Gulf countries attending the ADIPEC conference in October made it clear that oil and gas will be needed for decades to come, and the region has the least carbon-intensive barrels to fuel a global economy seeking to lower its emissions. How does this play against the United Nations' assertion that new hydrocarbon investments are incompatible with credible net-zero targets?
S&P Global Commodity Insights news editors Dania El Saadi and Henry Edwardes-Evans compare notes.
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Hello, and welcome to this Future Energy podcast by S&P Global Commodity Insights, where today, we'll be talking about the Middle East role in energy security in the energy transition and how these themes have played out in the UN climate talks in Egypt.
I'm Henry Edwardes-Evans, Managing Editor of Energy Transition News, here at S&P Global. And I'm joined today by my colleague, Dania El Saadi, Senior Editor of Middle East News, based in Dubai in United Arab Emirates. Dania, hi. We're taking this opportunity to catch up on security and transition themes in the Middle East today, not least because we've just had this huge conference, haven't we, the ADIPEC Exhibition in Abu Dhabi.
A huge meeting of oil, gas and energy officials, decision-makers and all sorts of industry people. So -- maybe we could start then with a little look at the main takeaways from the conference, which I know you were at, especially with regard to these 2 themes that we're going to zero in on today, which is energy security, which is such a current near-term demand on all economies and then the longer-term issues of energy transition. I mean, I'm guessing that these were absolutely dominant themes during the conference. Would I be right?
Dania El Saadi
Definitely, Henry. Everyone there talked about energy security, it was the topic of the day. But at the same time, they were talking about energy transition. Many officials from the Middle East focused on how energy transition and energy security can go hand in hand. They don't have to be in conflict with each other.
And that was mainly addressing the opening ceremony by Sultan Al Jaber, who's the CEO of Abu Dhabi National Oil Company, the main energy producer in the UAE, and he's also the Minister of Industry and Advanced Technology. He kept on repeating maximum energy, minimum emissions. That's, you could say, the phrase that he held on to throughout his speech. He repeated it a number of times.
And that's truly what they believe in. As ADNOC, they are boosting their oil production capacity to 5 million barrels per day by 2030 or even before, from around -- or over 4 million barrels a day now. Between 2022 and 2026, they're investing $127 billion on various projects, including the oil capacity ramp-up and hydrogen, CCUS, you name it.
At the same time, they are also investing in renewables, blue hydrogen projects. And ADNOC also acquired a stake in a renewables firm called Masdar. And Masdar has been spearheading a number of renewables projects in the UAE and globally, even they have offshore wind projects in the U.K. So they have big ambitions, big projects, and they see energy transition and energy security as sides of one coin.
Thank you. Yes. So there's a lot of kind of questions that come -- I want to ask around this, which is essentially, first of all, what -- roughly, what's the split between the fossil fuel investment and the kind of new energies investment? Is it significant in terms of new energies investment? Are we seeing that growing?
Because in the past, they've talked a good game, a lot of Middle East fossil fuel companies, but actually the amount of investment going into renewables has been pretty modest up until now, hasn't it?
Dania El Saadi
Well, actually, the UAE is the leader in the region in terms of investing in renewables. Dubai, for example, it's building a 5 gigawatts solar park. It's already in the -- they're going to tender the sixth phase. Abu Dhabi already has renewable projects. There's solar in the UAE, there is no wind.
Masdar is involved in projects in Saudi in renewables. And during ADIPEC, which took place end of October, October 31, till November 3, I think the biggest agreement or deal that was signed during that annual conference and exhibition was an agreement signed actually with the U.S. The UAE and U.S. signed an initiative where they plan to mobilize $100 billion to develop 100 gigawatts of clean energy projects by 2035.
These are not small numbers. They didn't provide details how they're going to go about doing that. But it shows you that the UAE is not doing it alone. It's working with its partners. It's investing globally. It's not just something they're going to do just inside the country. They want to have a global role in energy supply -- supplying energy and energy transition.
And actually, that was also the message of the President of the UAE during the opening ceremony of COP27 in Sharm El-Sheikh in Egypt that's taking place right now. He said that UAE will be -- or is a reliable supplier of energy, and it will continue to do so as long as the world needs oil and gas. And that the UAE provides one of the least carbon intensive barrels in the world.
And that's a line that is always repeated by ADNOC and Sultan Al Jaber, that ADNOC provides low cost, low-carbon energy, and that's why they see a future for their energy industry, oil and gas, both of them.
Yes. I mean, obviously, we are very interested in carbon intensity of a barrel and whether that has a premium in the market. But yesterday, I mean, Secretary General António Guterres essentially accused oil and gas companies of greenwashing instead of actively reducing the full chain emissions.
