With oil and gas prices surging, the countries of Europe face a looming winter energy crisis. Can the Middle East and North Africa help overcome the challenge?
Solving Europe’s energy challenge
Published in partnership with
One of the most apparent aspects of the Russia-Ukraine conflict is the rapid increase in energy prices brought on by Moscow’s reduction in exports to its European neighbours.
In 2021, Russia was the largest exporter of oil and gas to Europe, supplying some 40 per cent of its energy requirements, including 100 per cent of the total gas imports of five EU states, according to the International Energy Agency.
The continent’s three largest economies – Germany, Italy and France – depended on Russian gas for 46 per cent, 34 per cent and 18 per cent of their energy needs, respectively.
The imposition of sanctions on Russia in March 2022, followed by Moscow’s threat to suspend hydrocarbon exports, has resulted in a surge in energy prices.
Opec’s crude basket price increased from $78 a barrel at the start of the year to $122 in early June, while Henry Hub natural gas prices more than doubled from $3.8 a million British thermal units (BTUs) to $8.7 a million BTUs over the same period.
Expensive energy bills
This rapid energy inflation has been passed on to consumers through higher electricity bills.
In the UK, for instance, the energy regulator Ofgem estimates that the default tariff price cap will more than double from £1,300 ($1,529) in January to £3,580 in October, and reach a peak of £4,266 in the first three months of 2023, when demand will be highest during the colder winter months.
Replicated across the continent, this is likely to result in millions of households entering ‘fuel poverty’ as they struggle to pay their energy bills.
The Mena region is well-positioned to plug the shortfall in Russian gas exports as European governments scramble to source gas from new markets to reduce their dependence on Moscow
The first was that the Middle East and North Africa (Mena) is well-positioned to plug the shortfall in Russian gas exports as European governments scramble to source gas from new markets to reduce their dependence on Moscow.
The GCC alone globally exports almost exactly half of the 411 billion cubic metres of gas that Russia supplies to Europe annually. Most of this is in the form of long-term liquefied natural gas (LNG) contracts to east Asia, but there is some limited capacity available – primarily from Qatar – to fill part of the shortfall.
European nations have been quick to recognise this. For example, following a visit to the region by its Vice-Chancellor and Climate & Energy Minister Robert Habeck in March, Germany – Europe’s largest energy market – is now fast-tracking the construction of two LNG import terminals and has entered a long-term energy partnership with Qatar, the world’s largest LNG exporter.
The second principal finding from the Middle East & Africa Energy Week was that the conflict would act as an additional catalyst for renewable energy development as nations globally attempt to diversify their energy sources and reduce their dependence on imported fossil fuels.
This was in keeping with the results of a poll of up to 400 of the event’s participants. The survey, which forms the central component of the Siemens Energy’s Middle East & Africa Energy Transition Readiness Index, revealed that attendees considered the acceleration of renewables as the highest priority among 11 energy policies in their efforts to tackle the climate crisis, as well as the one with the greatest potential impact.
The Middle East is already taking a clear lead in this as it sets ambitious targets for clean, renewable capacity. For example, Saudi Arabia is looking to scale up its share of gas and renewable energy in its energy mix to 50 per cent by 2030.
Similarly, the UAE has set ambitious targets for 2050: to improve energy efficiency by 40 per cent, reduce emissions from the power sector by 70 per cent and increase the share of renewables in the energy mix to 44 per cent.
While Europe is looking for alternative gas supplies to urgently fill the gap in the short term, there is little doubt that in the longer term renewable energies and hydrogen will dominate the energy markets
Dietmar Siersdorfer, Siemens Energy
In the long run, the energy crisis also provides momentum for the development of hydrogen production in the region, one of four other central themes emerging from the Energy Week.
Demand for hydrogen in Europe alone is forecast to double to 30 million tonnes a year (t/y) by 2030 and to 95 million t/y by 2050. Thanks to its geographical position, the Middle East is ideally located to meet this demand either by ship or pipeline.
Today, there are at least 46 known green hydrogen and ammonia projects across the Middle East and Africa, worth an estimated $92bn, almost all of which are export-orientated.
“While Europe is looking for alternative gas supplies to urgently fill the gap in the short term, there is little doubt that in the longer term renewable energies and hydrogen will dominate the energy markets. That the robust mix of the energy (gas and renewables) will make the energy system more resilient and support energy supply security while we, at the same time, move us at a fast pace into a renewable future,” says Dietmar Siersdorfer, Siemens Energy’s Managing Director for the Middle East and UAE.
Electricity to Europe
Another unintended consequence of the Ukraine crisis is to turn attention to direct electricity supply from the Mena region to Europe.
Although plans for exploiting the high solar irradiation levels and space provided by the Sahara desert through initiatives such as DESERTEC have long been mooted as an alternative solution, a combination of the crisis, lower costs and improving technologies are increasing impetus.
Some projects are already capitalising on the trend. For example, a joint venture of Octopus Energy and cable firm Xlinks recently received regulatory approval for a 3.6GW subsea interconnector between Morocco and the UK, using energy produced from vast solar arrays in the desert.
A similar project is the 2GW high-voltage EuroAfrica connector currently under construction linking Egypt with Greece via Crete. Plans are also under way for a third power connection between Morocco and Spain, which today is the only operational electricity link between Africa and Europe.
With the Egyptian-Saudi interconnector now under construction, and agreements recently reached for interconnectors between Saudi Arabia and Jordan and Kuwait and Iraq, the region is growing closer to supplying power to Europe directly.
“The development of regional grids has brought the prospect of direct current connection with Europe ever closer,” says Siemens Energy’s VP and Head of Grid Stabilisation in the Middle East, Elyes San-Haji. “Due to its plentiful solar resources, the Mena region could become an energy hub with a global network of high-voltage highways and super grids.”
Interconnection makes sense on many levels. Not only would Europe benefit from a diversified, economical and renewable energy source, but its season of peak demand, winter, coincides with when supply is lowest in the Middle East, and vice-versa. Power transfer would not necessarily have to be in one direction only.
The Ukraine conflict and ensuing energy crisis have created an unprecedented opportunity for the Middle East and Africa to become more closely integrated with Europe. Whether in the form of fuel exports, either gas or potentially green hydrogen fuels, or direct electricity supply, the Arab world has never had a better chance to become the energy partner of choice for its European neighbours.
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.
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
Of all these, plastic appears as one of the major sources of harm to oceans. See the following data:
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.
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.
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.
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 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!
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.
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
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%
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.
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.
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.
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.
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.
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?
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.
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.
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