What if a patient unplugged the Oxygen Tube

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The above-featured image is about the ocean producing 50% of carbon dioxide produced by humans, buffering the impacts of global warming, and is the main source of protein for a billion people around the world. Credit: IPS

What if a patient unplugged the Oxygen Tube that Keeps them Alive

By Baher Kamal

MADRID, Jun 7 2022 (IPS– Imagine a patient connected to a vital oxygen device to keep him or her breathing, thus alive. Then, imagine what would happen if this patient unplugged it. This is exactly what humans have been doing with the source of at least 50% of the whole Planet’s oxygen: the oceans.

But oceans do not only provide half of all the oxygen needed. They also absorb about 30% of carbon dioxide produced by humans, buffering the impacts of global warming while alleviating its consequences on human health and that of all natural resources.

The carbon — and heat– sink

The world’s oceans capture 90% of the additional heat generated from those emissions.

In short, they are not just ‘the lungs of the planet’ but also its largest carbon sink.

The ocean is the main source of protein for more than a billion people around the world.

And over three billion people rely on the ocean for their livelihoods, the vast majority in developing countries.

Oceans also serve as the foundation for much of the world’s economy, supporting sectors from tourism to fisheries to international shipping.

Nevertheless…

Despite being the life source that supports humanity’s sustenance and that of every other organism on Earth, oceans are facing unprecedented real threats as a result of human activity.

While providing the above facts, this year’s World Oceans Day (8 June) warns about some of the major damages caused by human activities, which devastate this source of life and livelihood.

This report is also based on data from several specialised organisations, such as the UN Environment Programme (UNEP) and the Food and Agriculture Organisation (FAO), among others, as well as a number of global conservation bodies, including the World Wildlife Fund (WWF).

Too many causes. And a major one

Oceans as dumping sites: There are several major threats leading to suffocating the world’s lungs.

Such is the case –for example, of overfishing, illegal fishing and ghost fishing–, human activities have been transforming world’s oceans into a giant dumping site: untreated wastewater; poisonous chemicals; electronic waste; oil spills, petrol leaks, oil refineries near rivers and coastal areas, ballast waters, invasive species, and a very long etcetera.

Credit: Albert Oppong-Ansah/IPS

Plastic

Of all these, plastic appears as one of the major sources of harm to oceans. See the following data:

As much as 75 to 199 million tons of plastic are currently found in our oceans.

Unless the world changes the way how to produce, use and dispose of plastic, the amount of plastic waste entering aquatic ecosystems could nearly triple from 9-14 million tonnes per year in 2016 to a projected 23-37 million tonnes per year by 2040.

How does it get there? A lot of it comes from the world’s rivers, which serve as direct conduits of trash into lakes and the ocean.

In fact, around 1.000 rivers are accountable for nearly 80% of global annual riverine plastic emissions into the ocean, which range between 0.8 and 2.7 million tons per year, with small urban rivers amongst the most polluting.

Plastic everywhere: Wherever you look and whatever you see, buy and use, there is plastic: food wrappers, plastic bottles, plastic bottle caps, plastic grocery bags, plastic straws, stirrers, cosmetics, lunch boxes, ballpoints, and thousands of other products.

Cigarette butts: Then you have the case of cigarette butts, whose filters contain tiny plastic fibres, being the most common type of plastic waste found in the environment.

Today, the world produces about 400 million tons of plastic waste … every year.

Plastic addiction: Such human dependence on plastic has been steadily increasing. Since the 1970s, the rate of plastic production has grown faster than that of any other material. If historic growth trends continue, global production of primary plastic is forecasted to reach 1.100 million tonnes by 2050.

“Our seas are choking with plastic waste, which can be found from the remotest atolls to the deepest ocean trenches,” reminds the United Nations chief António Guterres.

Fossil fuel: As importantly, some 98% of single-use plastic products are produced from fossil fuel, or “virgin” feedstock. The level of greenhouse gas emissions associated with the production, use and disposal of conventional fossil fuel-based plastics is forecast to grow to 19% of the global carbon budget by 2040.

