Regarding the Middle East and its oil, the late Sheikh Rashid Bin Saed Al Maktoum, longtime Emir of Dubai and Prime Minister of the United Arab Emirates, once famously remarked:
“My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel.”
It’s an apt reminder of the finite nature of oil resources, and, of course, the wealth it brings. But, and this is what the Sheikh was getting at, it’s also a call for prudence and thoughtful transformation. Outside of Dubai, the overhaul of oil-based economies is wholly incomplete, but it’s an idea that holds no less relevance as the region prepares for what could be an even greater challenge: climate change.
According to a study by Jeremy Pal of Loyola Marymount and Elfatih Eltahir of the Massachusetts Institute of Technology, large areas of the Persian Gulf may well be uninhabitable by the end of the century. Specifically, the research, published in Nature Climate Change, posits that greenhouse gases will continue to accumulate in the atmosphere at their current pace, sending temperatures to intolerable seasonal highs and increasing the frequency and severity of extreme heat waves. In Kuwait City, Doha, and elsewhere, summer temperatures will frequently reach 140 degrees Fahrenheit; decadal heat waves may top 170 degrees. Related: Energy Storage Could Become The Hottest Market In Energy
Although crippling heat may be a problem for another generation, water, and in turn food, security will reshape the region in near future. With its population set to further explode, water stress – the ratio of water use to supply – is expected to double or triple across the Persian Gulf toward 2040.
While the human effects are better understood, the effects on the region’s vital oil and gas industries are less well-known. Rising temperatures present little direct threat, though extraction operations may become more time- and cost-intensive. Instead, the uncertainty centers on volatile future demand profiles and the rate at which the broader decarbonization movement takes hold.
As such – and considering their high economic reliance on hydrocarbon production – the Gulf States have appeared rather hesitant to commit much, or anything, to renewable energy development, green technologies, or international climate pacts. However, the increasingly negative climate realities – 2 degrees Celsius warming is coming – have dampened the relatively carefree, “damned if we do, not so much if we don’t” attitude surrounding alternative energy. Changes are coming, albeit slowly, and disjointedly. Related: A Big Week For The Oil Markets Ahead Of OPEC Meeting
Count Saudi Arabia among the laggards. The Gulf States’ largest GHG emitter and the world’s largest oil exporter has yet to submit their ‘intended nationally determined contributions’ (INDC) to the UN climate convention – though neither have its regional compatriots Iraq, Kuwait, and Qatar. The kingdom’s 2013 roadmap does outline an ambitious plan to develop some 54 gigawatts (GW) of renewable capacity, mostly solar, by 2032, but such dreams have only been met by delays and mismanaged investments; solar capacity today sits somewhere around 50 megawatts (MW).
It’s a similar story elsewhere around the Gulf. Qatar is expecting its first solar power facility (15 MW) in 2016 and is looking to expand its already established photovoltaic manufacturing industry, but results lag far behind ambition. Kuwait’s solar energy push will begin in earnest, and behind schedule, in late 2017, when the 70 MW first phase of its 2 GW renewable energy strategy is completed.
The UAE is perhaps furthest along with more than 100 MW of solar capacity already online. The country, which submitted its INDC in late October, plans to increase its clean energy mix to 24 percent by 2021, up from about 0.2 percent last year. Dubai’s burgeoning solar market saw record low bids last year, suggesting the energy has a place among heavily subsidized traditional energy sources. Still, its relatively stable business climate is not easily replicated in the region. Related: Apache Resists Unsolicited Takeover Bid
To be sure, the Gulf States’ green objectives stem from very un-green desires; rapidly growing domestic consumption – largely fueled by mounting cooling demands – may transform the oil exporters into net-importers in the not too distant future. Sating domestic needs with renewable energy frees that oil for export and alleviates any potential pressure on government coffers.
The recent climate prognosis isn’t entirely new, but the timeline is worryingly accelerated. Expecting an accelerated response however, would require almost paradoxical economic and political bravery heretofore unseen; though, the potential remains.
By Colin Chilcoat of Oilprice.com
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