Many of the Middle East’s multibillion-dollar, low-carbon developments — including blue- and green hydrogen and ammonia projects — as well as major petrochemical programs will be funded by petrodollars as the financial returns from conventional oil and gas activities are channeled by the region’s leading producers into their energy-transition plans.
The state-backed companies undertaking these projects are increasingly vocal in pushing for what they call a more realistic approach to the global energy transition, arguing that fossil fuels must play an essential role if long-term, low-carbon strategies are to be achieved along with stable energy supplies.
Aramco’s own targets for achieving net-zero Scope 1 and 2 greenhouse gas (GHG) emissions from its wholly owned assets by 2050, while simultaneously investing in and extending its long-term oil and gas production capabilities, include continuing with the company’s downstream expansion.
The UAE, the third-biggest oil producer in OPEC, became in October last year the first Middle Eastern country to commit to reaching net-zero emissions by 2050.
However, state-owned Abu Dhabi National Oil Co. (ADNOC), like Aramco, continues to ramp up its crude oil production — in ADNOC’s case by 1 million b/d, to a planned 5 million b/d by 2030 — to meet forecast oil demand growth, while also investing billions to expand its petchems and renewables portfolio.
The company, together with Abu Dhabi National Energy Co. (ADQ) and a growing number of international partners, is under way with one of the largest petchem and low-carbon developments in the region. The initial phase of development for the Abu Dhabi Chemicals Derivatives Co. (Ta’ziz) industrial chemicals park at Ruwais involves a minimum investment of $5 billion, with more in the pipeline. A new growth phase announced by ADNOC and ADQ includes plans for a low-carbon steam cracker at the Ta’ziz chemicals park. ADNOC and ADQ, the majority owners of the Ta’ziz venture.
Middle Eastern petchem producers, especially those in the energy-rich Gulf states, benefit from regulated prices for gas, and profit windfalls for the region’s energy companies from the sustained high price of oil throughout 2022 are being invested in their new or expanded low-carbon and petchem projects such as Ta’ziz.
The region is not relying solely on its vast conventional energy reserves and financial resources to fund its energy transition, however. Aramco recently launched a $1.5 billion sustainability fund that will invest in technology that can support “a stable and inclusive energy transition.”
The fund will be among the largest sustainability-focused venture capital funds globally.
The fund, managed by Aramco’s venture capital arm, plans to invest in technologies worldwide that support the company’s net-zero 2050 goal for its wholly owned operational assets, as well as the development of new lower-carbon fuels. Initial focus areas will include hydrogen, ammonia, carbon capture and storage, synthetic fuels, GHG emissions, energy efficiency, nature-based climate solutions, and digital sustainability.