Mare Nostrum: This small, semi-closed sea –the Mediterranean is considered as one of the most affected regional seas by marine litter.

In fact, the annual plastic leakage is estimated at 229.000 tons, 94% of which consist of macroplastics. Plastics constitute around 95% of waste in the open sea, both on the seabed and on beaches across the Mediterranean.

COVID-19: The Organisation for Economic Co-operation and Development (OECD) February 2022 publication: Global Plastics Outlook reports that the increase in the use of protective personal equipment and single-use plastics has exacerbated plastic littering on land and in marine environments, with negative environmental consequences.

Rivers: The United Nations Environment Programme (UNEP) reports that, flowing through America’s heartland, the Mississippi River drains 40% of the continental United States – creating a conduit for litter to reach the Gulf of Mexico, and ultimately, the ocean.

Data collected through the Mississippi River Plastic Pollution Initiative shows that more than 74 per cent of the litter catalogued in pilot sites along the river is plastic.

Electronic waste: should all this not be enough, please also know that the world produces 50 million tons of e-waste, a portion of it ends up in the ocean.

Ghost fishing

According to an October 2020 report released by World Wildlife Fund (WWF) and authored by Alexander Nicolas, more than 12 million tons of plastic end up in the world’s seas every year.

Fishing gear accounts for roughly 10% of that debris: between 500.000 to 1 million tons of fishing gear are discarded or lost in the ocean every year. Discarded nets, lines, and ropes now make up about 46% of the Great Pacific Garbage Patch, Alexander Nicolas explains.

This marine plastic has a name: ghost fishing gear.

“Ghost fishing gear includes any abandoned, lost, or otherwise discarded fishing gear, much of which often goes unseen.

“Ghost fishing gear is the deadliest form of marine plastic as it un-selectively catches wildlife, entangling marine mammals, seabirds, sea turtles, and sharks, subjecting them to a slow and painful death through exhaustion and suffocation. Ghost fishing gear also damages critical marine habitats such as coral reefs.”

Overfishing

Overfishing is yet another major damage caused to the world’s oceans threatening the stability of fish stocks; nutrient pollution is contributing to the creation of “dead zones.”

Currently, 90% of big fish populations have been depleted, as humans are taking more from the ocean than can be replenished.

Illegal, unreported and unregulated fishing: A fugitive activity that further adds to the abusive overfishing, causing the depletion of 11–26 million tons of fish… each year.

IPS article The Big Theft of the Fish provides extensive information about these two major activities that deplete the oceans vital natural resources.

Untreated wastewater is another example of the damage made by humans to the oceans.

It has been reported that around 80% of the world’s wastewater is discharged without treatment, a big portion of it ends up in the oceans.

The oceans in a conference

All the above facts –and many more– are on the agenda of the United Nations Ocean Conference 2022 (27 June- 1 July), organised in Lisbon and co-hosted by the Governments of Kenya and Portugal.

According to its organisers, the Conference seeks to propel much needed science-based innovative solutions aimed at starting a new chapter of global ocean action. Cross your fingers!

 

Why is turning to Saudi Arabia for oil so controversial?

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The reasons are many but the British Prime Minister who according to the latest BBC piece of international broadcast, decided to visit some of the Gulf leaders to mainly talk about ending reliance on Russian oil and gas, will discuss energy security and other issues in Saudi Arabia and the United Arab Emirates today. But because critics have expressed concerns about the human rights records of these two countries, he pledged to also raise certain human rights issues although fostering some understanding between the Saudis and the West has always been left to the next day.

Let us here have a look at the supply of oil and gas issue that seems at this stage in contradiction with the latest world trend of distancing all advanced economies from fossil fuels.

Meanwhile, the EU leaders appear to be subtly trying to gain and eventually incorporate the aggressed nation within their ranks; it will certainly increase their “Food Power” vis a vis the rest of the world.


Why is turning to Saudi Arabia for oil so controversial?


UK Prime Minister Boris Johnson has defended a trip to Saudi Arabia, saying “the widest coalition” is needed to end reliance on Russian oil and gas.

