Past Event
Petro Diplomacy 2024: The Countdown to Net Zero
Date
Jun 11, 2024
About the event
For the 10th consecutive year, AGSIW convened its Petro Diplomacy conference, bringing together private and public sector stakeholders from the United States, Europe, and the Gulf Arab countries to discuss emerging trends in energy markets and regional politics.
At the end of 2023, the United Arab Emirates hosted what was widely hailed as a successful United Nations Climate Change Conference, COP28, in Dubai, where nearly 200 parties agreed to transition away from fossil fuels and step up renewable energy investments. The U.N. stated that the outcome of COP28 signaled the “beginning of the end” of the fossil fuel era. Also included in the first global stocktake – a mechanism to measure countries’ progress in achieving their climate commitments – since the 2015 Paris Climate Agreement was recognition that global greenhouse gas emissions need to be cut by 43% from 2019 levels by 2030 to limit global warming to 1.5 degrees Celsius. Where does this leave the Gulf Arab oil and gas producers, and what further action is needed to align their policies with the goals set out at COP28?
The countdown has begun to turn these pledges into actionable policies, an imperative for a region that is extremely vulnerable to climate change and where oil and gas have for decades been the main drivers of their economies. Amid the devastating war in Gaza, the Middle East is again in the eye of the storm. The crisis has disrupted international trade flows and endangered the free flow of energy from the region, but it must not distract from the climate crisis. The next few years will be pivotal for the region and the broader international community as the world’s energy architecture is recalibrated to meet net-zero ambitions. AGSIW will convene senior officials and experts to discuss the various options for the Gulf Arab states to manage an accelerated transition that the U.N. says can no longer be stopped or reversed.
The views represented herein are the author's or speaker's own and do not necessarily reflect the views of AGSI, its staff, or its board of directors.
Agenda
Morning Briefing
Session 1: The Beginning of the End for Fossil Fuels?
“Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end,” said U.N. Climate Change Executive Secretary Simon Stiell at the closing of COP28. “Now all governments and businesses need to turn these pledges into real-economy outcomes, without delay.” The International Energy Agency says demand for all three fossil fuels – oil, gas, and coal – will peak by 2030, replaced by wind and solar energy and electrification. OPEC’s long-term view is that demand for oil will continue to rise until 2045 and that more upstream investment is needed to safeguard global energy security. The Gulf Cooperation Council states have started the process of diversifying their economies and investing in low-carbon technologies to lessen reliance on oil and gas export revenue, but these efforts will need to be scaled up massively if net-zero targets are to be attained. Current GCC targets for the share of renewable energy sources in the energy mix remain relatively modest: 10% by 2035 for Bahrain, 30% by 2030 for the United Arab Emirates, 10% by 2020 for Oman, 30% by 2040 for Saudi Arabia, 15% by 2030 for Kuwait, and 20% by 2030 for Qatar. This means that for the oil-based economies of the Gulf states, oil and gas revenue is the economic artery that cannot be cauterized in an instant without risking instability.
How are each of the Gulf countries positioned at this pivotal time in the energy transition, and what will the energy mix look like by 2050? How much is being done to future-proof their oil and gas assets through decarbonization technologies? Will the hydrogen economy take off and, if not, what might hold it back? The United States is today the biggest producer of oil, but with a presidential election looming, is there a risk that climate policies could be rolled back in the event of a Republican victory?
Session 2: Natural Gas: Bridge or Destination Fuel?
The Gulf states, led by Qatar, are investing heavily in expanding their liquefied natural gas capacity on the expectation that demand for the cleaner of the fossil fuels will rise beyond the end of the decade. The COP28 text makes no specific reference to natural gas but infers that it could serve as a transition fuel for a while longer. At the same time, ministers at COP28 pledged to cut harmful methane emissions by at least 30% by 2030. The lack of specific guidance on the gas issue has revived the debate over whether natural gas will serve as a bridge or destination along the path to net zero by 2050. Qatar is betting heavily that the world will need more gas and is investing accordingly. It plans to nearly double current LNG capacity to 142 million tons per year by 2030. The United Arab Emirates is expanding its LNG capacity, while Oman is considering the same. Even Saudi Arabia is considering building an LNG export facility as it expands conventional and unconventional gas production. Shell forecasts a more than 50% increase in LNG demand by 2040, driven mainly by Asia.
