How the Arab Gulf States are mastering the challenge of the energy transition

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DUBAI: Even before the start of the Ukraine war, it quickly became clear that the demand for conventional energy would not decrease. Now that Brent crude is down $107 a barrel and natural gas is up $6.95 per MMBtu, and the risk of supply disruptions is rising, the upcoming fiscal bonanza is giving the Arab Gulf States additional resources to accelerate their transformation to “green” economies .

From the ambitious “circular carbon economy” and net-zero emissions pledges to investments in renewable energy and the production of electric vehicles, numerous initiatives have already been launched by these energy-exporting countries in the past year in response to calls for accelerated action to tackle climate change.

At the same time, the Gulf region has made notable strides in the development of utility-scale solar and wind power, including the completion of the third phase of the Mohammed bin Rashid solar project in Dubai last year and the inauguration of Saudi Arabia’s first wind farm at Dumat Al-Jandal.

“These are game-changing moments that gain momentum through knowledge and experience,” Francesco La Camera, director-general of the International Renewable Energy Agency, better known as IRENA, told Arab News.

“These low-cost renewable energy projects also open the door to the production of low-cost green hydrogen. We believe that hydrogen will play a crucial role in decarbonizing the energy system.”

IRENA’s World Energy Transitions Outlook shows that hydrogen could account for 12 percent of total final energy consumption worldwide by mid-century, compared to today’s marginal values.

“There are already clear signals of intent from the region to take advantage of these market opportunities, which could prove to be a new and important aspect of the transition to which the region can apply its hydrocarbon expertise and experience,” said La Camera.

Ahead of the UN climate conference COP26 in Glasgow last November, the UAE committed to achieving net-zero carbon emissions by 2050 and investing up to US$160 billion in clean and renewable energy solutions.

Last month, Saudi Arabia launched the Saudi Green and Middle East Green initiatives, which committed the kingdom to achieve net-zero greenhouse gas emissions by 2060 and to plant 10 billion trees, rehabilitate 8 million hectares of degraded land and create new protected areas over the coming decades identify.

Recently, the Abu Dhabi National Oil Company and the Abu Dhabi National Energy Company announced that they would join the UAE’s state-owned holding company, Mubadala, as shareholders in the clean energy company Masdar.


The Gulf enjoys an ideal climate for the development of solar energy. (Shutterstock)

The partnership aims to increase Masdar’s renewable energy capacity to 50 gigawatts by 2030 and create a global clean energy powerhouse, with a focus on areas such as green hydrogen and renewable energy.

Similar developments are taking place in Saudi Arabia, including several projects in NEOM – the kingdom’s smart city on the Red Sea coast – notably the launch of Oxagon, the world’s largest floating industrial complex.

“The Oxagon project is a revolutionary idea aimed at reshaping the way industries operate at the gateway to the world’s most popular shipping canal, powered by 100 percent renewable energy and a comprehensive level of symbiosis between different industries,” says Daniel Gribbin, corporate sustainability head at WSP Middle East, told Arab News.

“The region’s quest for a more sustainable future is no secret. The level of transparency and individual consumer behavior coupled with the vision of regional leaders has accelerated the need to react and act so they can have a seat at the global table.

“Demand from international investors for sustainability considerations has also been a driving force to raise ESG awareness in the regional market and contribute to valuation and reputation.”


A view of the Jubail Desalination Plant in the industrial city of Jubail, some 95 kilometers north of Dammam in Saudi Arabia’s Eastern Province. (AFP/File Photo)

According to Nawal Al-Hosany, the permanent representative of the UAE at IRENA, the regional approach to climate protection has changed fundamentally in the past year.

At COP26, for example, the UAE announced a number of landmark pledges and partnerships to boost its ambition, including the UAE-IRENA Energy Transition Accelerator financing platform, which aims to raise $1 billion to support renewable energy transitions in developing countries to accelerate.

The UAE has already committed $400 million in anchor funding to the platform through the Abu Dhabi Fund for Development.

“We also announced the Hydrogen Leadership Roadmap, which aims to establish the country as a competitive global hydrogen exporter,” Al-Hosany told Arab News.

“Looking ahead to the COP27 in Egypt and the COP28 in the United Arab Emirates in 2023, the momentum for climate action will continue to generate ripple effects in the Middle East.”

INTO COUNT

* Estimated oil price of $120 per barrel if Russian oil flow is disrupted.

* $6.95 Current Natural Gas Price per MMBtu.

La Camera describes the energy transition as an unstoppable megatrend, underpinned by innovation and motivated by the pursuit of long-term prosperity and climate protection.

“The GCC countries recognize this opportunity and act accordingly,” he told Arab News.

“It is also important to recognize that the Gulf region is positioning itself as a serious player in the global energy transition because its leaders understand its wealth in hydrocarbon resources and its vast clean energy potential offers them the opportunity to build a resilient knowledge-based economy , clean technologies and long-term leadership in energy.”

Al-Hosany believes that hydrocarbons will continue to play an integral role in the energy system for decades to come, as managing an equitable and inclusive energy transition will be crucial to turning the tide on climate change.

“We need to rethink the balancing act between economic growth and sustainable development,” she said.


A Saudi worker fills his car’s tank with petrol at a gas station in Jeddah. (AFP/File Photo)

“But this transition will not happen overnight. We need to switch to an energy mix that includes renewable and clean energy sources. Although we must move toward tomorrow’s energy system, we cannot simply detach from today’s energy system. It’s not that easy to flick a switch.”

From desertification to droughts, the Middle East is particularly vulnerable to the impacts of climate change. And while each country has its own reasons for transitioning from fossil fuels to renewable energy, La Camera says the Gulf region has much to gain from the transition, even amid uncertainties about the long-term future of hydrocarbon exports.

“The exploitation of its vast clean energy resources offers diversified growth and job creation well into the 21st century,” he said. “Also, let’s not forget the dangerous situation this region could find itself in if global temperatures continue to rise unabated.”

La Camera said that the climate crisis “is likely to bring average regional temperatures to about twice the global average this century, while increasing pressure on already scarce water supplies. This is a profound and very real threat that the region cannot solve alone, but it must be part of the solution.”

Gribbin believes that there is no “king weapon” for the challenge facing humanity. Therefore, politicians, companies and individuals must work together to find common solutions.

“Investing in solutions to the challenges of climate change is not only good for humanity, but also smart business,” he said.

“Individual drivers and consumer behavior have changed and the demand for ‘green’ and sustainable products will continue to grow. As a region that is extremely dependent on imports, particularly for food, and that has contributed to the spread of hydrocarbons, early investment is key to ensure we are part of the solution.”

By acting now, Gribbin said, the region will ensure it has both a thriving economy and an environment that can support a high quality of life for generations to come.

The invasion of Ukraine has the potential to accelerate the global trend toward renewable energy, with Europe expected to drastically reduce its reliance on Russian natural gas supplies. If the Gulf states use their budget surpluses to fuel the development of renewable energy, hydrogen, ammonia export and carbon capture projects, they will be well prepared for the post-oil era.

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Twitter: @Kaline Malek

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