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Why the Gulf oil giants are betting on clean energy

T.United Arab Emirates It sits on a rich fossil bounty. Adnok, the national oil company, is one of the world’s top hydrocarbon producers.two months ago United Arab Emirates We welcomed nearly 140,000 delegates to the largest oil and gas jamboree on earth. Against the backdrop of the worst energy crisis in decades, we might have expected a lot of praise for how Persian Gulf carbon-emitting exports helped avert a bigger shock. , Sultan Al Jaber delivered the keynote address. United Arab EmiratesMinister of Industry, all the more noteworthy. Al Jaber reiterated the importance of greening this most demanding industry. “Adnok We are making today’s energy cleaner while investing in tomorrow’s clean energy,” he quipped.

In the past, the Gulf energy moguls were limited to defending fossil fuels. Today, there are many people like Al Jaber who are professing their commitment to decarbonization. Saudi Arabia and Kuwait have announced targets for net zero greenhouse gas emissions by 2060. United Arab Emirates And Oman says it will achieve it by 2050. Qatar has not set a net-zero target, but he says it will cut emissions by a quarter by 2030 compared to a business-as-usual scenario. All Gulf states have signed a global methane pledge, committing to reduce their powerful greenhouse gas emissions.of United Arab Emirates Annual united nations 2023 climate summit.

After years of denying climate science and sabotaging efforts to tackle global warming, some suspect that all the soothing sounds and toothless goals are greenwashing. In this view, Gulf governments are too reliant on revenues generated by state-owned energy companies (see Figure 1), which account for a large share of the national budget, to seriously decarbonise. But if you look at the investment plans of big companies, you’ll find that they’re making real (and sometimes quite big) bets on green technology.

This is worth scrutinizing as the companies behind this effort are important across the region.State-owned energy companies in other parts of the world are embracing the Gulf giants, especially Adnok A good example to follow is Saudi Aramco, the oil giant of the Arab Kingdom. Where the world’s two largest energy companies advance technologically and strategically, other state-owned peers often follow suit.

The Gulf Oil Champions approach is based on two pillars. The first is dark brown and he doubles oil and gas. Fueled by high oil prices, energy companies in the region are investing heavily in expanding production. Aramco’s capital expenditures in 2022 will reach $40 billion to $50 billion. He has promised even bigger sums over the next few years as he aims to raise oil production capacity from about 12 million barrels per day to 13 million barrels per day by 2027. Adnok It aims to spend $150 billion on capital projects to increase capacity from approximately 4 million to 5 million b/d by 2027. Qatar Energy to spend his $80 billion between 2021 and 2025 to expand production of liquefied natural gas (liquefied natural gas) will increase by two-thirds by 2027.

For most energy companies, doubling down on fossil fuels during the transition to a carbon-constrained world is financial folly. All the world’s national oil companies “want to be the last to survive,” says Patrick Heller of the Natural Resources Governance Institute. NGOsNaturally, “not all are.” Gulf giants with huge, low-cost reserves are the most likely to win. We believe that our investment may pay off.

Oilmen betting on oil is nothing new. But the Gulf giant’s latest bet suggests they’re no longer scratching their heads over the future of oil demand. I am painfully aware that I am S.&P. Global, research company.policies like EUcarbon border tax, details Member States approved on December 18 are a sign of things to come. “To be the last producer, you need more than the lowest cost,” he says Al-Shamma. To ensure their longevity, the Gulf Oil Champions also intend to be the cleanest producers of fossil fuels.

They enjoy natural benefits. Their hydrocarbon reserves are among the least carbon intensive to extract (see Figure 2). The United Arab Emirates and Saudi Arabia have also made efforts to further reduce this carbon intensity with high operational efficiency and low gas flaring, said Olga Savenkova of research firm Rystad Energy. Adnok spends $3.6 billion on subsea power cables and other kits to replace natural gas burned in offshore facilities with clean energy from onshore. This is also environmentally friendly and potentially good business. Al-Shamma believes lower emission grades of crude oil will garner a premium. liquefied natural gas market.

The second pillar of the Gulf strategy is even more interesting. This includes investing some of today’s fossil windfall in tomorrow’s clean energy technologies. Governments in the region are making the world’s biggest bets on carbon capture and storage, renewable energy and hydrogen. “A wave of low-carbon projects is being built in the Middle East,” marvels one analyst.

“Saudi Arabia has a huge advantage in decarbonizing,” says Jim Crane of Rice University in Texas. He points to empty, sunny expanses of land with geology specifically created to store carbon emitted by adjacent industrial areas. Aramco has developed capacity to capture, store and utilize 11 million tonnes of carbon dioxide annually, with 12 gigawatts (GW) of wind and solar power by 2035

Overall, Saudi Arabia aims to build 54GW of renewable capacity by 2032 United Arab Emirates aiming for 100GW Domestic and international renewable energy capacity to 2030 increases from 15 years of cumulative investmentGW– worthy of 2021. It would create Masdar, a state-owned clean energy organization. Adnok owns shares in the world’s second largest clean energy developer. The company recently acquired a British company that develops energy storage technology.

The Gulf States’ biggest green bet is on hydrogen. Hydrogen is a clean fuel if it is made using renewable energy instead of natural gas. Investments in the necessary infrastructure are skyrocketing all over the world, from Gujarat to Texas. In 2021, United Arab Emirates Opened the first “green hydrogen” plant in the region. ACWA Saudi Arabian utility Power has nearly finished financing a $5 billion green hydrogen project. Oman, which has fewer oil reserves than its neighbors and is more expensive to tap into, has spoken of a $30 billion investment in what could be the world’s largest hydrogen plant. , launched a state-owned hydrogen entity and offers concessions for green hydrogen projects in its special economic zones.

Saudi Arabia and the emirate are also looking abroad. Masdar is investing in his $10 billion hydrogen venture in Egypt. under development 4GW Green Hydrogen and Renewable Energy Projects in Azerbaijan. Invested in a company working on green hydrogen in the north of England. ACWA Power is eyeing multi-billion dollar green hydrogen projects in Egypt, South Africa and Thailand. By 2030, United Arab Emirates And Saudi Arabia wants to control more than a quarter of the global export market for clean hydrogen.

Ben Cahill of the Institute for Strategic and International Studies, a think-tank, sees the two countries as aggressively working on hydrogen and ammonia, which could serve as less hassle mediums for transporting gases. . They hope to gain a first-mover advantage by securing deals with Asian and European buyers. Qatar spends more than $1 billion on a plant that produces ‘blue ammonia’ from natural gas. Consultancy firm Roland Berger estimates that by 2050 annual revenues for the Gulf state could reach $120 billion to $200 billion if the hydrogen economy takes off. and gas; Aramco alone had sales of over $300 billion in the first half of 2022. But it’s a lot of money, and suggests that the Gulf’s environmental efforts should be taken seriously, given the real risk of the oil boom ending.

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https://www.economist.com/business/2022/12/19/why-the-gulfs-oil-powers-are-betting-on-clean-energy Why the Gulf oil giants are betting on clean energy

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