But maintaining close ties with the Gulf kingdom is controversial among critics of its human rights record.

Why is Saudi Arabia so important for oil?

The US, UK and EU have announced that they will buy less Russian oil and gas, because of its invasion of Ukraine. However, prices have rocketed.

Saudi Arabia is the largest producer in the oil cartel Opec and has the spare capacity to help lower prices by increasing supplies.

It means Western countries need its goodwill and to keep on friendly terms with its ruling family.

Read more on the BBC‘s article.

The above-featured image is for illustration and is of the BBC.

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Investments in fossil fuels to retreat as climate crisis increases pressures on producers

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Taking a stand that the energy transition to cleaner sources is underway, Petroleum Minister Dharmendra Pradhan of India said that fossil fuels would not have acceptability forever.
“Fossil fuels will be a bad word in the decades to come. There is a growing shift towards the clean energy ecosystem.” India, a would-be global leader, is one of many and counting throughout the world who are keen to jump ship ending up Investments in fossil fuels to retreat as the climate crisis increases pressures on producers.

There will soon be a time when all producers are made responsible for all the damage caused by climate change and be forced to pay for it; this applies equally to the Big Oils and to all OPEC+ countries.

The picture above is for illustration and is of Bloomberg’s. Private equity investors are pouring capital into fast-growing sectors such as solar energy.  Photographer: Jeremy Suyker/Bloomberg

Investments in fossil fuels to retreat as climate crisis increases pressures on producers

By Hadi Khatib, AMEInfo.com

 

Saudi and Russia believe fossil fuel demand will only increase, and cuts to investments in that sector are not in the offing. But major oil producers are feeling the pressure of meeting emissions targets

  • Almost 200 countries, including Russia and Saudi Arabia, ratified the Paris climate accord in 2015
  • The world was facing an acute oil shortage in the long-term due to underinvestment
  • Between 2010 and 2020, the cost of wind power fell by about 70%, and solar power by 89%

Two of the world’s largest oil-producing countries plan to defy the International Energy Agency’s (IEA) recommendations and continue investing in oil and gas, rejecting calls to drastically scale back the use of fossil fuels despite a deepening climate crisis.

Almost 200 countries, including Russia and Saudi Arabia, ratified the Paris climate accord in 2015, agreeing to pursue efforts to limit the planet’s temperature increase to 1.5 degrees Celsius above pre-industrial levels. The agreement requires net-zero greenhouse gas emissions by 2050.

Remarkably, the IEA delivered its starkest warning yet on global fossil fuel use last month, saying the exploitation and development of new oil and gas fields must stop this year if the world wants to reach net-zero emissions by the middle of the century.

Russia’s Deputy Prime Minister Alexander Novak (L) and Saudi Arabia’s Energy Minister Abdulaziz bin Salman Al Saud

Speaking at the St. Petersburg International Economic Forum on Thursday, Russian Deputy Prime Minister Alexander Novak said the IEA had ostensibly arrived at its findings “by using reverse calculations” on how to achieve net-zero emissions by 2050.

“It is a sequel of the ‘La La Land’ movie. Why should I take it seriously?” Abdulaziz said, according to Reuters.

His reaction to the report came shortly after OPEC and non-OPEC partners agreed to gradually ease production cuts in the coming months amid a rebound in oil prices.

Oil shortage

Igor Sechin, the head of Russian oil major Rosneft, said recently that the world was facing an acute oil shortage in the long-term due to underinvestment, amid a drive for alternative energy while demand for oil continued to rise.

Rosneft is the world’s second-largest oil-producing company by output after Saudi Aramco. It produces more than 4 million barrels of oil per day.

He expected some shortages to kick in from the second half of 2021.

Meanwhile, a court order to deepen carbon cuts for Shell was a new form of risk for oil majors, he said.

Oil giants’ emissions under pressure

Three major firms, Royal Dutch Shell, ExxonMobil, and Chevron, have all taken serious hits to their business models of late.  

A quarter of Exxon’s board of directors is now composed of critics who have argued the company has been too slow in moving away from traditional carbon power. 