I mean he said non-state entities, companies, basically oil companies, needed to stop buying cheap offsets and start publishing detailed decarbonization plans. But what you're telling me is that actually Middle East companies have actively sought to reduce the carbon intensity of their processes.
Give us a little bit of background on how it's been -- how they've been doing that in terms of flaring, in terms of the energy supply to their production sites. What's going on there that allows them to claim that their barrels are lower carbon than others?
Dania El Saadi
Well, I could give you the example of ADNOC. They have a carbon capture utilization and storage project called Reyadah (sic) [ Al Reyadah ]. It's currently capturing around 800,000 tons a year of CO2. It's capturing the CO2 from a steel plant in the Emirate of Abu Dhabi.
And they have plans to increase that capacity to capture CO2 to 5 million tons a year by 2030. During ADIPEC, they also announced certain targets for methane emissions. They do say that they have almost zero flaring of gas. The major country that has gas flaring issues in the Middle East, it's mainly Iraq. It's the world second-worst nation in terms of gas flaring, after Russia. Iran is not far behind.
But the Gulf region, in general, they've managed to bring their gas flaring to zero because they found out that they can actually use that gas for domestic power generation and other industries instead of burning their precious crude, which they can be exporting.
So even with the CCUS project in Abu Dhabi, they're capturing the CO2, injecting it into oilfields to maintain the reservoirs. You could say they're using their CCUS cleverly in terms of mitigating whatever emissions from the production but at the same time, helping them boost production.
And this is oil and gas carbon capture or is it industrial? Which sectors are being targeted for CCUS?
Dania El Saadi
At the moment, in ADNOC, it's -- they're capturing CO2 from a steel plant, Emirates Steel. In the future, they said they're going to capture gas from gas operations because they're really boosting their gas production in the UAE. It's mainly sour gas, lots of sulfur. So they're going to capture more gas from these operations in order to reach the 5 million ton a year capacity by 2030.
Saudi Aramco also has a project that currently has the capacity to capture 800,000 tons of CO2. Aramco has said that they want to boost their CCUS capabilities, but they didn't provide too many details about it. But they're also -- both of them as well are working on blue ammonia projects. That's a way of cleaning up their ammonia that they produce.
ADNOC has subsidiary called Fertiglobe, and they are going to build a 1-million-metric-ton-a-year blue ammonia project in an industrial hub called Ruwais, where ADNOC has its refineries, petrochemical activities and even some exports. So -- and they already sent some cargoes of blue ammonia to Japan and Germany.
Saudi Arabia also sent blue ammonia cargoes to Japan. So they're really working on blue ammonia. And both Saudi and the UAE, who are really the leaders in this region in terms of what they're trying to achieve in the energy transition, are also working on green hydrogen projects.
ADNOC has a stake in renewables firm Masdar, and they plan to develop green hydrogen projects. Masdar has said that they have around right now, 15 gigawatts of renewables, and they want to reach 100 gigawatts -- as much as 100 gigawatts by 2030. So they will have to invest -- they can't invest it all in the UAE. They will have to invest it globally as they expand their operations.
In Saudi, they have a futuristic city called NEOM, a $500 billion conceptualized zero-carbon city that's in the making. And NEOM, Air Products from U.S. and ACWA Power have teamed up to build a 1.2-million-metric-ton-a-year ammonia -- green project in NEOM in the middle of nowhere. And that's going to be the biggest green -- so far, the biggest green hydrogen project in the region. And Air Products is the offtaker. They will guarantee markets for that green ammonia.
Yes. So I was just looking at our hydrogen price wall, which is readily available everybody. If you just put in hydrogen price wall S&P Global into your search engine, it will come up. It's an interactive infographic. And it shows all our hydrogen prices on a monthly average basis.
And Middle Eastern blue and green hydrogen prices are amongst the most competitive in the world. And it just shows that where it's positioned as well is ideal really for shipping to the future demand markets in Europe, and it's a much better place for supplying some of these big contracts that are just being tendered by Germany, actually, where we had some news flow November 9, that auctions are being set up right now for the first $300 million worth of green hydrogen imports into Germany under their H2Global program.
But at this point, I'd like to take a moment to direct our listeners towards Platts Dimensions Pro, where these commodity prices can be found actually. And subscribers can access all our premium content on the commodity markets we've been discussing, hydrogen, carbon and, of course, oil and gas.
With your subscription, you can get daily prices, upstream news, hard hitting analysis, market updates are much more. So we're talking about hydrogen here, Dania, let's have a look at the potential volumes in future because, obviously, if we're talking about green hydrogen, a lot of the renewable build, the better use for that electricity is in direct electrification.
