For the Middle East and North Africa, as one of the largest fossil-fuel based regions, moving away from oil and gas is not going to be easy. So what is the forecast for the region and how will it move from ambition to action?
Fossil fuels currently provide 97% of energy the Middle East and North Africa (MENA) and energy consumption continues to rise. As the chart below from DNV’s Energy Transition Outlook shows, primary energy consumption is expected to grow by 42% over the next 30 years, from 49 EJ today to 69 EJ in 2050. Positively, energy from fossil fuels is expected to drop to 71% by 2050 (with solar and wind taking 18% and 6%, respectively). Electricity generation is also expected to increase 3.6 times from today’s levels, from 1,900 TWh to 6,800 TWh in 2050, mostly coming from solar and wind. It is electrification that will largely drive reduced oil use. Gas, although reducing its share of the energy mix will remain a “transition” fuel. In last week’s COP27 blog, we discussed the speed with which countries are moving towards the Paris targets. We concluded that ambition, but more importantly, action, was moving at an insufficient pace. So, what is the Middle East and North Africa doing to stay in the race to net zero?
Source: Energy Transition Outlook 2022
Egypt is setting its sights high to become an energy hub for the Region, for the EU and beyond
As hosts of COP27, we anticipate big announcements from its Presidency team on how Egypt will tackle climate change. It is aiming to provide the lowest emissions natural gas and looking to be an exporter of low carbon LNG, electric power and green ammonia to Europe and elsewhere. The country has several advantages, such as large national-level demand, strong wind and solar resources, the establishment of economic zones and transport links via the Gulf of Suez. And now policy is also moving in a positive direction to help position Egypt as an energy epicentre.Hydrogen taking off in MENA
The Middle East and North Africa is expected to play a substantive role in low-carbon hydrogen production. Volumes are expected to grow from around 1 mt in 2030 to 10 mt by 2050, consisting mostly of blue hydrogen from methane reforming with CCS. However, higher volumes of green hydrogen and grid-connected yellow hydrogen are expected from the 2040s.
Source: Energy Transition Outlook 2022
Saudi Arabia, the UAE and Oman have also set their stalls for hydrogen, taking advantage of the incredible potential of solar and wind power and natural gas reserves for blue hydrogen. Many partnerships and memorandums of understanding (MOUs) have been struck and foreign investment commitments made across the region for hydrogen, for example between Masdar and Hassan Allam Utilities for developing 4 GW of electrolyser capacity in Egypt by 2030, or between a number of industrial companies and state-linked energy companies such as ADNOC, ACWA Power and Aramco for projects, like the NEOM Helios Green Fuels project in Saudi Arabia. Several further announcements can be expected at COP27.
Regional emissions expected to rise till the mid-2030s
Many of the region’s petrostates have set net zero targets. The UAE has been leading the way, announcing a commitment to achieve net zero by 2050. Israel seeks to cut emissions by 85% by 2050 relative to 2015 and Turkey indicated in October 2021 it will achieve net zero in 2053. Saudi plans to reach this level in 2060. But the region will have significant energy-related emissions well into the 2050s. Emissions in the region will peak in the mid-2030s at 3.3GtCO2 or 18% above today’s levels. But by 2050, we anticipate they will reduce to 2.5GtCO2 or 5% less than 2020 levels.
Source: Energy Transition Outlook 2022
To move to net zero by 2050, the region would need a carbon price of $30/tCO2 in 2030 and $100/tCO2 in 2050, much faster transition to electrification of transport, substantial power generation from biomethane with CCS, a ban on new greenfield oil and gas capacity additions from 2028 and a ban on coal power plants in 2045.
Climate loss and damage of high concern as COP27 kicks off
On Sunday 6 November, COP27 commenced, as COP26 President, Alok Sharma handed over to the COP27 President, Dr. Sameh Shoukry. The calls for taking immediate action on climate change were resounding in the opening remarks. But so too were the calls on developed nations, that have been largely responsible for climate impacts, to cover the costs to help developing nations to deal with the impact of climate change which is already occurring.
Mitigation, adaptation and loss and damage will no doubt be the focal points of discussions over the next two weeks. We look forward to hearing the breadth of voices on these topics coming from the Middle East and North Africa, noting that many countries in the region are extremely wealthy, and others less so.
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