THE ENERGY TRANSITION in the ARAB GULF Atlantic Council GLOBAL ENERGY CENTER

THE ENERGY TRANSITION IN THE ARAB GULF Atlantic Council GLOBAL ENERGY CENTER The Energy Transition in the Arab Gulf: From Vision to Reality Dr. Jean-François Seznec Samer Mosis 1 THE ENERGY TRANSITION IN THE ARAB GULF Atlantic Council GLOBAL ENERGY CENTER The Global Energy Center promotes energy security by working alongside government, industry, civil society, and public stakeholders to devise pragmatic solutions to the geopolitical, sustainability, and economic challenges of the changing global energy landscape. Cover: Solar panel trees are seen on the pathway at Dubai’s Quranic Park in the United Arab Emirates (UAE), in April 2019. REUTERS/Satish Kumar This report is written and published in accordance with the Atlantic Council Policy on Intellectual Independence. The author is solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this report’s conclusions. Atlantic Council 1030 15th Street NW, 12th Floor Washington, DC 20005 For more information, please visit www.AtlanticCouncil.org. ISBN-13: 978-1-61977-188-8 July 2021 This report was designed by Donald Partyka and Liam Brophy 2 THE ENERGY TRANSITION IN THE ARAB GULF The Energy Transition in the Arab Gulf Dr. Jean-François Seznec Samer Mosis 3 THE ENERGY TRANSITION IN THE ARAB GULF TABLE OF CONTENTS EXECUTIVE SUMMARY 5 INTRODUCTION 6 THE POSITION OF THE ARAB GULF STATES 8 IN THE GLOBAL ENERGY TRANSITION LOCAL RESOURCES FOR THE ENERGY 11 TRANSITION IN KSA AND THE UAE THE ENERGY TRANSITION IN SAUDI ARABIA: 15 GREAT POTENTIAL IN NEED OF DIRECTION THE ENERGY TRANSITION IN THE UAE: 19 BALANCING COMPETING INTERESTS CONCLUSION AND POLICY 22 RECOMMENDATIONS 4 THE ENERGY TRANSITION IN THE ARAB GULF Executive Summary he energy transition is having a significant impact Compared to Saudi Arabia, the UAE’s strategy toward the on the Arab Gulf states as they work to move away energy transition is relatively more focused; however, due to from economic reliance on hydrocarbons exports. the federal structure of the country, there are diverging strat- The Kingdom of Saudi Arabia (KSA) and the United egies in the key emirates of Abu Dhabi and Dubai. While Abu TArab Emirates (UAE) have emerged as regional leaders of Dhabi has had considerable success establishing expertise the energy transition, both domestically and in their efforts in clean energy deployment, Dubai is bringing online the to rethink the ways in which they participate in the global region’s first coal-fired power plant, putting energy security energy system; however, both countries will confront chal- ahead of carbon reduction. lenges as they seek to establish their global leadership in the energy transition. Saudi Arabia would likely benefit from a In order to establish themselves as regional and global lead- more defined internal organization, since numerous minis- ers, Saudi Arabia and the UAE should take the following tries and organizations hold overlapping, duplicative, or even steps: competing priorities and mandates, which detracts from forward momentum in implementing critical policies related to • Promote greater transparency in government agen- the broader energy transition. In the UAE, there is a clearer cies: Saudi Arabia and the UAE should ensure that the sense of energy leadership, but there are still key differences governmental organizations that are leading each coun- between the different emirates—especially Abu Dhabi and try’s respective energy transition increase their levels of Dubai—that should be resolved. financial transparency. While the Arab Gulf states hold some of the most econom- • Provide consistency in the planning of the transition: ically competitive hydrocarbon reserves in the world, it is Regional leadership should show consistent support for not the only competitive advantage the region holds in transition efforts. the energy space. Indeed, the Gulf states have other critical assets they can turn to in the transition to the post-car- • Strengthen the private sector: Saudi Arabia and the bon economy. These include natural resources for renew- UAE should invest in the private sector, in addition to their ables, especially solar power, as well as the potential to investments in state-owned companies. invest hydrocarbon revenue in capital-intensive, low-carbon energy technologies, like nuclear power. The Arab Gulf • Invest in education: The countries should help universi- states hold enormous solar energy potential, and Saudi ties and existing state entities and commercialize locally Arabia and the UAE have been found to be among the top fif- developed technologies. teen countries globally in terms of practical PV power potential. Saudi Arabia and the UAE also have large amounts of • Invest in existing clean energy technologies and in available capital, much of which is presently being invested clean energy innovation: Both countries should set a abroad and can be redirected to investments in domestic goal of making CCUS