Global Oil Supply Crisis Looms as Industry Investment Declines, Aramco Chief Warns

Oil Industry Faces Supply Crunch After Decade of Underinvestment

The chief executive of Saudi Aramco, Amin Nasser, has issued a stark warning about potential global oil shortages, citing what sources indicate has been a decade of inadequate investment in exploration and production. According to reports, Nasser called for renewed spending as global oil demand continues to grow while current investment levels remain “extremely low.”

Shale Boom Unlikely to Repeat, Creating Supply Vacuum

Analysts suggest the US shale boom that flooded markets for fifteen years is unlikely to be repeated. “Eighty to 90 per cent of growth came from shale,” Nasser stated, adding that shale production is “most likely to plateau and decline” over the next 15 years. The report states this creates a significant challenge for meeting future demand growth.

Investment Declines Amid Energy Transition Pressures

According to the analysis, oil majors have been cutting exploration and production spending since the 2014 price crash, influenced by predictions of rapid energy transition and investor demands for higher returns. The International Energy Agency reportedly expects investment in oil and gas exploration to fall 6% to $420bn this year, marking the first annual decline since 2020’s pandemic-related slump.

Long-Term Supply Deficit Projected by 2040

Industry experts indicate that oil consumption is proving more robust than previously predicted due to slower clean energy adoption. Consultancy Rystad estimates this could lead to a global petroleum shortfall of nearly 10 million barrels per day by 2040. Nasser emphasized that with typical project development taking five to seven years, future supply depends on decisions made today.

Industry Leaders Echo Concerns Over Reserves

The concerns reportedly extend beyond Aramco, with multiple industry leaders expressing unease about reserves and long-term supply. The chief executive of Malaysian state oil company Petronas, Tengku Muhammad Taufik, told the Energy Intelligence Forum that “more exploration” was needed to fill “a vacuum.” Occidental Petroleum CEO Vicki Hollub noted that only a quarter of annual oil consumption is being replaced through new discoveries.

Current Market Conditions Mask Long-Term Risk

Despite the long-term warnings, analysts suggest the market currently faces oversupply concerns, with oil prices forecast to fall below $60 a barrel next year as OPEC+ countries increase production. However, the industry’s continued investment cuts in anticipation of prolonged downturn could potentially exacerbate the supply concerns raised by Nasser and other industry leaders.

Exploration Challenges Beyond Investment

According to reports, the problem extends beyond mere investment levels. Hollub noted that “it’s not just investment that’s the problem, it’s finding the bigger reservoirs.” She highlighted that even major discoveries like ExxonMobil’s in Guyana would only meet a small portion of global demand, emphasizing the scale of the challenge facing the industry.

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