Saudi Aramco says world faces major oil crunch

The head of Saudi Aramco told Reuters that the world is facing a major oil supply crunch because most companies are afraid to invest in the sector due to green energy pressures.

Amin Nasser, head of the world's largest oil producer, said on Monday he was sticking to the goal of 13 million barrels per day, from the current 12 million by 2027, despite calls to do it faster.

The world has less than 2% of spare capacity. Before COVID, the aviation industry was consuming 2.5 million barrels per day more than today. Nasser told the World Economic Forum in Davos if the aviation industry picks up speed, you are going to have a major problem, Nasser said.

What happened in Russia-Ukraine masked what would have happened. We were going through an energy crisis because of a lack of investment. He added that it started to bite after the pandemic.

Nasser said that China's COVID restrictions would not last long and global oil demand would resume its growth.

Saudi Arabia is currently producing 10.5 million barrels per day, or every tenth barrel in the world, and will likely raise output to 11 million barrels per day later this year when a pact between OPEC and allies such as Russia ends.

Riyadh has faced calls from the West to increase output and expand capacity faster to help combat the energy crisis.

If we could expand capacity before 2027, we would have done it. This is what we tell policymakers. It takes time for Nasser to say that there is a disagreement between the oil industry and policymakers over the transition from fossil fuels to energy that does not result in carbon emissions.

I don't think there is a lot of constructive dialogue going on. We are not brought to the table in certain areas. He said that we were not invited to the COP in Glasgow and referring to the last year's UN climate conference in Glasgow, Scotland.

He also said last year that the International Energy Agency said world oil demand was set to fall and no new investment in fossil fuels would have a significant impact on the world's economy.

We need to have more constructive dialogue. They say they don't need you by 2030, so why would you go and build a project that takes 6 -- 7 years. He said that the energy transition process was often proving chaotic and disruptive because of your shareholder's refusal to allow you to do it.

When you don't have plan B ready, don't demonise plan A, he said. The pressure and the rhetoric is - don't invest, you will have stranded assets. It makes it hard for CEOs to make investments. So-called stranded asset theory is the idea that significant oil and gas reserves are left unused because they are longer needed.

Nasser said missteps would only encourage greater use of coal by many Asian countries during the global energy transition.

The priority for policymakers in those countries is to put food on the table for their people. If coal can do it half the cost of coal, Aramco, where Saudi Arabia is the main shareholder, was different as it invested in both fossil fuel and energy transition.

But what we are adding is not enough to meet the energy security of the world.