Oil giant Aramco says windfall taxes ‘don’t help’ and could stifle decarbonization
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Pressuring oil companies by raising taxes is counterproductive at a time when global demand for crude is expected to exceed supply, said the CEO of Saudi Aramco, the world’s largest and most profitable energy company, at the World Economic Forum in Davos, Switzerland.
Asked by CNBC’s Hadley Gamble if a windfall tax on oil profits is a bad idea, Amin Nasser replied:
“I would say it’s not useful for them [in order] have an additional investment. They need to invest in the sector, they need to grow the business, in alternative and conventional energies, and they need to be helped.”
The CEO added that the green transition also requires investment, which he said is likely to be hit if companies face increased taxation.
“Decarbonizing existing resources also costs a lot of money,” he said. “So we need to see support from policymakers and capital markets at the same time. Capital Markets [are] also putting a lot of pressure on those companies, where it’s too difficult for them to make some of those investments and get the right funding and capital.”
Policymakers in a number of countries are calling for windfall taxes on big oil and gas companies, many of which posted record profits last year amid supply shocks and years of underinvestment in the sector pushed prices to multi-year highs.
The debate around the oil industry has been dominated by tensions between the desire for cleaner energy sources to combat climate change and the need for energy security, with demand for fossil fuels remaining high.
The International Energy Agency’s latest oil market report released on Wednesday predicts global oil demand will rise by 1.9 million barrels per day in 2023 to a record 101.7 million barrels per day. – while oil supply growth is expected to slow to 1 million barrels per day in the same period.
The United Nations Intergovernmental Panel on Climate Change has warned that fossil fuel emissions must be halved over the next decade if global warming is to be contained to 1.5 degrees Celsius below. above pre-industrial levels. According to the panel, around 90% of global CO2 emissions come from fossil fuels and heavy industry.
In October, a research team led by Oregon State University reported that several of the planet’s vital signs had reached “code red” and that “humanity is unequivocally facing a climate emergency.” Their report revealed that by 2022 the carbon dioxide content in the atmosphere had reached a level not seen for millions of years.
The decline in hydrocarbon deliveries to Europe, following EU sanctions against Russia, has revealed how vulnerable much of the world remains to energy supply shocks. Homes and businesses are facing record energy costs, while renewables are not yet able to close this gap.
Aramco’s Nasser pointed out that energy security concerns last year prompted some European countries to reopen their coal mines – huge sources of carbon emissions – with coal reaching its highest level of global consumption never recorded in 2022.
The CEO said he believes in the importance of the energy transition, but this balance is necessary to achieve this endgame:
“There’s no question the transition has to (happen),” he told CNBC. “At the same time, we need…to build oil and gas, while [we] decarbonize oil and gas. We need support for alternatives. But at the same time, we need the support of conventional energy sources by building carbon capture and storage and giving incentives and support by policy makers. »
He added, “They shouldn’t call it the short term. They should really extend their support for these things to co-exist in the long term.”
Nasser reiterated what he called the “energy triangle”: “Security, accessibility and sustainability. At the heart of this is climate change,” he said. “You cannot meet the climate change aspiration without these three elements, namely security of supply.”