commercially viable; emphasize clean energy development. local content requirements in all renewables and circular carbon economy projects; and encourage national oil However, the lack of centralized and transparent planning companies—like ADNOC and Saudi Aramco—to match has complicated Saudi Arabia’s shift to cleaner energy and the goals set by many IOCs of getting to zero net emis- economic activity. Outside of the Saudi Ministry of Energy’s sions by a target date. Renewable Energy Project Development Office (REPDO), there appears to be an absence of a centralized body responsible for the coordination of Riyadh’s overall decarbonization planning. Other institutions also exist within the KSA that are involved in the build-out of renewable capacity, but they are each moving forward in a generally inde- pendent manner. The notion of the circular carbon economy lends an overarching strategy to Saudi Arabia’s approach to the energy transition, but Saudi Arabia still has farther to go in establishing a unified vision for decarbonization. 5 THE ENERGY TRANSITION IN THE ARAB GULF Introduction he global transition to an energy system with lower leveraging the wealth of sun and—in some areas—wind carbon dioxide emissions will have an enormous resources available across the region. At the same time, both impact on the economies of the Arab Gulf states. countries are looking beyond renewables toward expansion As producers, refiners, and exporters of hydro- of clean technologies such as nuclear energy or decarbon- Tcarbon-based products for the past eighty years, these izing the oil and gas industry. The KSA and the UAE have states have been profoundly shaped by the global econo- increased their expertise in—and deployment of—carbon my’s dependency on hydrocarbons. Yet now, faced with the capture, utilization, and storage (CCUS). While solar, wind, global energy transition, the Gulf states are working to move and nuclear will provide new sources of carbon-free energy, away from their focus on hydrocarbon exports and toward CCUS is being pursued with the notion that, in time, it will global leadership in decarbonizing the energy sector. Saudi allow the Gulf oil and gas producers to continue using their Arabia and the UAE have emerged as regional leaders of own carbon-based production while still reducing their over- the energy transition, both domestically and in their efforts all emissions profile, especially when paired with new eco- to rethink the ways in which they participate in the global nomic models such as the development of a circular carbon energy system. For this reason, this paper looks to both the economy. KSA and the UAE as two critical case studies by which to understand a broader transition occurring throughout the Across the Gulf, the broader shift away from liquids, such as region, and the challenges and opportunities therein. This fuel oil and crude, and toward natural gas and renewables in report examines their efforts to lead the energy transition, the power sector has brought significant progress in reduc- and it argues that both will need to address internal issues ing overall national emissions. If this dynamic is maintained, first, before leading on a global scale. This report also dis- it will assist in meeting Paris Agreement targets in places like cusses some of the efforts of other Gulf states in the context Saudi Arabia.2 Beyond this, though, further technological and of these two case studies. policy implementation will be necessary. While the deployment of renewables and CCUS has been promoted by oil Saudi Arabia has the capacity—namely, the wealth and tech- exporting countries across the Gulf for over a decade, only nical expertise—to spur its internal energy transition and since late 2019 have these technologies begun to gather crit- emerge as a regional and global leader. It has ambitious ical momentum and enter the strategic objectives of regional plans for renewable power as well as managing emissions to decision makers. While it will be several decades until any develop a circular carbon economy, however, the KSA is not of these countries can realistically near any goals for zero or developing these efforts and reducing emissions as quickly net-zero emissions, governments and local energy compa- as it should.1 A large part of this can be attributed to the fact nies are now genuinely pushing for massive increases in the that, as in many of the Gulf states, numerous ministries and use of renewables and CCUS and advocating for lower car- organizations hold overlapping, duplicative, or even compet- bon emissions. ing priorities and mandates. In effect, this detracts from forward momentum in implementing critical policies related to Saudi Arabia and the UAE (along with their neighbors the broader energy transition, likely due to confusion over throughout the Gulf) hold some significant natural advan- which government entity has the authority to lead the energy tages necessary to scale these efforts quickly.

Load more