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Riyadh: Taxing oil companies and capping energy bills is not a long-term solution to the global energy crisis, according to Saudi Aramco CEO Amin Nasser, who warned of a lack of investment in the industry.
Governments across Europe have poured hundreds of billions of euros into tax cuts, relief and subsidies to combat an energy crisis that is driving up inflation, forcing industry shutdowns and raising bills ahead of winter.
Under a plan announced by the European Union last week, excess profits from energy companies would be stripped out and redistributed to ease the burden on consumers.
Nasser, the head of the world’s largest oil exporter, said continued underinvestment in the hydrocarbon industry was one of the root causes of the problem, while alternatives to fossil fuels were still not readily available.
“Freezing or capping energy bills may help consumers in the short term, but it doesn’t address the real cause, nor is it a long-term solution,” Nasser told a forum in Switzerland.
“Taxing companies when you want them to increase production obviously doesn’t help.”
He added: “Even if the Ukrainian conflict ends today, the energy crisis will not end. The real cause of energy insecurity is insufficient investment in oil and gas.”
Aramco has been investing to increase Saudi Arabia’s oil production capacity to 13 million barrels a day by 2027, but Nasser warned that global investment in hydrocarbons remains “too little, too late, and too short.”
The lack of investment comes as spare capacity is scarce and demand is “pretty healthy” despite strong economic headwinds.
“When the global economy recovers, we can expect demand to rebound further, removing the small amount of spare oil capacity there,” Nasser said, adding: “That’s why I’m seriously concerned.”
However, Nasser noted that limiting energy bills may help consumers in the short term.
He added that global climate goals should not be changed because of this investment crisis.
“Investing in conventional energy doesn’t mean that alternative energy and technologies should be ignored. But the world should respond better to this crisis,” he said.
Nasser further added: “We are working to reduce upstream carbon intensity, natural gas flaring and methane intensity, which are already among the lowest in the world.”
A report released last month by the King Abdullah Center for Petroleum Research and Research showed that to ensure energy security in 2025 and beyond, investment in the oil industry must increase significantly as the pandemic makes investment in the sector even more problematic. obvious.
According to the KAPSARC report, the investment forecast for 2022 is not optimistic.
The report estimates that global oil and gas investment, including midstream and downstream, will increase by just $26 billion this year, well short of the $140 billion required to increase upstream capital spending in 2025.
The report added that climate change “misunderstandings” were one of the key factors driving investors away from the oil industry.
“The oil and gas industry has suffered from external reputational damage due to climate and social misunderstandings, and the resulting stigma affects its investment attractiveness,” KAPSARC said in the report.
According to the report, the top four challenges that negatively impact investment in the industry are price volatility, uncertainty caused by widely divergent long-term forecasts, growing concerns about climate change, and a lack of environmental, social and governance regulation.
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