Nov 12, 2019

The Saudi Aramco IPO is shining a spotlight on peak oil demand

Ben Geman, author of Generate

Illustration: Rebecca Zisser/Axios

The release of the Saudi Aramco IPO prospectus is putting a fresh spotlight on a big question: the date when global oil demand will peak.

Driving the news: The document released over the weekend includes estimates that demand will grow until around 2035 before leveling off, but that the inflection point could occur by the late 2020s.

  • This week, the International Energy Agency will unveil its closely watched annual World Energy Outlook.
  • IEA's three main scenarios project future demand through 2040 based on existing policies, on announced plans, and on a world with policies aligned with the Paris agreement goals.

Why it matters: The timing of peak demand has big repercussions for the planet, and the strategy and future of oil producers.

The big picture: The prospectus makes the case that Aramco is very nicely positioned to increase market share in a world where global thirst for oil is flat or declining.

  • They argue that their comparatively low per-barrel production costs and emissions give them an edge.
  • The 658-page document sees Saudi crude, condensate and natural gas liquid supplies growing through at least 2050.

But, but, but: Bloomberg's Liam Denning connects the dots between the upcoming Aramco IPO and the flop of Brazil's big offshore auction late last week, which he notes is a sign of "expectations on the part of many investors that oil has entered its twilight years."

  • Plus, while the prospectus is largely meant to promote the company ahead of the offering, the various disclosures on climate-related risk state, "Climate change concerns and impacts could reduce global demand for hydrocarbons and hydrocarbon-based products and could cause the Company to incur costs or invest additional capital."

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