With time, other emission-free energies have been included in the list of renewables. That is the case for green hydrogen. In addition to being the most abundant element on the planet, hydrogen can be efficiently stored and transported. The element is now considered as having immense potential to reduce carbon emissions worldwide and was endorsed as environmentally friendly by the EU CertifHy Guarantee of Origin in 2016. Grey hydrogen has traditionally been produced from fossil fuels such as natural gas and other hydrocarbons, resulting in high carbon dioxide emissions, whereas green hydrogen is created by splitting water by electrolysis, thus potentially having a carbon footprint equivalent to other renewables, depending on each hydrogen-producing country’s power mix.
Hydrogen is far from being the only option GCC governments are exploring to prepare their economies for a post-hydrocarbon future. The region enjoys abundant solar irradiation, for instance, allowing its exploitation via solar parks and the use of photovoltaic modules (or solar cell panels). In January 2019, Abu Dhabi inaugurated the Noor solar power plant with a total capacity of 1.2 GW, and which supplies Abu Dhabi with clean energy through a long-term power purchase agreement with the Emirates Water and Electricity Company (EWEC).
In Dubai the Mohammed bin Rashid Al Maktoum Solar Park, is currently under construction and aiming to reach a capacity of 5 GW, upon its completion in 2030.
In bordering Saudi Arabia, the Sakaka photovoltaic plant, which was inaugurated in April 2021 and consists of 1.2 million solar panels, is the first of eight solar projects commissioned by Crown prince Mohammed bin Salman.
Aside from a seemingly endless supply of easily accessible solar power, GCC countries have long been exploring other potential renewable energy sources. The publication of the Sustainable Development Goals relating to climate action (the 13th of 17 goals) recommending that the global human-caused carbon dioxide emissions be reduced by 45% by 2030 and that a goal of net-zero emissions (offsetting all emissions) be reached, has encouraged them to explore further solutions and commit to decarbonising their economies either fully or in part.
Bahrain, Qatar, Saudi Arabia, the UAE, Kuwait and Oman have all ‘announced intentions to curb national carbon emissions between 2030 and 2050, resorting to different strategies’, explains Nadine El Gemayel, Head of General Counsel at Veolia Water Technologies (VWT) in Sharjah (UAE).
Indeed, Philippe Sébille-Lopez (Géopolia) explains that ‘the region will not exit oil in the short term. GCC countries have specific economies and social constraints they cannot dismiss so easily.’
He suggests that these countries’ approaches to climate action cannot solely be based on renewables. ‘In the future,’ he continues, ‘all sources of energy will be likely needed to sustain the worlds’ demographic and standard of leaving. Not all countries are equal, and each has its own abilities and needs. What matters, as a first step, is that energy producers understand they cannot resort to fossil fuel indefinitely – resources are limited, and the fragile balance of the planet’s ecosystem needs to be protected.’
As a result, the scope of a double strategy has quickly emerged in the region. On the one hand, white papers and actual regulations promote the development of renewable energy production and usage – such as the emerging regulation relating to electric vehicles or the adoption of green bonds –, and on the other, they aim at reducing the social and environmental impact of existing oilfield service companies – particularly by enforcing increasing ESG-related obligations.
‘The weight of the oil and gas industry is immense in the Middle East,’ says Marthinus Vermeulen, Global Head of the Legal Department at OilSERV, an oil and gas service company with its Management Head Office based in Dubai and with operations throughout the Middle East and North Africa Region. ‘The oil and gas industry is now very focused on Environmental, Social and Governance (ESG) sustainability requirements and so are we at OiLSERV. The term ESG was first coined in 2005 in a UN study which then led to the conceptualization of more responsible ways to do business and invest. Given the current ongoing climate crisis, it naturally includes environmental compliance. Many companies are now investing in technologies to improve their ESG performances throughout the full value chain.’
On both sides of that strategy, the Middle East is moving fast. For Marthinus Vermeulen, ‘public investments are so high in the region, that it could possibly be seen as a benchmark for the rest of the world.’ According to him, some US$2.8 billion were awarded for renewable-type projects in 2021 alone.
The region has strong potential to improve its environmental footprint but also to attract companies that lead the way in terms of environmental innovation and new investors that would be drawn to the growing green industry, rather than to the historic commerce of fossil fuels.
And this potential is rapidly turning into real opportunities. ‘Projects are blossoming in the UAE, Saudi Arabia and Qatar,’ says Marthinus Vermeulen.
For Philippe Sébille-Lopez ‘in the past, these countries may have had the reputation of defending the status quo and having slow legislative systems. That is no longer the case. Investors needs to understand that although the decision-making process is different in the region, things are moving fast, even in a strategic industry like oil and gas.’