Chevron also saw its own investors vote for a proposal to cut emissions from their customers at a recent conference, even after its board urged them not to.

Meanwhile, Shell recently lost a major case in a Dutch court. It recently ordered the Anglo-Dutch company to slash its global greenhouse gas emissions, which stood at around 1.6 billion tons of CO2 equivalent in 2019, by 45% by 2030 in keeping with European climate promises. 

More lawsuits demanding other companies to cut back their emissions are likely to follow, in Europe and elsewhere.

The world is in the middle of a rapid energy transition. The use of coal in utility-scale American electricity generation has fallen by 62 percent since 2007. Much of that slack has been taken up by natural gas, but wind and solar account for most of the rest, and renewables are starting to make inroads into gas too. 

The main reason being prices: Between 2010 and 2020, the cost of wind power fell by about 70%, and solar power by 89%. Other technologies like energy storage will also contribute to making renewables easier to deploy.  

It may take decades, but the long-term business prospects of oil and gas are weak.   

Oil prices

The world’s most important oil-importing region, Asia, is showing signs of weaker physical demand with lower cargo arrivals in May and crashing refining margins as a COVID resurgence depresses fuel demand in India and other South Asian markets.  

Imports into the Asian region are estimated to have dropped in May to the lowest monthly level so far this year. Asia imported 23 million bpd of crude oil last month, down from more than 24 million bpd in each of April and March, and from 25.2 million bpd in February, according to data from Refinitiv Oil Research cited by Reuters’ Russell.

Still, crude oil futures prices rallied to a two-year high last week after OPEC+ reaffirmed plans to unwind another 840,000 barrels per day (bpd) of its total cuts in July. 

Most analysts, forecasters, OPEC, and the IEA continue to expect strong global oil demand in the second half of this year that would offset weakness in some Asian markets this quarter. 

How Does the Arab World Move Away From Oil Dependence?

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BRINK‘s GEOPOLITICS article tells us How Does the Arab World Move Away From Oil Dependence? It also tells us how this part of the MENA region should leave in the ground substantial unexploited reserves of hydrocarbons together with its vast expense of stranded assets for good.

It is now common knowledge that for some time and without dramatic breakthroughs, widespread power generation from solar, photovoltaics and wind will remain more expensive than fossil fuels. And electric vehicles won’t replace gasoline-powered vehicles unless battery costs drop and oil prices go up at unrealistic rates.
Analyses by researchers concluded some time back that market forces alone won’t reduce the world’s energy needs to be met by fossil fuels.
Economic development and energy in the age of climate change cannot possibly wait for another opportunity. Anyhow, let us what Margareta Drzeniek, author of the article has to say.

The picture above is for illustration and of Arab News.

How Does the Arab World Move Away From Oil Dependence?

A general view of an oil field in Saudi Arabia. Many countries have undertaken major reform efforts to reduce commodity dependency.
Photo: Fayez Nureldine/AFP via Getty Images

The Arab world has historically been a hotspot for global risks. Over the past decades, the risk nexus of a tense geopolitical environment, high levels of youth unemployment and governments’ inability to diversify economies has been challenging the region’s leaders. 

The COVID pandemic accelerated pressures on income, and the twin transition to net zero and a more technology-driven economy will only exacerbate the region’s exposure to global risks and underlying gaps in resilience. While the region is not homogenous, three interdependent areas are key to strengthen resilience in all countries: economic diversification away from dependence on commodity or low-value exports, private sector growth to enable job creation, and future-proofing skills. 

Getting Out of Oil

Many countries have undertaken major reform efforts to reduce commodity dependency. The Gulf countries’ economic development plans — usually dubbed Vision 2030 or the like — have aggressive targets and high ambitions. 

For example, Saudi Arabia is implementing Vision 2030, which aims at transforming society, diversifying the economy, creating jobs and increasing the level of ambition throughout. 

In the UAE, efforts are taking place at the Emirate level, notably in Abu Dhabi and Dubai, which both have 2030 strategies that aim to strengthen high-end manufacturing (e.g., in medical equipment and aerospace). The objectives are ambitious — Abu Dhabi aims to grow the non-oil sector by more than 7.5% annually. 

