Middle East & Gulf States Network

Middle East & Gulf States Network

The Middle East and Gulf States region includes major energy producers but also some of the fastest-growing energy consuming countries. The diverse regional community provides national Member Committees and their members with opportunities to expand and deepen their network and engage around activities and events – from young energy professionals to CEO and Ministerial level – on topics of interest to the members.

Regional action priorities that support the Council’s mission and humanising energy vision are agreed on an annual basis by national Member Committees in the framework of a Regional Action Plan. In 2021, key topics of interest to members in the region included the future of hydrogen in the region, the development of a circular carbon economy framework as a comprehensive approach in utilising all available levers for emissions reduction, and conversation about inspirational projects for sustainable energy. 

Each month, the Middle East regional network meets to discuss matters of mutual interest, drive collective activities, and keep each other updated on relevant developments and events.

Energy in the Middle East 

REGIONAL OVERVIEW & CONTEXT

In the Middle East and Gulf countries, unlike the other regions, hydrogen and P2X had the highest uncertainty, closely followed by investment. Commodity prices were not a critical uncertainty, differing from the global average and previous Middle East and Gulf States surveys. The biggest impact issue was climate mitigation as expected, given the economic dependency on fossil fuels in many countries in the region. Energy storage stands out as an action priority, but many of the other issues are clustered around the centre line, with not a great deal of differentiation. A cluster of issues (climate adaptation, domestic growth, transmission grids and circularity) are action priorities. Notably, CCUS is more in the action space than on the global map. This is expected considering the region’s interest in establishing a circular carbon economy framework that helps identify economic opportunities by assigning monetary value to CO2 emissions when kept in the loop through various processes such as carbon capture and utilisation (CCU), carbon capture and storage (CCS) and carbon recycling. Demand management is receiving leadership attention but is less certain than the narrower energy efficiency in previous surveys. Ecosystem reparation and life cycle impact of renewable energy solutions were perceived as much higher than other regions in both uncertainty and impact.

MIDDLE EAST AND GULF STATES REGIONAL DEEP DIVE

Major regional changes

The dominance of oil in the Middle East and Gulf States (MEGS) faces an unprecedented challenge. A growing focus on clean energy and the potential for declining oil demand necessitate a bold transition to a new energy paradigm. On one hand, these countries are heavily reliant on oil and gas revenue, and diversifying their economies and infrastructure will require significant investment and a shift in mindset. Yet, there is a growing sense of urgency as the region has been warming more rapidly than the global average.

The Middle East energy landscape faces multifaceted challenges ahead with energy transition, poised between tradition and innovation. Beyond the conventional concerns of oil and gas stability, the region grapples with the complexities of energy supply chains, data security, and geopolitical instability, particularly heightened by events around the Gulf States.  Furthermore, Carbon Capture and Storage (CCS) initiatives, vital for mitigating greenhouse gas emissions, demand well-defined frameworks and clear liability assignments. The capability to manage these issues varies across the region: affluent nations like Saudi Arabia and the UAE are actively diversifying their energy portfolios to enhance future competitiveness. Lebanon is on a virtuous cycle of clean energy development driven by economic and energy security interests. On the other hand, countries like Libya and Iraq, with less effective resource management, struggle with both energy transitions and maintaining stability.

Accelerating regional trends over the last 5 years

The region's geology and existing energy infrastructure make it well-suited for long-term carbon storage, especially near industrial zones like Jubail, Ruwais, and Ras Laffan, which can facilitate the organic development of a Hub and Cluster CCS model. The Gulf States have ambitious emissions reduction targets, and despite underdeveloped emissions regulations, they have precedence and can rapidly implement laws and frameworks. Government action is necessary to support CCS projects and incentivize emitters to capture emissions while National Oil Companies (NOCs) lead in providing CO2 storage solutions. Regional governments are working on drafting laws for long-term storage, providing clarity for investment from the private sector, which has historically been vital for large hydrocarbon projects. Foreign partnerships can also provide technology and expertise beyond investment to ongoing projects.

