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Gulf Producers Leave Mark on COP27

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The Mideast Gulf went big at COP27 in Egypt. From pushing the possibilities of decarbonizing fossil fuels in the energy transition, to promoting investments in clean energy projects, Mideast producers tried to leave their mark on the UN climate summit. To be sure, a sea change in official attitudes toward the transition has been under way for a few years, but at and ahead of Sharm el-Sheikh, the traditional Mideast oil powers, led by Saudi Arabia, delivered a policy blitz. Make no mistake, producers still lobby tirelessly against any action aimed at phasing out fossil fuels. But they are convinced the energy transition is here to stay and they must adapt. Furthermore, they see a strong business case for clean investment and are well positioned with bountiful renewable resources. Mideast producers realize they must offer a positive climate narrative and establish relevance in the emerging clean energy economy. After complaining of being ignored at last year’s COP26 in Glasgow, Riyadh went large at Sharm el-Sheikh, where top officials outlined more ambitious climate agendas.

Both state-owned Saudi Aramco and the Public Investment Fund, the country's sovereign wealth fund, are now targeting net zero (Scope 1 and 2 operational emissions) by 2050, 10 years ahead of the national target. Carbon capture and storage (CCS) targets have been increased to 44 million tons per year by 2035, with a 9 million ton/yr facility eyed for near Jubail by 2027. New renewable projects totaling 11.4 gigawatts of capacity at a cost of $9 billion were announced, with 50% renewables generation by 2030 now targeted. And, while details were in short supply, from next year an emissions trading scheme will come into being, accompanied by a massive tree-planting campaign.

There was a lot of buzz about green hydrogen at COP27. Although much of Saudi Arabia's CCS drive is about blue hydrogen, it should have the largest green hydrogen plant in the world when Acwa Power and Air Products’ 4 GW Neom project comes on stream in 2026. The United Arab Emirates is also advancing plans. But it is perhaps in Oman that hydrogen fever is burning brightest. Boasting both stellar solar and wind resources, Oman’s green hydrogen push is being spearheaded by OQ. The state-owned firm has signed deals for projects requiring almost 34 GW of capacity, and if implemented will need some $40 billion of investment, Najla al-Jamali, head of its Alternative Energy division tells Energy Intelligence. Its biggest project, a 25 GW behemoth, dubbed GEO, will be implemented in a modular fashion over a decade, she says. A final investment decision on at least one project is expected in 2024, with first output in 2027-28. All told, Oman is targeting around 8 million tons/yr of hydrogen capacity by 2050 and a whopping $140 billion of investment. Ratios vary between projects, but in Saudi Arabia, Neom’s 4 GW of renewables is targeting 600,000 tons/yr of hydrogen output.

Still, the lack of focus on Scope 3 emissions — from end-users — has left Mideast producers open to greenwashing accusations from climate activists. Saudi Arabia's 2060 net-zero target excludes Scope 3 emissions from oil exports, which are by far the kingdom’s biggest contribution to global warming. And while Riyadh is certainly ramping up clean investments, it remains committed to fossil fuels too, signing a $7 billion deal for a petrochemicals plant in South Korea this week. But Mideast producers can point to today's supply-driven energy crisis for justification here. Besides, Gulf clean energy politics are about much more than wooing the environmental movement. Firms like Saudi Arabia’s Acwa Power are building a new regional energy architecture and political economy. Just as Aramco is the world’s lowest-cost oil producer, Acwa has broken multiple records for the levelized cost of solar photovoltaic generation. And with a significant stake from China’s Silk Road Fund, Acwa is not just a vehicle for the projection of Riyadh’s regional green power. The UAE is a clean energy pioneer, being the first Gulf state to announce a net-zero target and developing nuclear as well as significant solar capacity. And two deals, one last year between Abu Dhabi National Oil Co. and Taqa to add 30 GW of renewables domestically and regionally and another announced at this month’s Adipec conference with the US to develop a massive 100 GW of renewables, underline there is a lot more to come.

OQ: A Future Green Hydrogen Giant
Project NameCapacity (GW)Partners
Hyport Duqm1.3Deme, Uniper
Green Energy Oman (GEO)25.0Intercontinental Energy, EnerTech
H2Oman3.5Acwa Power, Air Products
Salalah H23.8Dutco, Linde, Marubeni

Topics:
Renewable Electricity , Carbon Capture (CCS), Carbon Markets , Nature-Based Solutions, Hydrogen
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