Similar initiatives are under way in North Africa. Trade agreements with the EU entered at the turn of the millennium have had some success, notably in the automotive sector, where exports increased by a factor of 50 to 60 in Egypt and Morocco and tripled in Tunisia. Nevertheless, countries in North Africa remain dependent on a few sectors, including tourism, agriculture and apparel and on the EU market. 

The African Continental Free Trade Area, which started trading in 2021, provides an important opportunity for diversification and integration at the regional level, including regional backward linkages to ensure broader participation in global value chains. Weak infrastructure and connections between countries remain to be addressed to more fully benefit from this opportunity. 

Public Sector Still the Employer of Choice

Private sector growth has been a key to building a strong and vibrant domestic private sector that provides employment for the significant youth bulge currently entering the labor market in all countries of the region. 

In most countries in the region, the public sector remains the employer of choice due to perceived employment stability over a lifetime, but also because many people lack the skills required in the private sector, notably soft skills such as for example team work, entrepreneurial attitudes and agility. 

The transition to a more environmentally sustainable economic model appears to be risky at first glance, but investment in renewables could provide a solution to the unemployment challenge.  

However, the public sector is not able to absorb all the young people coming into the market. Private sector growth is necessary for political stability, but it has been hampered by heavy regulatory environments, rent-seeking behavior and governance challenges, and political uncertainty.

Some positive developments are happening in local startup ecosystems, which have been blossoming across the region, enabled by digital business models that circumvent some of the rigidities of the traditional business environment and take advantage of the prevalence of digital technologies.

Energy Sustainability Is the Critical Pathway

The region’s elephant in the room remains environmental sustainability. 

It is important in two ways. Firstly, the world’s move to net zero threatens the very economic model of hydrocarbon-exporting MENA countries, and secondly, countries experience significant environmental degradation and are major pollutants. 

Qatar places 122nd in the Environmental Performance Index; Saudi Arabia is 90th and Morocco 100th (UAE, however, is a better 42nd). Challenges range from threats to biodiversity, which is low for climatic reasons, and water shortages, to an energy-vore lifestyle coupled with a lack of awareness of sustainability challenges. Gulf Cooperation Council (GCC) countries are also among the top 14 per capita emitters of carbon dioxide globally. 

Albeit from a low level, efforts to improve on environmental sustainability are gaining speed. The UAE’s Energy Strategy 2050 aims to double the contribution of renewables in the country’s energy mix, and the renewable energy capacity in the Gulf countries already increased by approximately 313% between 2014 and 2018. 

Chinese Partnerships

Strategic investments with Chinese partners are the main channel toward achieving this objective. Deteriorating air quality in the region and its potential impact on health may increase pressures on governments to tackle the issue more holistically. 

The transition to a more environmentally sustainable economic model appears to be risky at first glance. Progress in diversification and private sector development has been slow, and although the region is entrepreneurial, youth unemployment remains a key issue. However, recent research shows that investment in renewables could provide a solution to the unemployment challenge.  

Renewable energies are generally more labor-intensive than extractives. The International Renewable Energy Agency estimates that current commitments and project plans could create 220,000 jobs in GCC countries by 2030.  

To sum up, while economic diversification is crucial, the energy transition provides resilient recovery pathways to the MENA region that could ensure future growth, a stronger intergenerational contract and higher resilience.

Margareta Drzeniek is a managing partner at Horizon Group. She previously led the economics unit of the World Economic Forum and was in charge of the main flagship reports, including The Global Competitiveness Report and the Global Risks Report.

@MDrzeniek

Geopolitical Implications of Global Decarbonization for the MENA

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NATURAL GAS NEWS‘ Geopolitical Implications of Global Decarbonization for MENA producing countries by Pier Paolo Raimondi and Simone Tagliapietra, Oxford Institute for Energy Studies (OIES) is an expert’s hindsight in the foreseeable future of the region.