Will current low gas prices sustain the cost of expansion, and what is the added cost of complying with the methane reduction pledge? How will the U.S. administration’s pause on new LNG projects affect supply in the longer term, and are the Gulf states on the right track when it comes to gas? Will Russia and its vast gas reserves have a role in the future if free of sanctions? And will there be enough demand to accommodate all the additional supply?
Lunch Keynote
Session 3: Financing the Energy Transition
The IEA says clean energy investments will need to quadruple in emerging and developing economies to meet rising demand for energy in a sustainable way and reach climate targets. However, capital-intensive renewable energy projects remain complicated to finance and will require an unprecedented mobilization of private capital. Yet according to the IEA’s “World Energy Investment 2023” report, less than half of the oil and gas industry’s unprecedented cash flow from the 2022 energy crisis has gone into traditional supply and only a small fraction to clean technologies. Saudi Aramco CEO Amin Nasser said in March that the world has invested more than $9.5 trillion in the energy transition over the past two decades, yet solar supplies just under 4% of the world’s energy. COP28 President Sultan Ahmed Al Jaber said April 26 that at least $6 trillion should be spent by 2030 to meet the goal of tripling global renewable energy capacity by that date.
The U.S. Inflation Reduction Act has done much to encourage investments in renewable energy through tax and financial incentives to drive the renewable energy program forward in the United States. Is the rest of the world doing enough, and what more needs to be done? The private sector has a role to play if the energy needs of millions of people without access are to be met, but this requires access to affordable finance that is out of reach for many African and other developing economies. How can limited public finances be leveraged to turn billions into the trillions needed to finance the transition?
Session 4: The Return of Geopolitical Risk
Conflict in the Middle East and the ongoing war in Ukraine have caused thousands of casualties, disrupted the global geopolitical order, and redirected trade flows. The Iran-backed Houthis have wreaked havoc on shipping through the Red Sea while consolidating their presence in areas under their control in Yemen. The United States has been drawn back to the Middle East, ostensibly to prevent an escalation of the war between Israel and Hamas in Gaza, where the risk of a wider conflagration drawing in regional and external players cannot be ruled out.
What are the prospects of a resolution to the decades-old Israeli-Palestinian conflict once the guns fall silent? Will the United States be forced to return as a security guarantor and peacemaker, or has it tarnished its image as an honest broker? What role will the Gulf Arab states play in a postwar scenario? What are the prospects for a peaceful resolution to the Yemen conflict and generally for peace in the wider Middle East?
Morning Briefing
Session 1: The Beginning of the End for Fossil Fuels?
“Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end,” said U.N. Climate Change Executive Secretary Simon Stiell at the closing of COP28. “Now all governments and businesses need to turn these pledges into real-economy outcomes, without delay.” The International Energy Agency says demand for all three fossil fuels – oil, gas, and coal – will peak by 2030, replaced by wind and solar energy and electrification. OPEC’s long-term view is that demand for oil will continue to rise until 2045 and that more upstream investment is needed to safeguard global energy security. The Gulf Cooperation Council states have started the process of diversifying their economies and investing in low-carbon technologies to lessen reliance on oil and gas export revenue, but these efforts will need to be scaled up massively if net-zero targets are to be attained. Current GCC targets for the share of renewable energy sources in the energy mix remain relatively modest: 10% by 2035 for Bahrain, 30% by 2030 for the United Arab Emirates, 10% by 2020 for Oman, 30% by 2040 for Saudi Arabia, 15% by 2030 for Kuwait, and 20% by 2030 for Qatar. This means that for the oil-based economies of the Gulf states, oil and gas revenue is the economic artery that cannot be cauterized in an instant without risking instability.
