Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman stated in an interview with S&P Global Platts last week that Saudi Arabia is no longer an oil-producing country. “Saudi Arabia is no longer an oil country, it’s an energy-producing country,” the Prince said, although he most likely did not mean the statement literally.
The Minister also shared in the interview that Saudi Arabia has high green ambitions that include gas production, renewable energy and hydrogen. “Not only are we an energy country, we are a very competitive energy country, and we are low-cost in producing oil, low cost in producing gas and low-cost in producing renewables and will definitely be the least-cost producer of hydrogen. I urge the world to accept this as a reality. We are going to be winners of all these activities,” he stated.
Although Saudi Arabia is officially raising its oil selling price to Asia in July, the country would continue pursuing its green ambitions tagged the “Saudi Green Initiative.” The country plans to fund this green initiative through oil sales. Saudi Arabia plans to generate 50% of its energy from renewable energy by 2030, in part to reduce its dependence on oil. In 2017, renewable energy made up just 0.02% of the overall energy share in Saudi Arabia.
The green initiative does not mean Saudi Arabia is planning on producing any fewer barrels of oil and it does not mean that Saudi Arabia is planning to halt funding for all new oil and gas projects. These activities are in contrast to what the recent IEA (International Energy Agency) report suggested the world must do to reach net-zero by 2050. Saudi Arabia has long maintained that oil will remain a dominant energy source for decades.
Prince Abdulaziz bin Salman said that the IEA’s net-zero pathway spelt out in its report was like a sequel to La La Land. “I would have to express my view that I believe it is a sequel of [the] La La Land movie, why should I take it seriously?” he stated.
The IEA’s roadmap concluded that if the world were to slash carbon emissions to net-zero over the next three decades, global oil supplies would need to shrink more than 8% annually, down to 24 million b/d in 2050, from pre-pandemic levels of just above 100 million b/d. That would mean no new oil and gas upstream projects would be developed.
Several oil-producing and oil-consuming nations have dismissed the report. OPEC said in a report to members seen by S&P Global Platts that, “The claim that no new oil and gas investments are needed post-2021 stands in stark contrast with conclusions often expressed in other IEA reports and could be the source of potential instability in oil markets if followed by some investors. While the [net zero] scenario seems overly ambitious in terms of assumptions and results, it will certainly influence investment decisions, which may curb demand (growth) for fossil fuels, such as oil and gas, as many policymakers and oil and gas companies use the IEA’s scenarios for their strategic planning.”
Saudi Arabia’s oil revenues, which will fund any green aspirations the country may undertake, have dwindled over the last year and a half, and state-run oil giant, Aramco had to hold bond sales just to pay its hefty dividend to the state.
Nevertheless, the world’s largest exporter of crude claiming it is no longer an oil-producing country is noteworthy indeed.