Endowed with half of the world’s proven oil and gas reserves, the Middle East and North Africa (MENA) region represents a cornerstone of the established global energy architecture. As the clean-energy transition gains momentum worldwide, this architecture might shrink—challenging the socio-economic and geopolitical foundations of the region in general, and of its oil and gas-producing countries in particular.

The picture above is for illustration purpose and is of Natural resource wealth and public social spending in the Middle East and North Africa published back in 2015.

Geopolitical Implications of Global Decarbonization for MENA producing countries

February 21, 2021

This challenge has two dimensions: domestic and international. Domestically, a decline in global oil and gas demand would reduce revenues for producing countries. Considering the profound dependency of these countries on oil and gas rents (the ‘rentier state’ model), this could have serious economic and social consequences. Internationally, the global clean-energy transition might push producers towards a fierce competition for global market share, exacerbating geopolitical risks both regionally and globally.

In 2020, MENA oil and gas producers experienced a situation that some observers have described as a preview of what the future might look like for them beyond 2030, as global decarbonization unfolds. The COVID-19 pandemic resulted in an unprecedented crash in global oil demand. At the same time, oil prices collapsed (for the first time in history, the benchmark West Texas Intermediate entered negative territory) due to a lethal combination of falling demand and OPEC+ coordination failure. All this generated a perfect storm for MENA oil- and gas-producing countries, which led to unprecedented macroeconomic imbalances.

The evolution of oil markets, national stability, and prosperity as well as international influence are closely linked in the MENA region, but MENA oil- and gas-producing countries are far from homogenous. Different countries are likely to experience different impacts from the global clean-energy transition, depending on a number of domestic and international factors.

International factors

MENA producers are likely to be affected by the differences in the trajectories for oil and gas markets, the speed of the energy transition in different world markets, increased competition between energy producers, and increasing penalties for carbon intensity in production.

While gas is set to play a role in the global energy mix for decades, oil is expected to lose relevance as a result of decarbonization policies and technological developments in electric vehicles. BP’s 2020 Energy Outlook warned about the imminence of peak oil demand. In its business-as-usual scenario, oil demand is set to recover from the pandemic by 2025 but drop slowly thereafter. In its rapid-energy-transition scenario, oil demand drops from around 100 million barrels per day (mb/d) in 2019 to 89 mb/d in 2030 and just 47 mb/d in 2050. Such a scenario would represent a challenge for MENA oil producers. By contrast, in the business-as-usual scenario, gas demand is expected to increase from 3.8 trillion cubic meters (tcm) in 2018 to 5 tcm in 2040, underpinned by a massive coal-to-gas switch in Asia and elsewhere. Such a scenario would be beneficial for MENA gas-producing countries such as Qatar and Algeria, which could remain geopolitically relevant by providing an important transition fuel to a decarbonizing world.

In the MENA region, Qatar seems to be the best positioned to preserve its geopolitical role, thanks to its significant liquified natural gas (LNG) capacity and its geographical location between Europe and Asia. Nevertheless, gas-producing countries will not be immune to the challenges posed by decarbonization policies in the long run. Gas demand is especially difficult to predict starting in the second half of the 2030s, as a result of increasing cost competition in power generation from renewables, as well as stricter environmental regulations (e.g. the EU Methane Strategy). It will thus be of paramount importance for MENA gasproducing countries to cut emissions in their gas value chain, in order to preserve their position and geopolitical influence.

The speeds of the energy transition in different world regions will also affect MENA geopolitical shifts. For instance, Europe’s oil and liquids demand is expected to decrease from the current 13.3 million tons of oil equivalent (Mtoe) to 8.6 Mtoe in 2040, according to the International Energy Agency’s stated-policies scenario. By contrast, Asia-Pacific countries’ oil and liquids demand is set to increase from the current 32.5 Mtoe to 37.9 Mtoe in 2040. Thus, MENA producers more exposed to the European market are likely to suffer more—and earlier—from the global decarbonization process than others more exposed to Asian markets. That is, energy demand will increasingly dominate energy geopolitics, especially in an oversupplied energy market.

