The chief executive of the world’s largest oil company has said that the Global South does not have the capital needed to transition to clean energy, and trying to impose an “unworkable and unaffordable” energy transition plan on developing countries will threaten their economic progress and social cohesion.
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Speaking at Singapore International Energy Week on Monday, Amin H. Nasser, CEO of Saudi oil major Aramco, said that while rich-world countries had made progress in moving away from fossil fuels, emerging economies have not been able to afford mass investments in clean energy, which would cost poorer nations in the region of US$6 trillion a year.
Developing countries should be looking to invest in “secure and affordable” energy sources, such as oil and gas, or else see their dependence on cheaper, more polluting coal increase, he said.
“In a transition that will require a staggering amount of front-end capital investment, the cost of capital is more than twice as high in developing countries where the need is greater,” Nasser said.
Climate finance for developing countries will be a key negotiation point at COP29 next month, with current president Mukhtar Babayev aiming to get fossil fuel producers to contribute to a voluntary US$1 billion fund.
“For the least developed countries, the future looks especially bleak if many have to spend up to half their total gross domestic product (GDP) every year on transition finance. Which is why almost all the recent growth in clean energy investment has been in advanced economies and China,” he said.
While the energy transition has been relatively slow in Asia – a region which Nasser noted relies on fossil fuels for 84 per cent of its energy – the region has also been on the sharp end of climate impacts. Economic losses in the region, driven primarily by floods in China and drought in India, reached US$65 billion in 2023.
Pollution from burning fossil fuels kills one in five people globally, with a greater proportion of pollution-related deaths occurring in developing Asia, where dirty energy has a larger share of the energy mix.
‘A transition plan that works’
The boss of the state-owned petroleum firm, which saw its second quarter profits dip to US$29.1 billion amid low crude production volumes, said that the world “urgently needs a transition plan that works”, as opposed to pursuing “half baked alternatives” to fossil fuels.
While he acknowledged the need to accelerate the development of renewables, developing nations should focus on improving “reliable energy sources” that they “need and can afford” by reducing greenhouse gas emissions from existing oil and gas operations, he said.
Once renewable energy can compete on price and performance with fossil fuels, Nasser said consumers can use low-carbon products “without demanding subsidies and tariffs that distort markets”. The fossil fuel sector received a record US$7 trillion in subsidies globally in 2022, more than triple what renewables received.
“Our main focus should be on the levers available now,” Nasser said. He stressed the importance of carbon capture, use and storage (CCUS) – a largely unproven, costly technology – in reducing the emissions of carbon-intensive energy sources like oil and gas while renewables are scaling up.
“We need to reduce our carbon footprint by using CCUS as well as making other efficiency improvements while we’re building renewables. We should not be shifting to plan B without making sure plan A is affordable,” he said.
While oil growth has plateaued in some mature economies, the Global South is likely to see “significant growth in oil demand for a long time,” as economies grow and living standards rise, said Nasser, whose company was headline sponsor of SIEW.
Aramco, which is the biggest corporate emitter of greenhouse gases worldwide, has committed to reaching net zero by 2050. However, Aramco’s net zero targets do not take into account Scope 3 full value chain emissions resulting from oil and gas exports, and the company has been accused of greenwashing its climate targets.
Nasser’s speech was made on the same day that more than 100 professional female footballers called on football industry body FIFA to drop Aramco as its sponsor, because of the company’s history of lobbying to delay climate action.
Record renewables additions
Speaking after the Aramco boss, Francesco La Camera, director general of the International Renewable Energy Agency (IRENA), said that clean energy was not being deployed fast enough to meet the target set at the COP28 climate talks last year to triple renewables by 2030.
However, he noted that last year 73 gigawatts of renewable energy came online – an amount that had taken nuclear energy 70 years to develop – and 2024 was set to be another record year for renewable energy capacity additions.
In most of the world, renewables are now the cheapest way to produce electricity, La Camera said. “The new energy system will be largely dominated by renewables – this is happening and no one will stop it,” he said.
“The problem is not the direction of travel – which is perfectly clear. The problem is whether the speed and scale of the transition is consistent with the commitment of the Paris Agreement to keep the global temperature below 1.5 degrees Celsius.”
