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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle…

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Middle East Oil Producers Are Making Ambitious Renewable Energy Pledges

  • Gulf oil producers present big renewables plans ahead of COP26
  • Oil remains key, but NOCs look to offset a large part of emissions
  • Renewables investment fits in long-term low-carbon energy strategy

Net-Zero is a phrase we’re hearing a lot of at the moment, as the world gears up for COP26. Certain Western economies are already on track to reduce emissions, but in the oil-producing hub of the world, namely the Arabian Gulf, Net-Zero is more of an abstract term.

This weekend Saudi Arabia, the world’s largest oil producer, committed to a Net Zero 2060 strategy. In this respect, it follows in the footsteps of its regional neighbor, the UAE, which has gone even further in pledging Net-Zero by 2050. As the world’s largest producers of fossil fuels, ‘going green’ may sound like a paradox, but Gulf Governments clearly think otherwise. Their timing in the lead-up to COP26 is far from a coincidence. 

There is no question that these economies plan to keep oil flowing for the foreseeable future, which is an unavoidable economic reality not just for them, but for global energy security. However, there has been a marked difference in tone, with oil-rich OPEC states not just reluctantly accepting the need to go greener as a fait accompli, but proactively taking steps to do so. This has especially taken a flight in the run-up to COP26.

The scale of the announcements emanating from the region appears to be growing larger by the week. Saudi Arabia, for example, has pledged to bring the world’s largest green hydrogen power plant, powered entirely by renewables, online by 2026. Elsewhere, in something of a coup, Abu Dhabi was announced as the host of COP28, a first for the region, and a sign of changing times. It is clear that the Gulf is betting that a greener stance will pay off in the long run. However, it doesn’t necessarily mean the Gulf states will sideline their oil interests.

In a potentially game-changing decision, some national oil entities are considering integrating full-scale renewable energy supply into their own operations. Once again, this sounds contradictory, but this opens up a potentially new model for oil companies to ‘go green’. This week, the Abu Dhabi National Oil Company (ADNOC) signed an agreement with Emirates Water & Electricity Company (EWEC) to meet up to 100% of its energy requirements from renewable or nuclear sources. This will see the bulk of the company’s energy supply come from low-carbon sources. 

Developing a short-to-medium-term model where an energy transition can happen alongside the production of hydrocarbons is essential to global economic prospects. The ongoing energy crunch in Europe, China, and even in the U.S., have shown that there is a major discrepancy between OECD-based energy transition strategies, most targeting wind and solar energy, and the reality on the street. 

That reality, for now at least, involves hydrocarbons remaining the backbone of the global energy and economic system. However, oil producers’ licenses to operate have been put under severe pressure, as activism, investors and politicians have pushed for divestment worldwide. In the face of this all, the options for privately owned international oil companies (IOCs) are limited, but national oil companies (NOCs) such as ADNOC have more room to adjust. 

The use of renewables will not only mitigate emissions associated with hydrocarbon production, but at the same time, increase opportunities for renewable production expansion worldwide. Integrating renewables is a major step towards a net-zero oil and gas production chain. ADNOC’s cooperation with major renewable producers inside of the United Arab Emirates (UAE) is not new. The company has promised direct support for a host of in-country renewables projects. This latest step, however, massively increases the scale of this support. 

The use of a mix of solar and nuclear energy will, in one fell swoop, render ADNOC the world’s leading supplier of low carbon oil and gas products. In future trade scenarios, oil and gas producers with the lowest carbon footprint will reap rewards as carbon intensity becomes a bigger factor in the ‘cost of doing business’. Ahead of COP26, it appears the world’s biggest hydrocarbon producers are putting forward their own version of an energy transition, which sees oil and renewables capable of living side-by-side. 

By Cyril Widdershoven for Oilprice.com

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