The president and CEO of Aramco says Asia’s priorities, like that of the Global South, are being ignored by the developed markets as they push ahead with the energy transition.
This is despite Asia accounting for “almost half” the world’s GDP as well as half the world's population, says Amin Nasser, head of Saudi Arabia’s state-owned oil giant. “This year alone, Asia is likely to contribute roughly 60% of the global economy growth and Asia consumes more than half of global energy supplies. Crucially, 84% of the consumption is still supplied by conventional energy. In short, Asia is vital to the global economy, our shared climate ambition and the hopes and dreams of billions of people.”
Speaking on the opening day of the Singapore International Energy Week (SIEW) 2024 on Oct 21, Nasser says Asia’s progress on the energy transition is “far slower, far less equitable and more complicated than many [have] expected”.
“This may be Asia’s century, but Asia's voice and priorities — like those of the broader Global South — are hard to see in the current transition planning, and the whole world is feeling the consequences,” says Nasser.
Nasser even bookended his 14-minute speech by invoking Singapore’s founding prime minister Lee Kuan Yew, alluding to the late politician’s pragmatic approach to nation-building.
“[Asia’s populace] hunger for something that connects the passion for the net-zero future we all want with a reality we can all afford and a relentless focus on what works. This was Mr Lee Kuan Yew's mindset, and I believe it would change ‘mission impossible’ into ‘mission possible’.”
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Affordability, infrastructure concerns
Nasser cites electric vehicle (EV) adoption to illustrate his point of an overlooked Asia.
“Electric vehicles are certainly making progress, but out of almost 1.5 billion vehicles on the road, only 57 million are EVs, or less than 4%. Even the low level of penetration is mostly limited to the US, China and the richer countries in the EU, driven by policies, subsidies and incentives,” says Nasser.
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In the rest of the world — “particularly in Asia, Africa and Latin America” — EVs lag “far behind”, he adds. “Consumers generally struggle with affordability and infrastructure concerns.”
While Nasser acknowledges that oil demand has “plateaued” in “mature economies” such as the European Union (EU), the US and Japan, he says “they still consume large quantities of oil”.
Emerging markets will consume much more oil in the future as they develop, he adds. “While US oil consumption is roughly 22 barrels per person per year, and the EU is around nine barrels, it is 2.4 barrels in Vietnam, 1.4 barrels in India and only one barrel in Africa. So, the Global South is likely to see significant growth in oil demand for a long time as national economies grow and living standards rise, just as developed countries [have] enjoyed for decades.”
Even if the growth in oil demand reaches a standstill, Nasser says “most analysts” foresee a “long plateau”, and not declining demand. “More than 100 million barrels per day will realistically still be required by 2050. This is a stark contrast to those predicting that oil will almost fall to just 25 million barrels every day by 2050. Being short 75 million barrels every day will be devastating for energy security and affordability,” he adds.
Ignoring reality
The current transition plan continues to ignore reality, says Nasser, whose company has been the world’s largest corporate greenhouse gas emitter since 1965.
Nasser lists three promises that he believes the clean energy industry has failed to deliver thus far. “One, energy that is affordable. For example, electricity prices in Europe rose as much as three- to five-fold in many countries over the past two decades, despite the shift to renewables. Two, progress is way off-pace. I mentioned low EV penetration; wind and solar combined supply under 4% of the world’s energy. Three, transition will be expensive for everyone, with [an] estimated US$100 [trillion to] US$200 trillion required globally by 2050. For developing countries, almost US$6 trillion may be required each year.”
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Many countries in the Global South cannot afford large-scale investment in new energy, says Nasser, “especially when many countries are only at the start of their development journey”.
For the least-developed countries, the future looks “especially bleak” if many have to spend up to half their total GDP every year on transition alone, adds Naser. “Trying to force an unworkable, unaffordable transition plan on them will only cripple their economic progress and even social cohesion.”
In a subsequent question-and-answer segment, Nasser says of the energy transition: “We should not be shifting to ‘Plan B’ without making sure that ‘Plan B’ is affordable to the majority of the people.”
Instead, each country should choose an energy mix that helps them meet their climate ambitions “at a speed and manner that is right for them”, says Nasser.
The world must also accelerate the development of new energy sources and lower-carbon technology, he adds, which can one day compete on price and performance. “Consumers can then embrace lower-carbon products without demanding subsidies and tariffs that distort markets.”