In such a scenario, export portfolio composition and diversification will determine the evolution of geopolitical influence for MENA oil and gas producers. Exporters that depend heavily on European markets will see their geopolitical position erode and their revenues fall. For example, Algeria, which mostly exports gas via pipeline to Europe, has been an essential element of the European gas supply architecture. Unless it manages to decarbonize its gas exports, this important role will shrink as the European Green Deal is implemented. In 2019, 85 per cent of Algeria’s total gas exports flowed to Europe, 62 per cent via pipeline (mainly to Italy and Spain). By contrast, LNG provides more flexibility to gas exporters, which will enable them to respond effectively to the geographical shifts of the energy demand. Qatar is the world’s top LNG exporter. In 2019, Qatar exported 83 per cent of its total gas exports via LNG. Of this volume, 67 per cent was directed to Asia Pacific countries. Asian markets are expected to drive energy demand growth in general and LNG in particular until 2030. Oil and gas producers will increasingly try to gain market share in such growing energy markets.

While energy demand will be crucial in the future, energy supply issues will not disappear. Competition among producers will persist, and even increase in the foreseeable future. The peak of oil demand will create a harsher world of more intense competition and tighter revenues for MENA oil producers. Regional oil and gas producers are likely to pursue different supply strategies, which will need to deal with the consequence of the global energy transition.

The transition indeed raises an existential dilemma—requiring a choice between maximizing production, which would weaken higher-cost exporters, and coordinating production cuts to increase prices, which could deprive governments of vital revenues. These are not trivial issues, as maximization of production would put into question established assumptions about saving reserves for future production and avoiding stranded assets. An intensification of competition among producers could thus undermine coordinated actions (e.g. OPEC agreements), which are important to oil price stability. This was illustrated by the collapse of OPEC+ talks in March 2020—spurred by disagreements between Saudi Arabia and Russia on the introduction of production quotas, as the two were also competing for market share with US shale oil producers—and the consequent fall in oil prices.

Another example of the growing competition among producers is the growing opposite visions between the United Arab Emirates (UAE) and Saudi Arabia that emerged openly during OPEC talks in late 2020. Although they managed to reach an agreement within OPEC, the UAE’s ambitious plans to increase its oil capacity from about 4 mb/d to 5 mb/d by 2030 puts further pressure on the traditional alignment among Gulf OPEC producers. Moreover, in late 2020 the Abu Dhabi National Oil Company announced a $122 billion investment plan for 2021–2025, suggesting that the UAE had abandoned its more cautious approach to the oil sector. The plan suggested that MENA national oil companies might gain a growing share of world oil and gas production in the future. That is also due to (Western) oil companies’ decisions to cut their capital expenditure and other investments. Such decisions are motivated mostly by low oil prices and their commitment to decarbonization.

In a more competitive world, some MENA producing countries such as Saudi Arabia and the UAE have the economic advantage of vast oil reserves (298 and 97 billion barrels, respectively), the lowest production costs (under $4 per barrel), and the least carbon-intense production. In the next years, due to expected higher carbon prices, carbon intensity will play a key role in determining which oil and gas producers will be able to preserve their geopolitical influence. MENA oil producers with higher production carbon intensity, such as Algeria and Iraq, might thus lag behind.

Domestic factors

The global energy transition can also impact MENA oil- and gas-producing countries’ governance, due to their heavy dependence on revenues from these resources. To address this issue, regional oil and gas producers have launched several strategies (referred to as Visions) aimed at economic diversification (e.g. by increasing productivity, strengthening the private sector, and developing non-oil sectors), as well as increasing the share of renewables in the energy mix. These Visions were largely developed as a response to the 2014 oil price drop; COVID-19 and the acceleration of the global energy transition make it necessary to accelerate them. A country’s chances of success at this are likely to be affected by domestic factors including population size, government capacity, and financial ability to implement diversification measures.

Countries with a large, young, and growing population (Algeria, Saudi Arabia, and Iraq) will encounter significant obstacles to the transformation of their rentier-state model. By contrast, countries with a smaller population, like the UAE and Qatar (9.7 and 2.8 million inhabitants, respectively) are likely to find it easier to adjust.