But I know that the hydrogen strategies developing in the Middle East are looking at exporting hydrogen. So can we have a look at, roughly, when the first volumes might come on stream and when load centers like Europe could hope to receive its first deliveries?
Dania El Saadi
Well, there are so many projects that have been announced in countries like UAE, Saudi, Oman, Egypt. I think the project that's maybe more advanced in construction and development would be the green hydrogen project in NEOM. That is expected to start operations, I think, between 2025, 2026.
And as I said, Air Products is the offtaker. So they are going to kind of guarantee the sale of the green ammonia to -- globally. In the UAE, the blue ammonia project between ADNOC, Fertiglobe, I think, would go mainly to Asia. ADNOC has sent some cargoes to INPEX -- blue ammonia cargoes from its current Fertiglobe operations to companies, users, in Japan, like INPEX.
And Japan is really looking at the UAE very closely to get some supplies of blue ammonia. The UAE has set a target to provide around 25% of low-carbon hydrogen to the world by 2030. That's a big target. As I said before, Masdar is being involved in green hydrogen projects. There were some projects also announced in Abu Dhabi ports and the Emirate of Abu Dhabi where ADNOC is based and where most of the oil and gas reserves are.
But the Abu Dhabi ports projects, they're scant on details. The most advanced would be the blue hydrogen -- blue ammonia project that ADNOC is working on in Ruwais with Fertiglobe. The Masdar projects that are being -- they've signed a lot of agreements, Masdar, for renewables and developing green hydrogen projects globally. So I think you will start seeing production from blue and green hydrogen trickle into global markets around 2025, 2026.
Excellent. That's fairly interesting. Listen, let's -- you mentioned at the top, COP27. Let's look at all of this through the prism of climate change policy. And where we stand this year, it's so different from last year. The geopolitical situation is utterly different. Prices have been so high, so volatile.
And of course, the physical delivery of products out of Russia has dried up, in some instances almost completely on the gas front into Europe. So the priorities -- the near-term priorities have really trumped longer-term climate change story that had been developing quite a lot of momentum up into Glasgow and directly afterwards.
Can you give me a feel for how the Middle Eastern nations are playing COP27 in Egypt and what they're hoping to get out of the talks and whether their message is being received positively or otherwise?
Dania El Saadi
I think the biggest announcement that came out of COP27 from the Middle East is Kuwait saying that they want to hit net-zero emissions by 2060, with their oil and gas sector hitting that target by 2050. They didn't provide any details. Kuwait has been a bit of a laggard in terms of renewables projects, and they don't have any investments in green or blue ammonia at least announced so far.
So it was a bit of a surprise, I must say, because I don't know if they're trying just to jump onto that zero wagon -- because the UAE was the first country to announce a net-zero target by 2050. It was sold followed by Saudi Arabia and Bahrain, who will reach that target by 2060. And then Oman, this year they said they will reach that target by 2050, which leaves only one gulf country with no net-zero target, which is Qatar, the top LNG producer.
They have yet to announce any targets to reach net-zero. But there were -- definitely expanded their gas production, especially as they're a top LNG exporter. And they're banking on that there will be a good demand for LNG for the foreseeable future.
In terms of the COP message, I think what the UAE President in the opening ceremony said, about them being known as a reliable energy supplier, set the tone for what at least the UAE thinks is that energy security is an important topic. It shouldn't detract from the importance of climate change and energy transition.
One shouldn't negate the other, because the second line -- his second statement was, we produce the lease carbon-intensive -- among the least carbon-intensive oil and gas barrels in the world. So that's a really strong message he gave in his opening speech. And we shouldn't forget that COP27 this year is being held in Egypt.
Next year, it's going to be in the UAE. So if the next host of the UN Climate Change Conference is talking about energy security and producing the least carbon-intensive barrels, we can get an idea what the themes of next year will be when it's held in Dubai and actually in the Expo Center.
So they knows exactly what they want. Their messages has always been clear, they haven't wavered from it. And I think that was among the statements from the UAE President during COP27, was among the strongest. The Crown Prince of Saudi Arabia, Mohammed Bin Salman, he spoke during the Middle East Green Initiative, which was launched by Saudi Arabia last year in order to garner investments for green projects in the region.
And he did not refer that much to energy security. He only talk about Saudi Arabia's commitment to renewable investments, their take on having a circular carbon economy, that's been the mantra for a while now. And he talked how they want to help other countries in the region to have clean projects. He didn't talk much about being a reliable energy supplier. So it just shows you a bit of a difference in tone between the 2 countries at COP27.
Indeed, yes. Dania, thanks so much for joining me in this conversation today. I found it fascinating and full of insight. And thank you to our listeners as well for tuning in. This Future Energy podcast episode was produced by Felix Fernandez in London.