Gulf oil-producing countries accelerate carbon reduction
Investing heavily in CCUS and hydrogen energy projects
Currently, Gulf countries led by Saudi Arabia and United Arab Emirates are investing heavily in carbon capture, utilization and storage (CCUS) and hydrogen energy projects to reduce carbon emissions. Gulf countries are taking advantage of the growing global demand for clean energy, as well as abundant natural resources, low-cost solar energy and government support policies to become global leaders in CCUS and hydrogen energy production.
The background for the Gulf countries to develop CCUS and hydrogen energy is first of all, the region's oil and gas producers continue to receive rich income from high global oil and gas prices. Leveraging these revenue, Gulf national oil companies are accelerating investments in CCUS, hydrogen and clean energy to reduce carbon emissions and support the energy transition. At the same time, because the world continues to rely on oil and natural gas during the energy transformation process, the Gulf region has the advantage of low-cost oil and gas production and abundant oil and gas resources, which means that in the next few decades, CCUS will be useful in reducing carbon emissions from local oil and gas production.
In principle, CCUS allows oil and gas companies to decarbonize from the production process. This carbon can be stored, redeployed into enhanced oil recovery technologies, or converted into other consumer goods. With the growing demand for clean energy and carbon trading markets in user end markets, the momentum of development in this field is increasing. As of March 2023, a total of 569 CCUS projects around the world are in different stages of development, of which 47 projects have been put into operation, and 364 projects will be put into operation before 2030.
Among them, many CCUS projects are implemented by Gulf national oil companies. Mitsubishi Heavy Industries, which is involved in many CCUS projects in the region, said that by 2030, carbon capture capacity in the Middle East will reach 50 million tons per year, while the global total capture capacity is expected to be 80 million to 89 million tons per year. According to data from the Global Carbon Capture and Storage Institute, Qatar, United Arab Emirates and Saudi Arabia captured 3.7 million tons of carbon in 2022, accounting for 10% of the global total. The think tank estimates that carbon capture in the GCC countries will reach 60 million tons per year by 2035. In addition, in order to promote the development of CCUS, Saudi Arabia launched a carbon offset and carbon credit trading platform for Middle East and North Africa countries in September 2021.
Currently, some international observers have expressed concern about the oil and gas industry's over-reliance on CCUS to achieve its net-zero emission plan. They believe that this area requires significant technological progress to achieve tangible emission reductions. CCUS may also simply provide cover for continued oil production, rather than encouraging downstream shifts to clean energy. But in fact, the Gulf countries are not walking on one leg. According to a report released by German consulting firm Roland Berger and United Arab Emirates Dii Desert energy, with the world's cheapest solar energy, abundant wind energy and sufficient land to build green energy power generation projects, Gulf national oil companies can establish a first-mover advantage in green hydrogen production and exports, which could bring in US$200 billion in revenue by 2050. Therefore, Gulf oil companies are also actively investing in hydrogen energy.
Like CCUS, hydrogen energy has also achieved significant development in the Gulf region. Saudi Arabia already has active hydrogen energy projects and ambitious expansion plans. In March 2022, Saudi Arabia began to build a US$5 billion wind-and solar-powered hydrogen energy plant in its NEOM large-scale project. When completed, the project will become the world's largest hydrogen energy plant. In October 2021, Saudi Arabia announced its goal to become the world's largest hydrogen energy producer, with the goal of reaching 2.9 million tons/year of hydrogen production capacity by 2030 and 4 million tons/year by 2035.
Other Gulf countries, such as the United Arab Emirates, Kuwait and Oman, are also developing national hydrogen energy strategies. Although Qatar does not plan to produce its own hydrogen energy, its natural gas will be used to power electrolysis cells abroad. In May 2022, Abu Dhabi National Oil Company (ADNOC) announced a new energy partnership with British Petroleum (BP) to develop hydrogen energy facilities in the United Arab Emirates and the UK. ADNOC will acquire a stake in BP's H2Teesside hydrogen energy project, while BP will invest in ADNOC's green hydrogen plant in Masdar, Abu Dhabi. ADNOC is also considering working with Japan to develop a green hydrogen supply chain.