The ability to govern and finance major domestic socio-economic transformation will also be crucial. For example, North African countries could exploit their geographical vicinity to Europe and become major clean-electricity suppliers. In this sense, the recent EU Hydrogen Strategy considers imports of 40 GW of green hydrogen from the EU’s eastern and southern neighbours. However, countries like Algeria and Libya are experiencing major social and political instability, which undermines such scenarios and discourages the needed foreign investments. Thus, countries with major governance issues like Algeria, Libya, and Iraq are expected to lag behind on energy and economic diversification. The risk is that these countries will focus political energies on an intensifying fight for a share of the diminishing global oil and gas market, rather than on a strategy to reorient their economy. By contrast, countries with stronger governance are better equipped to transform their economies, bear the negative consequences of the transition in the short term, and navigate the geopolitical evolution.

The availability of large foreign exchange reserves will be crucial for the transformation of MENA producing countries. With such reserves, countries could offset the negative economic effects of lower oil demand and revenues in the short term, while investing in renewable energy projects for the medium and long term. Thus, countries like Saudi Arabia, the UAE, and Qatar (with $500, $108 and $38 billion of foreign reserves, respectively) are potentially well equipped to manage the negative effects of lower revenues and foster economic transformation. Additionally, countries with large sovereign wealth funds could use them as an integral part of the diversification effort, for example to finance research and development and renewable-energy projects in MENA countries.

Producers with large foreign exchange reserves, sizable sovereign wealth funds, and small populations to appease are potentially the best placed to navigate the uncharted waters of the global energy transition.

MENA oil and gas producers have also considered developing their high renewable-energy potential, especially solar. This could help them pursue several goals, including economic diversification and reduction of greenhouse gas emissions. It could also free additional oil and gas volumes, currently used to meet fast-growing domestic energy demand, for sale abroad to produce additional revenue—thus avoiding the negative economic effects of growing energy consumption and positioning themselves as major renewable powers in a low-carbon future.

More recently, MENA oil and gas producers have begun to consider the growing interest in hydrogen as a way to preserve their geopolitical influence and remain pivotal actors in the future energy system. Given the region’s abundant renewable energy and carbon capture and storage potential, MENA countries could be at the forefront in both the green and blue hydrogen markets. In the short and medium term, blue hydrogen could benefit from its cost advantages. In the longer term, the MENA countries could exploit their excellent solar conditions and low-cost renewables in order to produce and export green hydrogen. Three MENA oil producers (Saudi Arabia, the UAE, and Oman) have announced major hydrogen plans. For example, in July 2020 an international consortium announced plans for a $5 billion green renewables and hydrogen plant in Saudi Arabia, which aims to begin shipping ammonia to global markets by 2025. In September 2020 Saudi Arabia shipped 40 tons of blue ammonia to Japan in a pilot project undertaken by Saudi Aramco and the petrochemical giant Sabic.

Conclusions

The global energy transition will inevitably affect MENA oil- and gas-producing countries, both macroeconomically and geopolitically. However, not all MENA countries will see their geopolitical influence change in the same way. Some countries are better equipped than others to offset the negative effects domestically and internationally. Internationally, MENA oil and gas producers will start to focus more on energy demand differences among world regions. MENA countries with lowest-cost and least-carbon-intensive production are better positioned to preserve their geopolitical influence. Moreover, export portfolio composition and diversification will crucially define whether a country will lead or lag behind in the energy transition. Oil and gas producers are also endowed with an abundant renewable potential, another possible route to future energy leadership.

Nevertheless, competition among producers will remain or even increase, potentially undermining coordinated efforts to stabilize oil prices. Due to the strong link between hydrocarbons and the nature of the state in the MENA region, the domestic sphere will be a key element in the geopolitical shifts. Population size, strong governance, and the financial ability to adapt to change will help some MENA oil and gas producers to preserve their geopolitical role, while managing domestic socio-economic transformation.

Originally publishes by the Oxford Institute For Energy Studies.

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