The CEO of Saudi Aramco, Amin Nasser, was recently quoted at a conference in Istanbul as saying that the world is likely heading towards an oil supply shortage before too long as a result of falling discoveries of new conventional oil reserves and steep drops in new investment.
This situation — peak oil for conventional oil fields, which was passed several years back, and the growing dependence on expensive “unconventional” options — is one that we’ve reported on numerous times now.
We’ve also reported on the way that the oil price crash of recent years has led directly to rapid increases in the debt levels at many top oil companies, and to a steep drop in new investments.
While taking an oil exec at their word when they’re discussing the oil market is probably ill-advised, in general, Nasser is more or less just stating the blunt reality of the situation here — as far as general trends go, oil is only going to get more expensive as time goes by, as cheap conventionals are rapidly being depleted.
“If we look at the long-term situation of oil supplies, for example, the picture is becoming increasingly worrying,” Nasser commented, as reported by Reuters. “Financial investors are shying away from making much needed large investments in oil exploration, long-term development and the related infrastructure. Investments in smaller increments such as shale oil will just not cut it.”
To put a figure to that, around $1 trillion in new investments have been “lost” since 2014 or so. This only compounds the situation as regards the increasing difficulty of finding new conventional oil reserves. The easiest to find and develop have been in production for a long time now — what remains are the less attractive options.
“New discoveries are also on a major downward trend. The volume of conventional oil discovered around the world over the past four years has more than halved compared with the previous four,” Nasser continued.
Commenting on Saudi Aramco’s near-term plans, Nasser stated: “We plan to invest more than $300 billion over the coming decade to reinforce our pre-eminent position in oil, maintain our spare oil production capacity, and pursue a large exploration and production program centering on conventional and unconventional gas resources.”
It should be realized here that every time in recent years that a country that is heavily dependent upon oil production has surpassed peak oil, severe economic and social problems have followed not too long afterwards. Syria and Egypt both make very good examples in that regard.
Over the mid- to long-term, Saudi Arabia is likely facing a very similar situation to that of those two countries — so the survival of the current regime is closely tied to the ability to maintain current production levels. Hence the $300 billion pledged for investment.
While western media has pretty much stopped reporting on what’s happening in the country, I’ll note here that Egypt is continuing to come apart at the seams — food and water supply problems are growing day by day, and social breakdown + cultural/ethnic conflicts are as well.
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