RIYADH, SAUDI ARABIA – The Kingdom’s surprise decision to halt a planned expansion of its oil production capacity reflects ambitions to expand into other forms of energy, the Gulf country’s energy minister said on Monday.
Oil giant Aramco announced on January 30 that the energy ministry had ordered it to maintain production capacity at 12 million barrels per day, abandoning a target of 13 million bpd by 2027.
Officials in the world’s biggest crude exporter did not explain the move, leaving analysts to speculate that it reflected lack of confidence that long-term oil demand would justify further capacity investment.
“I think we postponed this investment simply because… we’re transitioning,” Energy Minister Prince Abdulaziz bin Salman told a conference in the eastern city of Dhahran, where Aramco is headquartered.
“And transitioning means that even our oil company, which used to be an oil company, became a hydrocarbon company, now, it’s becoming an energy company.”
That will require further investments in other energy forms such as gas and renewables, he said.
“We have been saying all along that we are going to be the country that produces every source of energy,” he said.
The decision to put the brakes on the planned capacity expansion was not “made in haste” and instead came after “elaborate reviews”, he said.
Aramco’s profits are expected to finance the country’s economic and social reform program known as Vision 2030, which aims to lay the groundwork for a post-oil future.
Saudi Arabia has also pledged to achieve net zero carbon emissions by 2060 –- drawing intense scepticism from environmental activists.
Aramco has pledged to achieve “operational net-zero” carbon emissions by 2050, which does not include the emissions from customers burning its products.