So far, GCC countries, remaining faithful to their international commitments, have made important steps towards transitioning their energy sectors and are committing further to the pivot.
However, with their ample fossil fuel reserves – Kuwait, Saudi Arabia, and the UAE are in the top ten countries with the largest proven oil reserves, with the latter two also being in the top ten countries with the largest proven gas reserves in the world along with Qatar – GCC countries will continue to supply most of the world’s energy demand in the coming decades.
Indeed, fossil fuel energy, including oil, gas but also coal, account for 80% of the global energy consumption, which means that investment in new oil and gas production capacity might still be required for several years. ‘This factual situation might still ensure a substantial GDP growth in producing countries, but it also distracts them from their environmental objectives and from the risk of relying on fossil fuels for too long,’ Ahmed Samir Elbermbali (CEBC) estimates.
Mohammed Atif (DNV Dubai) agrees that GCC countries still need to produce fossil fuels. ‘However,’ he adds, ‘the global energy landscape can change very rapidly. New technologies that provide cheaper and more efficient energy are constantly developed and tested. We might be a few months away from discovering or commercialising a ground-breaking innovation that would shake the whole industry.’
‘In addition,’ Philippe Sébille-Lopez (Géopolia) comments, ‘in parallel to renewable energies, we are experiencing the recognition of clean energies. The concept is slightly different and can include nuclear technologies, which are a very efficient way to produce energy. In January 2022, the EU has admitted it as being a ‘green’ or ‘clean’ source of energy. If Western Europe and North America develops their nuclear plants, their reliance on the Middle Eastern energy can decrease quickly.’
The region therefore has an interest in furthering its diversification. Towards this end, and given the current states of the regulatory landscape, legal and business professionals have identified possible hurdles that could prevent GCC countries to move to the next level and become key global players.
The first and most obvious of those is that the private sector still relies on public initiatives and incentives that are both funded by fossil fuel revenues. For Sebastien Bernard (EDF Renewables), ‘GCC governments need to develop financing solutions that are independent from the oil and gas industry. Crucial to the successful implementation of such measure is the inclusion by these countries of their own populations. They too will have to diversify and possibly change some entrenched habits.’
Experts also consider that the lack of unified standards in the region’s industry might curb trade and investments as it splits a potentially large market into multiple smaller ones. However, they also suggest that a favourable evolution is possible.
Although ‘the region consists of six sovereign countries, each with autonomous laws and regulations, with, in some cases, additional local government levels’ as Norma Akoury (TotalEnergies) explains, ‘GCC countries tend to operate based on a deeply integrated cooperation.’ Marthinus Vermeulen (OilSERV) clarifies ‘I can see interests in them coordinating certain policies. It might take some time, but I can imagine them making such decisions when the time has come.’
Finally, there is a consensus that broader regulatory issues that do not only pertain to the energy sector could also be ameliorated to bring flexibility and competence in the industry and thus accelerate its growth.
‘The regional foreign direct investment and business environment is conducive, but some hurdles are indirectly created by the development of policies in separate key areas,’ Sebastien Bernard says. ‘For instance, GCC countries have incorporated a specific concept into their labor law apparatus called Bahrainization, Emiratization, Kuwaitazation, Omanization, Qatarization or Saudization depending on the country considered. These governmental initiatives aim at ensuring that local citizens are employed in the private sector. From a labor market point of view, they are undeniable progresses, however, they might need a bit more flexibility.’
In this regard, Ahmed Samir Elbermbali adds that ‘established companies setting up offices or starting projects in a new country invariably need to bring expertise from jurisdictions where they have proven record of success. To some extent this is still possible, but most companies would like to be allowed to hire the best suitable workers regardless of nationality. Prominent law firms have managed to secure legal derogations, but these are restricted and entail having a developed network with the relevant regulators and ministries.’
Regardless of how regulations unfold in the months and years to come, Monica Hashemi (Dii Desert Energy) states a few key elements relevant to grasp what is ahead for the renewable energy sector. She is in agreement with Philippe Sébille-Lopez on the evidence that a wide variety of energy types will be needed in the future.
However, she adds, ‘I understand the struggles of power and influence that are behind a country’s control over its energy production and needs. Nonetheless, if our objective is indeed that the entire world reach net zero-emission, we should have a global rather than a regional or national approach to energy. Nowadays, it is easier to produce energy in some regions than in others, but it is reasonably easy to transport it on long distances. It might be worth it to have a look at the bigger picture and to explore regulations and policies at a much larger scale than we are now.’
Energy policies are indeed characterised being under strong national and state control, but for Monica Hashemi, as more interconnected hydrogen networks are developed in the region, there will be a need to subject them to comprehensive, and possibly cross-border regulation. ‘New provisions for a regulation of the GCC hydrogen networks is the critical element missing within the regional regulatory framework. One of our missions at Dii Desert Energy is in fact to help governments coordinate regulations and reduce the regulatory gaps.’ she says.