How Gulf Energy Powerhouses Are Blazing A Trail For Green Industrialization – Analysis

By Rebecca Anne Proctor

As the effects of weather variations possibly linked to climate change intensify around the globe, many countries have set goals to reach net-zero carbon emissions by 2050, hoping to prevent Earth from warming 1.5 degrees Celsius above pre-industrial levels.

Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE, and Oman — the six countries of the Gulf Cooperation Council — are home to around one-third of the world’s oil reserves and approximately one-fifth of its natural gas reserves.

As a strategy for effective climate-change mitigation, the GCC states see themselves as trailblazers of the hydrogen economy by unveiling ambitious plans to supply Europe and the Asia-Pacific region with the low-carbon, environmentally friendly fuel.

The UAE and Saudi Arabia have committed themselves to net-zero greenhouse gas emissions by 2050 and 2060, respectively. Bahrain has pledged to meet the same target by 2060.

Net zero means that all greenhouse gas emissions produced are counterbalanced by an equal number of emissions that are removed from the atmosphere.

Achieving this important goal will require rapid decarbonization. Hydrogen, as a new energy carrier, can play a key role in successfully decarbonizing the most difficult sectors, such as shipping, aviation, steel, and chemicals.

Replacing fossil fuels partly with hydrogen would be a big step toward meeting the targets for reduction in greenhouse emissions set in the Paris Agreement, an international treaty adopted in 2015 covering climate-change mitigation, finance, and adaptation.

In a report published in January, the International Renewable Energy Agency projected that hydrogen could cover 12 percent of global energy use by 2050, and that 30 percent of hydrogen could be traded internationally in the same timeline — another sign that fossil fuel assets could be devalued by mid-century, despite today’s high oil prices and record gas prices.

Looking to the future, Gulf states are exploring ways to diversify their economies and decarbonize by producing hydrogen using their vast reserves of fossil fuels, from which carbon capture, or blue hydrogen, is produced.

Among them, Saudi Arabia plans to expand beyond blue hydrogen into other, even cleaner forms, such as green hydrogen, which is made by using renewable energy to split water.

The NEOM Green Hydrogen Project, to be commissioned in 2026, will be the world’s largest green hydrogen plant powered entirely by renewables and will have a production capacity of 650 tons of hydrogen per day, according to Saudi energy developer and operator ACWA Power.

As Saudi Arabia continues to develop its clean, safe nuclear energy program in line with International Atomic Energy Agency regulations, it will also push for the production of pink hydrogen, according to statements made by Saudi Energy Minister Prince Abdulaziz bin Salman at the World Economic Forum last year.

Pink hydrogen is produced by electrolysis using nuclear power. This year, Prince Abdulaziz signed several memoranda of understanding on the use of hydrogen fuel cell-powered public transportation throughout the Kingdom.

Early last month, IRENA joined 14 global companies to set up a new alliance that aims to decarbonize industries and help countries to achieve net-zero goals in line with the Paris Agreement.

The Alliance for Industry Decarbonization was unveiled during IRENA’s Investment Forum on Energy Transitions in Bali, Indonesia, on Sept. 1.

Speaking at the event, IRENA Director General Francesco La Camera said: “Climate action needs industry leaders.

“This alliance stands for the growing commitment of global industry to act on decarbonization and unlock opportunities that come with a green industrialization through renewables and other transition-related technologies like green hydrogen.

“By standing together we send a clear signal of solidarity ahead of COP27 (UN Climate Change Conference) and we invite new partners to join our common vision,” he added.

The first meeting of the alliance is scheduled to take place at this year’s COP27 meeting being held in Sharm El-Sheikh, Egypt, in November. Members of the alliance include Abu Dhabi’s Taqa, Italy’s Enel Green Power, Egypt’s Taqa Arabia, Eni, and Technip Energies.

Addressing the Bali forum, Karim Amin, a member of the executive board of Siemens Energy, said: “We need to slash greenhouse gas emissions urgently if we are going to tackle climate change.

“Accounting for more than a quarter of global emissions, the industrial sector is the second-largest emitter and requires rapid decarbonization. In this endeavor, partnerships are crucial.

“With our technologies, we at Siemens Energy constantly seek to create value with our partners toward a low-carbon future. I am convinced the alliance for decarbonization will accelerate decarbonization by installing a first-class exchange forum for industry, technology, and knowledge partners.”

