 2027. The ministry did not disclose the reason behind its decision at the time, sparking questions over potential Saudi concerns over the future of oil demand amid a progressing energy transition.
The Saudi energy minister on Monday qualified the decision was not made hastily and was the product of a continuous review of market conditions.
“We are in [a] continuous mode of reviewing and reviewing and reviewing, simply because you have to view the realities [of the market],” he said.
Oil prices have spasmed through waves of volatility in the wake of the Covid-19 pandemic, weighed by lower-than-expected recoveries in Chinese demand and inflationary pressures. The global movement to decarbonize and stave off a climate crisis has redirected energy companies away from long-term fossil fuel projects in favor of greener investment pastures — and may redefine the outlook for energy security, Abdulaziz bin Salman signaled on Monday.
“Energy security in the 70s, and 80s and 90s was more dependent on oil. Now, you get what happened last year … It was gas. The future problem on energy security, it will not be oil. It will be renewables. And the materials, and the mines,” he stressed, noting that there is still a “huge cushion” of spare capacity available in the event of an emergency shortage. Previously, such supply shocks have struck by way of sanctions or attacks against oil infrastructure worldwide.
“Why should we be the last…