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Could the Mideast Gulf Become a Clean Energy Powerhouse?

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Mideast Gulf hydrocarbon producers have made remarkable progress in the energy transition lately, especially in light of the recent energy crisis in Europe and high oil and gas prices. Countries like the United Arab Emirates (UAE) and Saudi Arabia are under pressure to supply the market with more oil and gas to stabilize prices — while still meeting net-zero targets they committed to last year. While they move forward with plans to expand hydrocarbon production capacity and meet increasing global demand, they have also increased their renewable energy capacity tremendously. Although kinks remain to be ironed out, some say these Gulf players rank among the most likely potential suppliers of renewable energy to European and Asian markets in the near future.

The UAE and Saudi Arabia both announced their net-zero commitments ahead of COP26 last year, with the UAE pledging to emit zero emissions by 2050, and Saudi Arabia by 2060. And in a recent report by Australia-based aggregator Compare the Market, the UAE was found to have recorded the largest increase in renewable capacity worldwide in the past 10 years. It surged to 2,540 megawatts in 2020 from only 13 MW in 2011, followed by Saudi Arabia, where capacity reached 413 MW in 2020, up from 3 MW in 2011.

Last week, too, Abu Dhabi firms Taqa, Abu Dhabi National Oil Co. and Mubadala finalized the Masdar acquisition announced last year. That marks a new milestone in the creation of a global clean energy powerhouse that consolidates the renewable energy and green hydrogen efforts of these companies, under Masdar.

Hydrogen Potential

Hydrogen has become central to regional decarbonization strategies. Countries across the wider Middle East, including the UAE, Saudi Arabia, Oman, Egypt and Morocco, have the potential to supply markets with different shades of the fuel.

After the UAE’s Hydrogen Alliance was formed last year, several hydrogen projects have been signed across that country. Several partnerships have been formed between UAE-based companies and international companies including TotalEnergies, Siemens Energy and more recently BP. The region’s first waste-to-hydrogen plant, which is being developed in Sharjah through a partnership between local company Beeah and the UK’s Chinook, is expected to be completed by 2024. In Saudi Arabia, Acwa Power’s partnership with the US’ Air Products in Neom to produce and supply green hydrogen was an important milestone for the kingdom’s ambitious diversification strategy.

These partnerships are key to the development of the needed technologies and building the right infrastructure to integrate the hydrogen economy, according to Katarina Uherova Hasbani, partner and global director of strategy and advisory for consultancy AESG.

Oman, which established its national hydrogen alliance last year, has been eyeing the development of blue hydrogen from its gas production, and trying to get the private sector involved. It recently signed a deal with BP to explore the potential for renewable energy, including green hydrogen.

But what the region truly needs to develop its hydrogen potential is an offtaker. And Europe is most often seen as the first major offtaker of hydrogen, to which Mideast producers would be able to supply the fuel. “In the Middle East, they are lucky because Europe is next door, and it has quadrupled its hydrogen offtake. Things are starting to happen," Hasbani tells Energy Intelligence. The energy crisis caused by the Russia-Ukraine war may be an accelerator of that as Europe pushes to cut reliance on fossil fuels.

Different Strategies

The UAE's role in hosting the COP28 summit next year will offer an opportunity for hydrocarbon producers to take part in the climate conversation and showcase their commitments to reducing emissions. But while both the UAE and Saudi Arabia have become not just regional but also global leaders of the energy transition, they have adopted different strategies and must wrestle with their own set of challenges.

The UAE has taken an approach of developing large-scale projects, according to Hasbani. But the next step, she explains, would be medium- to long-term plans to decentralize power generation, adding that efforts by the government are already seen in this regard and that these things take time. The need for decentralization was recently echoed by Engie's senior vice president of hydrogen for Asia, the Middle East and Africa, Stephan Gobert. “Retailing remains an issue for companies like Engie, as it remains fully integrated by the energy sector,” he says.

Hasbani sees Saudi Arabia as far bigger than the UAE — in terms of its geography and the diversity of its renewable resources. This makes its market more flexible, giving it huge renewable energy potential. “Saudi Arabia reacted in a good way, and at a very fast pace," she says, as it offered higher integration of renewable resources in newbuild projects, with its Red Sea projects such as Neom. But Saudi Arabia could also provide specific targets that could be more ambitious if it wishes, according to Hasbani. And indeed, a year after announcing its Green Initiatives, specific details are yet to be revealed.

National oil companies are also taking steps to clean up their acts and decarbonize. In its recent sustainability report, Saudi Aramco, which has pledged to become net zero by 2050, set a carbon capture, utilization and storage capacity target of 11 million tons per year by 2035, in addition to targets for 12 gigawatts of wind and solar and 2 million tons of blue hydrogen.

Yousra Samaha is a reporter for Energy Intelligence focused on the energy transition and renewable energy in the Middle East. A version of this article originally ran in EI New Energy.

Topics:
Low-Carbon Policy, Renewable Electricity , Nature-Based Solutions, Hydrogen, Policy and Regulation
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