In 2021, during COP26 in Glasgow, IRENA unveiled the $1 billion energy transition accelerator financing (ETAF) platform to support new renewable energy projects in developing countries. Both Masdar — the Abu Dhabi Future Energy Co. — and the Abu Dhabi Fund for Development are supporting the platform.

In June, IRENA signed agreements with ADFD and Masdar to provide the anchor investment of $400 million to ETAF.

La Camera told Arab News: “Climate challenge is a universal challenge. It is one that requires a rapid, holistic transformation of our energy system and the decarbonization of industrial processes represents a major part of that challenge.

“However, it presents a great opportunity as well. It is a daunting task that requires the highest levels of cooperation between industry leaders. This alliance, led by IRENA and the private sector, will be instrumental in coordinating efforts and paving the way to net zero.”

For Saudi Arabia and the UAE, reconciling their ambitious environmental commitments with their present reliance on hydrocarbons will be at once a challenge and an expensive journey. For both countries, the journey begins with decarbonizing their oil and gas production to reduce their carbon footprint and increasing their domestic green-energy production.

This does not of course mean they will stop producing hydrocarbons completely. As Middle East energy expert Ruba Husari pointed out in an article for the Middle East Institute, though demand for oil and gas will continue past 2050, “albeit at lower levels than now — their net-zero target does not equate to zero oil and gas production. Instead, their transition will differ from that of other countries and will happen at a different pace.”

At the Youth Green Summit in Riyadh in October 2021, Prince Abdulaziz announced the goal of becoming the world’s largest hydrogen producer.

The same year, Saudi Aramco, the national petroleum and natural gas company, published its first sustainability report detailing its road map toward net zero. Aramco’s ambition, the report said, was to decarbonize its operations and achieve “a net-zero footprint by 2050 across its wholly owned operated assets.”

The report acknowledged that achieving net-zero operational emissions while also growing its business to meet global energy demand would be “a huge challenge.”

Aramco has set initial interim targets for 2035, planning to cut carbon emissions from 10.2 kilograms of carbon dioxide equivalent per barrel of oil equivalent (CO2e/boe) in 2018 to 8.7 kg of CO2e/boe by 2035 — a 15 percent-plus reduction.

Aramco’s corporate strategy is based on its “ability to produce the lowest cost and lowest carbon oil and its intent to work with customers along the value chain to offer products that support their ambitions for low-carbon fuels.”

Since the launch of Vision 2030 in 2016, Saudi Arabia has taken significant steps to step up climate action and environmental protection through greater reliance on clean energy and offsetting emissions.

The Saudi Green Initiative, launched at the inaugural Green Initiative Forum on Oct. 23, 2021, consists of more than 60 initiatives, the first wave of which entails investments worth SR700 billion ($187 billion) designed to contribute to the growth of a “green economy.”

Meanwhile, as part of its net-zero strategy, the UAE intends to invest 600 billion Emirati dirhams ($163.37 billion) in clean and renewable energy projects over the next three decades.

On Sept. 12, the UAE Cabinet approved an updated version of the second National Determined Contribution, setting a higher economy-wide emission reduction target for 2030 of 31 percent relative to business as usual, an increase from the 23 percent initially submitted in 2020.

Additional announcements were made on sectoral contribution to this target.

Evita Moawad, an international sustainable energy and decarbonization consultant, told Arab News: “The UAE was the first Gulf country to commit to net zero by 2050 and has defined interim targets for 2030.

“It is important that the UAE and other countries’ targets are consistent with the Paris Agreement’s 1.5 degrees Celsius warming limit. The next steps are to define road maps to net zero for the different sectors and create a conducive framework to move forward toward decarbonization.

“The UAE has already achieved successes in clean energy supply; now efforts are needed in other sectors such as industry and transport. Such efforts have started. For example, the UAE is one of five countries to have so far joined the Clean Energy Ministerial’s Industrial Deep Decarbonization Initiative, which has been active since the start of this year,” she said.

To achieve decarbonization, all aspects of a country’s economy must change, including how energy is generated and how goods are produced and delivered. This, La Camera pointed out, “requires a dynamic approach to the energy transition, integrating new solutions and technologies as they become available.”

He lauded the UAE’s recent update of its NDC as “a great display of the country’s leadership ahead of COP28.”

The 2023 annual session of the COP conference will be held in Expo City Dubai toward the end of the year.