Gulf producers led by Saudi Arabia and the United Arab Emirates are positioning themselves to reclaim more of the narrative on the low-carbon transition in the run-up to November’s COP27 climate summit in Egypt.
At the Future Investment Initiative summit in Riyadh this week, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman vowed that the kingdom would help make COP27 a success.
At the event, state Saudi Aramco added to earlier initiatives with an announcement that it would set up a $1.5 billion sustainability fund managed by its venture capital arm. The new fund will invest globally in technologies that have the potential to support both a “stable and inclusive” energy transition and Aramco’s goal of net-zero emissions from its wholly owned assets by 2050.
At the same time, producers are keen to show that it is possible — and required — to continue investing in upstream oil and gas in parallel.
Establishment of the fund is part of Saudi Arabia’s efforts to ensure that fossil fuels with a relatively low carbon footprint — such as its own — remain an integral part of the global energy mix.
‘Inclusive’ Approach
Aramco Chief Executive Amin Nasser this week also criticized Western states for often looking at supply issues from their own point of view and taking the position that “the rest of the world needs to adapt.” He added, “No. It doesn’t work like that.”
Such sentiments are expected to play out in COP27 discussions as developing countries such as India push back on a perceived Western-led energy agenda, and call for more financial support for their decarbonization efforts.
In an opinion piece for Energy Intelligence this week, Aramco Chairman Yasir al-Rumayyan cited statistics that 730 million people globally — about 1 in 10 — lack access to electricity, and 90 million people in Asia and Africa with access could no longer afford to pay for basic needs.
Al-Rumayyan called for a speedier transition, but with “an inclusive and pragmatic approach” that nurtures “multiple transition pathways to ensure the pace of change does not trigger global energy shocks, or punish those least able to adjust.”
Responsible Partners
Ahead of last year’s COP26 summit in Glasgow, Saudi Arabia and the UAE declared a target of reaching net-zero carbon emissions — moves seen as essential to position themselves as credible actors in the global climate debate.
But fossil fuel producers were still sidelined from last year’s discussions, particularly at the corporate level.
Gulf states want to ensure that producers have more of a voice and are seen as constructive participants in the intensifying effort to tackle climate change at both COP27 and next year’s COP28 meeting in the UAE.
Global Energy Mix
Gulf producers have continued to argue that global demand for oil and gas will remain for decades and will have to be met by increased investments, while transition efforts will need to be more pragmatic to avoid creating an increasingly unstable energy system.
“Little thought has been paid to how we manage energy supply and demand during this crucial period of transition,” al-Rumayyan wrote.
“But as events over the past few months demonstrate, maintaining the equilibrium of energy markets will be critical as the world gradually recalibrates energy production systems and moves to a lower-carbon future. Exiting conventional energy pathways prematurely risks upsetting that balance.”
The world is already facing an energy crisis amid high oil and gas prices, while questions around energy security, in Europe in particular, are looming large as a result of Russia’s invasion of Ukraine. This has prompted producers such as Saudi Arabia and the UAE to invest further in expanding production capacity to meet demand.
With supply balances uncertain and the health of Russia’s oil sector in doubt, Gulf states’ upstream investments could put them in a stronger position as long-term suppliers of low-cost, low-carbon oil and gas — even in a world in which demand is eventually constrained by the energy transition.
Commitment in Focus
While some skeptics question Gulf producers’ commitment to net-zero targets, they have made significant progress on decarbonization plans.
Renewable energy projects, blue and green hydrogen initiatives, and carbon capture and storage (CCS) projects are gaining momentum. In Saudi Arabia, the $5 billion Neom green hydrogen scheme will set a global benchmark once completed around 2026.
Saudi Arabia’s move towards net zero is seen by officials as a way to achieving the economic diversification plans under its “Vision 2030” program.
Energy Intelligence