How are each of the Gulf countries positioned at this pivotal time in the energy transition, and what will the energy mix look like by 2050? How much is being done to future-proof their oil and gas assets through decarbonization technologies? Will the hydrogen economy take off and, if not, what might hold it back? The United States is today the biggest producer of oil, but with a presidential election looming, is there a risk that climate policies could be rolled back in the event of a Republican victory?
Session 2: Natural Gas: Bridge or Destination Fuel?
The Gulf states, led by Qatar, are investing heavily in expanding their liquefied natural gas capacity on the expectation that demand for the cleaner of the fossil fuels will rise beyond the end of the decade. The COP28 text makes no specific reference to natural gas but infers that it could serve as a transition fuel for a while longer. At the same time, ministers at COP28 pledged to cut harmful methane emissions by at least 30% by 2030. The lack of specific guidance on the gas issue has revived the debate over whether natural gas will serve as a bridge or destination along the path to net zero by 2050. Qatar is betting heavily that the world will need more gas and is investing accordingly. It plans to nearly double current LNG capacity to 142 million tons per year by 2030. The United Arab Emirates is expanding its LNG capacity, while Oman is considering the same. Even Saudi Arabia is considering building an LNG export facility as it expands conventional and unconventional gas production. Shell forecasts a more than 50% increase in LNG demand by 2040, driven mainly by Asia.
Will current low gas prices sustain the cost of expansion, and what is the added cost of complying with the methane reduction pledge? How will the U.S. administration’s pause on new LNG projects affect supply in the longer term, and are the Gulf states on the right track when it comes to gas? Will Russia and its vast gas reserves have a role in the future if free of sanctions? And will there be enough demand to accommodate all the additional supply?
Lunch Keynote
Session 3: Financing the Energy Transition
The IEA says clean energy investments will need to quadruple in emerging and developing economies to meet rising demand for energy in a sustainable way and reach climate targets. However, capital-intensive renewable energy projects remain complicated to finance and will require an unprecedented mobilization of private capital. Yet according to the IEA’s “World Energy Investment 2023” report, less than half of the oil and gas industry’s unprecedented cash flow from the 2022 energy crisis has gone into traditional supply and only a small fraction to clean technologies. Saudi Aramco CEO Amin Nasser said in March that the world has invested more than $9.5 trillion in the energy transition over the past two decades, yet solar supplies just under 4% of the world’s energy. COP28 President Sultan Ahmed Al Jaber said April 26 that at least $6 trillion should be spent by 2030 to meet the goal of tripling global renewable energy capacity by that date.
The U.S. Inflation Reduction Act has done much to encourage investments in renewable energy through tax and financial incentives to drive the renewable energy program forward in the United States. Is the rest of the world doing enough, and what more needs to be done? The private sector has a role to play if the energy needs of millions of people without access are to be met, but this requires access to affordable finance that is out of reach for many African and other developing economies. How can limited public finances be leveraged to turn billions into the trillions needed to finance the transition?
Session 4: The Return of Geopolitical Risk
Conflict in the Middle East and the ongoing war in Ukraine have caused thousands of casualties, disrupted the global geopolitical order, and redirected trade flows. The Iran-backed Houthis have wreaked havoc on shipping through the Red Sea while consolidating their presence in areas under their control in Yemen. The United States has been drawn back to the Middle East, ostensibly to prevent an escalation of the war between Israel and Hamas in Gaza, where the risk of a wider conflagration drawing in regional and external players cannot be ruled out.
What are the prospects of a resolution to the decades-old Israeli-Palestinian conflict once the guns fall silent? Will the United States be forced to return as a security guarantor and peacemaker, or has it tarnished its image as an honest broker? What role will the Gulf Arab states play in a postwar scenario? What are the prospects for a peaceful resolution to the Yemen conflict and generally for peace in the wider Middle East?
