National oil companies (NOCs) in the Gulf are stepping up investment in carbon capture, utilization, and storage (CCUS), hydrogen, and other green energies in order to reduce the carbon intensity of their operations and support the energy transition as hydrocarbon producers continue to benefit from high global prices for their products.
To develop CCUS and hydrogen while constructing a manufacturing facility in the King Salman Energy Park in eastern Saudi Arabia, Saudi Aramco and Sinopec of China struck a deal last week.
In order to work together on CCUS and hydrogen, the Abu Dhabi National Oil Company (ADNOC) and France’s TotalEnergies inked a contract in July. The agreement will assist ADNOC in achieving its target of collecting 5 million tonnes of carbon per year (tpa) by 2030, which is six times more than the 800,000 tpa capability of its gas plants at now.
These agreements, the most recent of dozens that Gulf NOCs have made recently, may establish them as global leaders in both CCUS and hydrogen.
Since the world still depends on oil and gas during the energy transition, CCUS can lower emissions for decades to come thanks to the low-cost production advantages and vast hydrocarbon resources of the Gulf NOCs.
In 2021, QatarEnergy produced 4.4% of the world’s gas and possessed 13.1% of the world’s proved gas reserves, compared to Aramco, ADNOC, and Kuwait National Petroleum Company, which produced 19.3% of the world’s oil and held 28.7% of the world’s proven oil reserves.
According to a report released last year by consultancy Roland Berger and Dii Desert Energy, a public-private network focused on the energy transition, the Gulf NOCs could establish a leading advantage in the production and export of green hydrogen, which could generate $200 billion in revenue by 2050. They also have the world’s cheapest solar power, an abundance of wind power, and plenty of lands on which to build green power generation projects.
Coal
With the use of CCUS, hydrocarbon producers may extract carbon from their operations, which can then be stored, dispersed through increased oil recovery methods, or turned into other consumer goods.
Due to the high start-up costs and absence of a market for carbon credits and offsets, many businesses have been sluggish to embrace CCUS. But the industry is growing as end-user markets, especially in Europe, call for greener energy sources and carbon trading markets.
The International Energy Agency reports that from 18 new CCUS projects announced globally in 2019 to 38 in 2020 and 97 in 2021, the number has grown. The organization claims that this pipeline of projects is far from having a meaningful influence on the world’s climate goals and that 1.7 billion tpa of CCUS capacity will be required by 2030 in order to achieve net-zero emissions by 2050.
Since a lot of these businesses run Gulf NOCs, they serve as a test case for the spread of CCUS technology internationally. The Middle East might produce 50 million tpa by 2030, according to Mitsubishi Heavy Industries, which is involved in many power generation projects in the area. Estimates for the global total in 2030 range from 80 million to 89 million tpa.
The GCC is expected to capture 60 million tpa by 2035, according to the Global CCS Institute. In 2020, Qatar, the United Arab Emirates, and Saudi Arabia each caught 3.7 million tpa of carbon, or 10% of the total amount worldwide.
The investment will assist Saudi Arabia to reach its aim of 11 million tpa of CCUS capacity by 2035 as part of its larger goal of attaining net-zero emissions by 2060, even if the financial details of Aramco’s agreement with Sinopec are undisclosed. The Kingdom’s gas liquefaction facility in Hawiyah now catches 800,000 tpy of carbon.
In the meanwhile, Qatar Energy, which will begin producing gas from the North Wellfield in 2025, is a leader in the area of collecting 2.1 million tpa of carbon from its Ras Laffan gas liquefaction facility.
Saudi Arabia last year developed a platform for MENA countries to exchange carbon credits and offsets in an effort to get CCUS recognition. One of the founding members of the platform is Aramco.
Despite these goals, there is considerable worry among international stakeholders over an excessive dependence on CCUS in order to achieve their net-zero targets because of the necessity for major technological advancements in this area and the possibility that CCUS might offer production coverage. instead of promoting the transfer to sustainable energy sources, oil production will continue in the ensuing decades.
Hydrogen
Additionally, the Gulf NOCs are investing heavily in hydrogen, a clean fuel, and energy source that may be produced from hydrocarbon or renewable energy sources and utilized domestically or internationally.
Similar to CCUS, hydrogen has shown substantial recent growth. In 2021, there were 17 nations with a hydrogen strategy, up from the original three (France, South Korea, and Japan), with an additional 20 nations allegedly working on their plans.
Saudi Arabia already has big growth plans and hydrogen projects in the works. It started building the $5 billion wind and solar-powered hydrogen plant at its NEOM megaproject in March, which when finished would be the biggest hydrogen plant in the world, producing 650 tons of hydrogen per day.
The energy minister of Saudi Arabia, Prince Abdulaziz bin Salman al-Saud, declared last year that the country aims to create 4 million tpy by 2035 and 2.9 million toa by 2030, making it the largest hydrogen generator in the world.
Qatar does not intend to manufacture hydrogen itself because its gas will be used to power electrolyzers overseas, but other Gulf nations including the United Arab Emirates, Kuwait, and Oman are creating national hydrogen programs.
ADNOC and BP launched a new energy collaboration in May with plans to build hydrogen hubs in the UK and the United Arab Emirates. While BP will invest in ADNOC’s green hydrogen facility in Abu Dhabi’s Masdar, ADNOC plans to buy a stake in BP’s H2Teesside hydrogen project. Along with Japan, ADNOC wants to create a green hydrogen supply chain.
Gulf NOCs are trying to make use of developing digital technologies and artificial intelligence (AI) by implementing CCUS and expanding their hydrogen production and export capacities in order to diversify their economies and promote sustainable growth.
AI is already being used by Aramco and ADNOC to improve operations, track and lower CO2 emissions, and include renewable energy sources.
Synergies that result from investments in digital technology may also spur the growth of new industrial industries.
For instance, Aramco announced a deal with French automaker Gaussin in January to investigate producing hydrogen-powered cars. This agreement followed agreements with France’s Air Liquide, Alteia, and Axens to develop artificial intelligence (AI), carbon capture, low carbon hydrogen, and ammonium, as well as manufacturing.
