Transition Plans Diverge in Mideast Gulf

Copyright © 2021 Energy Intelligence Group

Oil-rich Mideast Gulf states will rely heavily on their low-cost reserves to see them through the energy transition. But as the region gets more serious about decarbonization, transition strategies are starting to diverge among some of the biggest oil producers in the world. A highly uncertain outlook for oil demand in the coming decades has already put these countries in a difficult spot. Now, the United Arab Emirates has raised the bar for Mideast climate action by pledging net-zero emissions by 2050 ahead of the COP26 summit in Glasgow later this month. The UAE announcement adds pressure on Mideast Gulf and Opec producers to declare similar goals. As part of its net-zero plan, the UAE aims to invest more than $160 billion in clean and renewable energy over the next three decades. While details remain scant, greater use of carbon capture, utilization and storage (CCUS) technology at scale will help meet the objective. Plans to boost existing CCUS capacity around sixfold to 5 million tons per year of carbon dioxide by 2030 are under way. Compared to other oil exporters in the region, the UAE in recent years has been faster to diversify its economy away from hydrocarbons. Hydrocarbons currently account for around 30% of GDP, and oil exports comprise less than 40% of government revenues — less than regional peers. But even as the transition accelerates, the UAE remains committed to boosting oil production capacity to 5 million barrels per day by 2030 from 4 million b/d. It believes its lower-cost, lower-carbon resources will give it a competitive advantage despite the inevitable future decline in fossil fuel demand.

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