The Middle East accounts for almost one-third of world oil production and holds close to half of all proved oil reserves and 40 per cent of gas reserves.

How the leading oil-exporting region navigates the energy transition is of huge significance to global markets, and will influence boardroom strategies in North America and beyond.

Saudi Arabia is the number one oil producer and exporter and has long been keen to diversify away from fossil fuel dependency.

In 2022, Saudi Aramco, produced 11.5 million bbls/d of crude and other liquids — about 10 per cent of the world’s total.

Other big producers include Iraq, UAE and Kuwait, while Qatar and Iran are major gas exporters.

The task for all countries is to maintain a competitive position in global markets, supplying secure, affordable oil and gas, while hitting environmental targets and embracing cleaner, alternative energy solutions at home.

Production increases

For now, production of oil and gas is set to rise, in response to demand.

Saudi Arabia’s 12-million-bbl/d nameplate capacity will rise to 13 million bbls/d by 2027 through various offshore and onshore projects.

Its capacity could even hit 15 million bbls/d by 2030, by freeing up products currently used in the utilities sector — much of its power infrastructure still burns oil — as well as the expansion of gas capacity, yielding additional NGLs and condensate.

UAE is boosting production too. Abu Dhabi National Oil Company (Adnoc) recently brought forward plans to lift output to five million bbls/d by 2027, from a previous 2030 target.

Kuwait, Iraq, Iran and Qatar are similarly working on aggressive capacity expansions.

QatarEnergy is expanding its hunt for new reserves globally. It has acquired exploration blocks in Guyana, Namibia, South Africa, Cyprus and recently, offshore the East Coast of Canada. With limited oil upside at home, it is looking to add production to balance its massive natural gas resource at home. This could impact its currently low emissions profile.

OPEC’s World Oil Outlook sees global demand rising from almost 97 million bbls/d in 2021 to 110 million bbls/d in 2045.

Renewables investment

The revenue from these additional volumes will help to bankroll the Middle East’s long-term transition goals.

That includes playing catch-up in the roll-out of renewables, notably solar, as well as nuclear.

According to the International Renewable Energy Agency, headquartered in Abu Dhabi, the region has 29 gigawatts (GW) of renewable generation capacity, a global share of just one per cent.

But the Middle East recorded its highest expansion on record last year, with 3.2 GW of new capacity commissioned during 2022 — a yearly rise of 12.8 per cent, faster than any other region.

UAE has grown total installed renewables capacity to 3.1 GW in 2022, up tenfold since 2017.

Its Barakah nuclear plant, the first on the Arabian Peninsula, began operations in 2021.

Saudi Arabia’s progress has been slower, with just 443 megawatts (MW) of installed capacity, mainly from the Sakaka solar plant, though its pledge to produce 50 per cent of all electricity from renewables by 2030 will see a massive acceleration in the coming years.

UAE in the lead

UAE — set to host the COP28 summit this November and December — is ahead of other Middle Eastern nations with a plan to reach net zero by 2050.

It began financing clean energy 15 years ago, investing over US$40 billion to date, and expects installed capacity to reach 14 GW by 2030.

Adnoc’s own decarbonization strategy includes a $15 billion multi-year action plan to bring carbon intensity down 25 per cent overall by 2030.

It is transforming the way it powers upstream operations, drawing on nuclear and solar sources for all its grid electricity.

A $3.8-billion subsea transmission network, connecting offshore operations to clean onshore power, could eventually slash offshore carbon intensity by up to 50 per cent. 

Adnoc’s portfolio also includes Al Reyadah, the region’s first commercial-scale CCUS facility, which can capture up to 800,000 tonnes of CO2 per year.

Saudi’s Vision 2030

Saudi Arabia’s transition roadmap aims to achieve net zero by 2060.

Its Vision 2030 and Saudi Green Initiative outline key sustainability goals and a pledge to cut emissions by 278 million tonnes annually by the end of the decade.

Some 13 renewable projects with a total capacity of 11.4GW — worth $9 billion — are currently under development.

Plans extend into green ‘smart’ cities with embedded energy strategies, such as the $500-million NEOM project.

NEOM Green Hydrogen Company was recently granted a licence to produce green hydrogen from 100 per cent renewable energy sources starting in 2026, with output of up to 1.2 million tonnes of green ammonia annually for export.

The plant will run on four GW of wind and solar power, highlighting the rapid planned roll-out in capacity.

Saudi Aramco itself, now engaged in its largest capital spending program ever, will play a pivotal role.

Last year, it established a $1.5-billion Sustainability Fund to invest in technologies that support the company’s own target of achieving net zero by 2050 in wholly owned operational assets, as well as development of new lower-carbon fuels.

It has also embarked on a scheme to construct one of the world’s largest carbon capture and storage hubs, at Jubail, with capacity up to nine million tonnes of CO2 a year by 2027.