Both agree on the effectiveness of these jurisdictions. ‘In the past few months, the UAE alone has adopted a dozen laws to address current issues. They are not all specific to the environment or the development of renewables, but the speed with which they adapt to a fast-evolving business environment shows how reactive gulf countries can be when they have decided to further their objectives on a specific matter.’
Recent reforms aimed at modernising the UAE’s legal system to increase its compatibility with international practices. Amongst others, it partly liberalised foreign investment for Emirati companies, updated the country’s crypto and fintech regime, reinforced the emirates’ arbitration institutions and consolidated data protection. In addition, federal law no. 26, passed in 2020 and which came into force in 2021, modified the country’s Company Law that requires a minimum of 51% Emirati shareholding in onshore companies and allowed full foreign ownership. The sector remains highly regulated, but these changes help the country achieve the double objective of implementing its green priorities and attracting investors that are re-deploying their capital as per their ESG commitments.
In part, this dynamism is fostered by the perspective of the COP 28 conferences scheduled to take place in the UAE in November 2023. ‘The spotlight will then also focus on the whole region,’ comments Nadine El Gemayel, ‘and,’ adds Marthinus Vermeulen, ‘GCC countries have already taken the lead and will continue to push an ESG and renewables agenda until then.’
Meanwhile, in ‘an attempt to directly address the 13th SDG goals, most GCC countries have committed to various targets with regard to renewable energy and greenhouse gas reduction,’ continues Nadine El Gemayel. In particular, the UAE have pledged to reduce carbon emissions by 30% and to reach net zero emissions by 2050, and Saudi Arabia to generate 50% of its energy from renewables by 2030.
Norma Akoury, Legal Manager at Total Energies in the UAE, confirms that ‘there is an undeniable political will to pivot from being an all-oil region to becoming more neutral to the environment. The GCC members are looking at the international market and trends, and they are amenable to investing in renewables.’
This commitment to change translates into the launch of various projects involving an array of energy sources and the development of innovative technologies, particularly in the hydrogen sector.
Stakeholders in the industry consider hydrogen as a crucial part of the transition to a clean energy future in the Gulf. As Monica Hashemi, Director Operation Compliance at Dubai-based oilfield service company Dii Desert Energy explains, ‘solar and wind plants – like the Saudi Dumat Al Jandal project, which is the largest wind farm in the Middle East – are being built at a rapid rate, but hydrogen is commensurate with the region’s needs.’
Indeed, hydrogen is produced using hydrocarbons including natural gas and oil that are so prevalent in the region. ‘In addition,’ Monica Hashemi continues, ‘GCC countries already have the adequate infrastructure that would allow them to produce and, especially, transport the gas to Europe, Asia and Russia. Finally, the hydrogen economy represents vast employment opportunities that would potentially compensate the slowdown of the oil sector.’
Investments in the sector are pouring in and deals are being made across the region. In 2021, Saudi’s ACWA and the government of Oman signed a memorandum of understanding worth USD7 billion, and Abu Dhabi-based clean energy company Masdar agreed with French Engie to invest USD5 billion in the sector. Likewise, Aramco, the world’s biggest oil producer, has announced entering the hydrogen race and its participation in the country’s bid to become the largest supplier of hydrogen.
Mohammed Atif, Area Manager, energy Systems UAE, of risk management and advisory DNV, echoes these remarks. ‘The share of hydrogen on GCC countries energy balance is going to keep increasing between now and 2050; particularly the blue and green types.”
In that perspective, Mohammed Atif continues, ‘The Gulf region has the potential to become the main global supplier of hydrogen. I see colossal business potential in the sector in the imminent future’.
This observation is particularly acute, ‘if you consider that the EU, when it launched its own strategic greenhouse gas emission reducing plan in 2019 – the Green Deal package – has also opted to support green hydrogen,’ Monica Hashemi notes. ‘An EU-wide green hydrogen-specific strategy is also expected to be published in July. Depending on its terms, it is likely to incite GCC-based companies to develop the sector.’
This movement towards transitioning the existing model to a renewable one is also supported by an evolving legal and regulatory framework. ‘Countries in the region have had a quasi-monopoly over oil and gas exploration and production for over half a century,’ says Monica Hashemi, ‘therefore governments know they have to find a regulatory balance between all energy industry stakeholders – including oil and gas companies.’
The approach decided by UAE Ministry of Energy and Infrastructure exemplifies this bid to find the right equilibrium between all players in the market. In 2021, the Ministry launched the National Integrated Energy Model in cooperation with the International Renewable Energy Agency and the Khalifa University (both based in Abu Dhabi) with the objective to develop a roadmap forecasting the future of the energy sector in the country. The Model brings together researchers, investors, and industry leaders to guarantee both the environmental and economic efficacy of the country’s energy-related policies.
For Norma Akoury, the GCC governments’ ‘efforts clearly go towards creating a pertinent regulatory setting for the renewable energy industry.’