With the Middle East demonstrating an unrelenting willingness to combat the climate crisis and make further progress en route to a sustainable future, the immediate future demands anticipation and action in equal measure. While roadmaps have already been established to meet related objectives, the wider energy system is continuously changing in times of disruption and essential adjustment. To bear witness to the potential benefits of a successful energy transition and deliver on targets aligned with the Paris Agreement, National Oil Companies (NOCs) must not only understand the latest challenges at hand but also ensure they evolve to endure – something achievable through holistic strategy and technology deployment.
Energy Transition Outlook
While NOCs differ in geographic location, they are bound by certain commonalities. The transition to low-carbon energy sources is fundamentally reshaping how energy is produced and consumed, and Middle Eastern NOCs have remained ahead of this evolutionary trend to date – broadening operational scopes to include alternative energy areas, approving decarbonization investments, redefining business processes and policies in anticipation of the energy transition. For example, Abu Dhabi National Oil Co. (ADNOC) grew its renewable energy portfolio by over 400% in the decade commencing 2010[1], while Qatar Energy has committed to low-carbon liquefied natural gas (LNG) as part of its ongoing North Field East (NFE) project[2].
However, an ever-increasing enhancement of climate change governance is likely in due course, with full disclosure of financial risks associated with climate change becoming mandatory. Moreover, NOCs are also facing mounting pressure from regulators and investors to once again review future strategies and further articulate their inputs and contributions in tomorrow’s landscape, which is a major energy transition challenge at present. Most crucially, though, NOCs have fully committed to making specific contributions in these areas – and they are mandated to develop strategies and honor stakeholder contributions. With this in mind, all NOCs should aspire to fulfill the topmost objectives without delay.
Priorities And Vital Courses Of Action
As Middle Eastern NOCs seek to continue honoring their energy transition obligations and driving essential reform, three imperatives must be actioned and accomplished. Firstly, NOCs must manage to expand regulatory requirements and ensure compliance within governmental frameworks. Secondly, they must retain the social licenses essential for having visible operations and presence in public domains and investor communities. Thirdly, they must continue identifying emerging business opportunities and anticipate potential scenarios yet to transpire that will support emissions reductions activities.
While simultaneous success in each of these areas is non-negotiable, it is also more than achievable. For starters, NOCs can reduce their emissions further. Along the entire value chain, companies can minimize their greenhouse gas (GHG) outputs by enhancing energy efficiency, prohibiting natural gas flaring, transitioning to renewable power sources, and implementing low-carbon hydrogen. At the same time, they can place a strong emphasis on low-cost production. To attain the most sizeable revenues possible with minimal expense, NOCs – particularly those with an expansive range of oil and gas resources – can, for instance, prioritize the development and integration of hydrocarbons for both lower costs and further GHG emissions.
Deploying green energy technology will also be essential, and successful efforts in this direction can be driven by R&D investments and building robust relationships with prominent and emerging technology providers. The role of technologies cannot be overlooked, and several will inevitably become invaluable energy transition pillars moving forward.
Which Technologies Will Support The Energy Transition?
Productive and sustainable action to help avoid dangerous climate change and limit global warming as per the Paris Agreement can undoubtedly be supported by several technologies in the years ahead. Although in an infant, somewhat immature stage at present, their full potential can be realized with the necessary regulatory support. In addition to widescale renewables deployment already well documented, others will become viable in the medium to long term. Among the most prominent is capture, storage, and utilization (CCSU), one of a few technologies capable of decarbonizing large, stationary CO2 emitters.
Although reducing current CCUS costs will be imperative in due course, the development of large-scale geographical hubs in different locations around the world whereby multiple emitters are connected to a shared CO2 transportation and storage network will contribute substantially. These can open up CCUS to a wide range of emitters, offering substantial cost advantages and emissions reductions through geological storage proximity, existing pipeline infrastructure, and scalability capabilities.
It is important to note that both governments and policymakers will first need to consider how to promote the development of local networks that integrate different emitters. Moreover, industries emitting CO2 will be obligated to analyze CCUS practicality before determining whether any of their plants could be combined with those of other emitters to form a network. CCUS aside, other less mature applications, including direct air capture and biochar, could also contribute to Paris Agreement efforts providing further development is pursued.
Further Reform Within Reach
For Middle Eastern NOCs, driving the energy transition charge and making valuable Paris Agreement contributions hinges on a forward-facing approach through which challenges are met, change enacted, and technological potential explored and ultimately harnessed. Already, recent years have seen key players at the national level facilitate vital reform. And while requirements are becoming more demanding and delivery timeframes more sensitive, the above recommendations and their proven track record of compliance can serve as the latest stepping stone to greater accomplishments.