The Middle East and Gulf countries have several major operational CCS projects, such as Qatar's LNG operations in Ras Laffan, Abu Dhabi's Al Reyadah steel project, and Saudi Arabia's Hawiyah NGL CCS project, storing around 3.7 million metric tonnes per annum (MMTPA) of CO2. These projects, along with plans for significant new capacity, demonstrate the role of CCS in helping national oil companies (NOCs) enhance the value of reserves by remaining competitive in nearly all transition scenarios. CCS projects, including those announced in Qatar, Saudi Arabia, and the UAE, could see further expansion with a contribution to the production of low-carbon blue hydrogen using natural gas reserves

Additionally, low-cost mature technologies such as methane monitoring, zero flaring solutions, and low-emission refinery technologies can support a circular carbon economy. Infrastructure improvements to enhance trade corridors can also boost regional cooperation for carbon management, leading to a significant expansion of the CCS project pipeline in the region.

Integrating people and communities in the energy transition

The identification of societal needs as an action priority with low uncertainty demonstrates the many opportunities presented by the energy transition. Stakeholder coordination and affordability have also emerged as key action priorities, offering significant societal benefits.

The energy transition presents an opportunity for upskilling and reskilling the region's workforce, fostering new job creation and driving economic development. However, the Gulf Cooperation Council (GCC) countries exhibit differences in their approaches to expatriates. While some, including Saudi Arabia, aim to attract millions of highly skilled expatriates by offering premium residency, others are more reserved in their visions for expatriate populations by 2040. Nevertheless, expatriates remain integral to GCC economies, stimulating demand for infrastructure and subsequently energy. As these countries navigate through these shifts, they must account for the evolving role of expatriates and their impact on economic growth and energy consumption.

The vulnerability of the region to climate change and the need for adaptation and resilience is evident and the risk of further water scarcity and reduced agricultural yields.  The involvement of people building resilient societies is critical. Examples of such initiatives include the UAE’s Emirates Youth Climate Strategy 2018–2021 and the Youth Climate Delegates Programme.

A SNAPSHOT OF 2024 RESULTS

A green molecule hub

The region is strategically positioning itself as a hub for hydrogen production, leveraging its abundant solar and natural gas resources along with the availability of capital for investment. For instance, Saudi Arabia's NEOM project aims to build a large green hydrogen facility using renewable energy sources, producing up to 650 tonnes of carbon-free hydrogen daily. The UAE's green hydrogen plant in Dubai is a pilot project in partnership with Siemens Energy and DEWA, using solar power. In Oman, the Hyport Duqum project involves collaboration between Omani and international companies to develop green hydrogen facilities. Sustainable Aviation Fuels (SAF), particularly power-to-liquid fuels (P2X), offer promise but necessitate overcoming financial barriers and policy misalignments. In this regard, hydrogen production can help the region achieve their carbon emission reduction targets while also leveraging their abundant natural resources for economic diversification.

Several reasons can explain the high uncertainty levels regarding hydrogen and P2X in the Middle East and the Gulf States, including immature technology, insufficient infrastructure investment, lack of regulation and standards, competition from renewables, and the legacy of fossil fuels. The most promising option appears be green hydrogen production, due to abundant sunshine and wind. Furthermore, green hydrogen has the potential to help economic diversification, reduce fossil fuel dependency, and enhance and diversify the region’s energy export capacity. As per the report published by Strategy&, green hydrogen, once seen as a futuristic idea, is now becoming a realistic possibility with the GCC potentially at the forefront. While the GCC has a clear advantage in producing green hydrogen due to its plentiful and affordable renewable resources, delivering it cost-effectively is the key hurdle. Transporting green hydrogen can be very expensive, even doubling the initial production cost. To compete in major import markets like Europe and East Asia, GCC producers must focus on minimizing the total delivered cost by optimizing every step of the supply chain.

Striving for balance

Transitioning away from oil in the Middle East and Gulf States requires collaboration, partnerships, and stakeholder coordination. This is particularly crucial for securing critical minerals essential for batteries and equipment, requiring cooperation with other countries. From this perspective, the Saudi Green Initiative (SGI), launched as part of Vision 2030 in 2021, is actively investing in collaboration for clean transitions by uniting government and private sector efforts under a single umbrella, overseeing over 80 initiatives to accelerate Saudi Arabia's green economy, enhance sustainability, and implement the Circular Carbon Economy approach.

