Rising global energy demand growth means that renewable energy resources alone are unlikely to meet the planet’s energy requirements, said Eng Salim bin Nasser al Aufi, Minister of Energy and Minerals.
He noted in an interview with CNBC Middle East that other energy resources would continue to be required during the global energy transition journey.
Speaking on the sidelines of the UN COP27 climate conference in Egypt’s coastal city of Sharm El Sheikh, Al Aufi stated: “The world will need all the energy it can get hold on off (and) we are still producing coal today. We have been talking about getting rid of coal production for quite some time. The world needs energy. If we go forward to 2050, there will be more energy demand, and not less. It will be foolish for us to assume that the world energy requirement is going to go down and we can meet the demand with renewable energy, and so on.” Al Aufi also stressed the importance of energy affordability if the energy transition is to succeed. “Energy has to be affordable for every person to get access to. There is no point providing energy that is not affordable,” he said.
Asked to comment on the recent Saudi-led production cut, the Minister said, “The production cut is helping to balance it (the price), and really helping to try avoid price spikes probably in the future if we are not careful. We are trying to balance it.” Opec+, at its meeting on October 5, agreed a 2 million barrel per day output cut that triggered mixed reactions from the West, with the US calling it “shortsighted”.
He said he was not surprised at the West’s reaction to the production cut. “It was expected. I would be surprised if the reaction was anything different. We still believe it was a right decision. Looking at the numbers now, we believe it was a right decision. The world needs a bit of reflection point, a bit of courageous move to try and balance it.” He further added: “There is no point making short term gains for a long term pain for everybody. We’ve been doing this since 2016 trying to play a very difficult act of balancing the supply and demand, and so on. It’s not an easy task, and so far it was executed quite well, with all the pluses and minuses, of pros and cons and so on, and it will be foolish for us to assume that every decision Opec+ makes will be accepted by the international community.” Earlier, in remarks to journalists on the margins of the Summit, Al Aufi said he foresaw oil prices prevailing at around $90/barrel “until the end of winter, probably by end of Q1.
“Once winter has come and gone, hopefully with very little impact in terms of access to energy and so on, then the world will realise that the crisis was not as big as we thought, (then) the price will start to come down.” The Sultanate of Oman is not banking on these prices to continue to stay high for next year, he said. “Our current strategy is the price will probably start to come down some time next year. Our budget is balanced on $55 (per barrel), which is way below down the price today; just to make sure that we are not overinflating the price hike,” he said.
“If the price continues to be where it is today, we have other things to worry about like cost of transportation, cost of material, and so on. We are equally impacted and therefore it is also in our best interest that prices will come down to a reasonable level, where the consumer and the supplier are both winning,” he added.