By Rania El Gamal, Davide Barbuscia and Marwa Rashad
DUBAI/RIYADH (Reuters) – The slump in demand for crude during the coronavirus pandemic has forced oil companies to contemplate the possibility that the fossil fuel market has peaked and the time for a global energy transition has come.
But Saudi Aramco plans to boost its production capacity so it can pump as much of Saudi Arabia’s vast oil reserves when demand picks up – before a shift to cleaner energy makes crude all but worthless, industry sources and analysts told Reuters.
With almost 20% of the world’s proven reserves and production costs of just $4 a barrel, Aramco believes it can undercut competitors and carry on making money even when lower oil prices make it unprofitable for rivals, the sources said.
Riyadh now plans to follow through on its apparent threat in March during an oil price war with Russia to raise its capacity to 13 million barrels a day (bpd) from 12 million bpd, officials and sources have said.
Aramco’s approach is in stark contrast to Western rivals such as BP and Shell which plan to curb spending on oil production so they can invest in renewable and green energy as they prepare for a low-carbon world.
With a renewed focus on oil, the state-run oil giant is also revising ambitious downstream expansion plans and now aims to grab assets in established projects in key markets such as India and China, rather than building expensive mega plants from scratch, the sources said.
“We expect oil demand growth to continue in the long term, driven by rising populations and economic growth. Fuels and petrochemicals will support demand growth … speculation about an imminent peak in oil demand is simply not consistent with the realities of oil consumption,” Aramco said in a