The Middle East and the Gulf States face challenges in balancing the interconnected needs of food, energy, and water security, often referred to as the food-energy-water nexus. While the Gulf States ensure food security through trade agreements and acquiring stakes in large agricultural industries, other Middle Eastern countries depend more on domestic agriculture. The region as a whole depends on desalination to fulfil its water needs. To address these challenges, holistic policy approaches are being adopted, including pilot programs that focus on water-saving irrigation techniques and the use of treated wastewater for agriculture. Saudi Arabia has introduced subsidies for drip irrigation systems and the development of drought-resistant crops.  In parallel, the UAE is investing in technologies to treat wastewater for irrigation and desalinate seawater. Despite these efforts, many challenges persist, primarily due to the fragmented governance, hindering a unified food-energy-water strategy. Water scarcity remains a major concern in the region, exacerbated by a growing population and climate change, placing further pressure on already limited resources.

Climate risk and resilience

The “UAE Consensus” at COP28 is significantly influencing action priorities in the region, prompting a shift towards sustainability and the greening of economies. COP28's ambitious goals, which include tripling renewable energy capacity and doubling energy efficiency by 2030, require adjustments in regional priorities. This entails accelerating investment in renewable energy, green hydrogen production, and sustainable projects such as CCS.

Notably, 2023 witnessed an increase in green financing, particularly in the UAE and Saudi Arabia, where it is estimated at nearly USD$14.6 billion of green debt. This surge in financing is fostering economic diversification and job creation. The region's sovereign wealth funds play a crucial catalytic role in climate finance by providing capital to back long-term, capital-intensive renewable energy projects in both developed and developing nations. While UAE’s Mubadala has already deployed more than USD$20 billion in clean energy projects, Saudi Arabia’s sovereign wealth fund has committed to developing 70 per cent of the country’s renewable energy by 2030. Additionally, the Saudi Energy Efficiency Center enhanced energy efficiency across various sectors, reducing energy consumption intensity by 12% from 2012 to 2022, and implemented the Saudi Corporate Average Fuel Economy (CAFE) standard to improve fuel efficiency. Meanwhile, Lebanon is enhancing its renewable energy landscape through the Distributed Renewable Energy Law (Law No. 318/2023), which facilitates distributed renewable energy production and has initiated projects totalling 165 MW of PV capacity to expand energy access and promote sustainability.

The region already produces the lowest-cost solar energy in the world. This cost advantage is opening significant opportunities for the Middle East in green fuels such as green hydrogen, green manufacturing such as green steel, and for the emerging area of converting energy.

FINAL CONSIDERATIONS

The transition towards clean energy in the Middle East and Gulf States is not only about economic diversification but also about enhancing energy security and proactively addressing the severe impacts of climate change. The integration of Carbon Capture and Storage (CCS) technologies exemplifies the region's commitment to reducing greenhouse gas emissions, though this introduces complexities related to regulatory and liability frameworks. The shift to a sustainable energy paradigm in the Middle East and Gulf States will necessitate both regional and global cooperation. Cross-border partnerships will be crucial in securing the necessary technologies, investments, and markets needed to support the development of new energy products.

CONVERSATION STARTERS FROM THE 2024 WORLD ENERGY ISSUES MONITOR

• What are the specific challenges anticipated in the regional energy context in the year ahead, considering factors such as hydrogen and P2X, investment, commodity prices?
• Why is uncertainty regarding hydrogen and P2X so high and what are the available energy sources for producing hydrogen? Which of these sources is best suited for the region and what actions can be taken to prioritise it?
• How is the UAE Consensus perceived to impact action priorities in the region, and how do the region’s economies plan to adjust their priorities to meet the ambitious goals set at COP28?
• What strategies could be employed to effectively integrate circular carbon economy principles and scale up CCS technologies in the Middle East, thereby fostering sustainable economic growth, reducing carbon emissions and enhancing energy security?
• What are the interlinkages and synergies between climate mitigation, international collaboration, critical minerals and metals and supply chain disruption in the region?
• What progress has been made on the water-energy-food nexus in the region, and what are the next steps to address remaining challenges?

ACKNOWLEDGEMENTS

Future Energy Leaders

Ghada Rahal, Future Energy Leader, World Energy Council; Education and Events Lead, Advancing Net Zero Volunteering Team, Dubai, UAE

Siddharth Jain, Future Energy Leader, World Energy Council; Field Development Manager at SNOC, Sharjah, UAE

Regional Chair

Fahad Alajlan, Chair, Middle East and Gulf States, World Energy Council

Project Management

World Energy Council