Energy Transition Outlook 2026

Middle East and North Africa

A forecast of the energy transition in the region to 2060, based on the data from DNV's Energy Transition Outlook 2026

Key takeaways
  • The Middle East and North Africa is balancing energy security and transition goals, maintaining oil and gas exports while scaling renewable and low-carbon energy investments.
  • Solar is becoming a key growth driver, supported by abundant resources, cost competitiveness, and strong government backing.
  • Power demand will grow substantially, driven by economic expansion, electrification, cooling, desalination, and hydrogen production.
  • GCC countries are reducing the carbon intensity of hydrocarbons, focusing on electrification, methane reduction, efficiency improvements, and carbon capture.
  • Hydrogen is emerging as a major export opportunity, leveraging the region’s energy resources and infrastructure.
  • Climate resilience is becoming a business imperative, as heat, water scarcity, and other climate risks increasingly impact economic growth and operations.

This region stretches from Morocco to Iran, including Turkey and the Arabian Peninsula.

Middle East and North Africa energy transition at a glance

Metric

2026

2060

Population

605 million

811 million

GDP*

USD 14.8 trillion

USD 33.4 trillion

GDP/person

USD 44,400

USD 21,200

Primary energy use

59 EJ

79 EJ

Primary energy use/person

97.5 GJ

97.5 GJ

CO2 emissions**

3.6 Gt

2.9 Gt

CO2 emissions/person

6.0 tonnes

3.5 tonnes

*All GDP figures in the report are based on 2017 purchasing power parity and in 2023 international USD.

**Energy- and process-related CO2 emissions, after carbon capture and storage, before direct air capture.

The Middle East and North Africa (MENA) region possesses immense energy wealth, with vast hydrocarbon reserves and renewables potential. That wealth was tested directly in 2026: the conflict knocked out roughly a fifth of global LNG export capacity and pushed oil prices well above USD 100 per barrel at points during the year – the largest disruption to global oil supply on record. Countries in the region are simultaneously seeking to diversify their energy portfolios and leverage clean energy trends, some motivated by energy security newly underlined by the war, others by economic diversification in balance with hydrocarbon investments.

Where the Middle East and North Africa stands today

  • Fossil fuels supply about 95% of primary energy. The 2026 Iran war dominates regional energy developments: disruption to the Strait of Hormuz and strikes on Qatar’s LNG facilities removed around one-fifth of global LNG export capacity and cut oil production 18%, from 28 to 23 Mbpd. The crisis has prompted stronger regional energy conservation efforts, repair investments, and higher coal burn among Asian economies facing LNG shortages (Talukdar, 2026). This has also driven expansion of alternative export routes — most notably the UAE's second West–East pipeline. ADNOC is fast-tracking this new line to Fujairah, which could nearly double the UAE's crude export capacity, with the project targeted to become operational in 2027 (Hussein, 2026).
  • Renewable deployment remains uneven. While policy, financing, and regulatory barriers persist in many countries, Egypt, Morocco, Saudi Arabia, Turkey, and the United Arab Emirates (UAE) are advancing major projects. Renewable investment in MENA reached a record USD 22bn in 2025, marking a third consecutive annual high and placing Saudi Arabia among the top 10 energy transition markets (Bloomberg, 2026a, b). Nevertheless, fossil fuels still generate around 82% of regional electricity in 2026.
  • Climate risks include severe water stress and extreme weather. The Middle East is the most water-stressed region, with 83% of its population already facing extreme water stress, rising to 100% by 2050 (Brown, 2026). The region accounts for about 42% of global desalination capacity, with some Gulf states relying on it for up to 90% of water supply (Zawya, 2026) – a vulnerability heightened by the war’s infrastructure risks.

 

Key agendas shaping the Middle East and North Africa's energy transition

  1. Export competitiveness and decarbonization

    • The region retains the common objective of remaining competitive as an exporter of hydrocarbons, hydrogen, and eventually electricity.
    • Hydrocarbon producers continue to plan fossil fuel expansion while pursuing lower-emission exports through operational decarbonization, carbon capture and storage (CCS) and hydrogen, and economic diversification through renewable deployment and cleantech industry investments.
  1. Energy security and export resilience

    • The 2026 Iran war reinforces the strategic importance of export infrastructure resilience. Saudi Arabia and the UAE are accelerating oil export bypass routes that reduce reliance on the Strait of Hormuz. Regional power interconnections and grid expansion are increasingly viewed as energy security assets alongside market integration tools.
    • Energy importers such as Turkey and Egypt pursue pragmatic energy strategies to meet growing demand and reduce fossil fuel import reliance, combining gas infrastructure and transit ambitions with renewable deployment.
  1. Power system transformation

    • Countries in MENA continue to pursue ambitious renewable energy and storage targets, with major investments in large-scale solar, wind, and battery projects.
    • Investment in upgrades to transmission networks and cross-border interconnections will support higher renewables penetration and greater system flexibility.

 

Energy transition indicators

95 %

Fossil fuels

in primary energy supply in 2026

18 %

Renewables

in electricity mix in 2026

83 %

of population

facing extreme water stress

Middle East and North Africa - Primary energy consumption by source (EJyr) - Energy Transition Outlook 2026

Primary energy consumption (EJ/yr)

MENA remains heavily dependent on fossil fuels, at roughly 95% of primary energy supply in 2026. Their share is projected to decline to around 58% by 2060 as primary energy supply grows by 35%, driven initially by natural gas – which continues growing to 2035 before flattening – and increasingly by solar and wind from the 2030s.

 

Middle East and North Africa - Final energy demand - Energy Transition Outlook 2026

Final energy demand (EJ/yr)

Final energy demand rises by around 40%, from 41 EJ/yr in 2026 to 58 EJ/yr by 2060 – a somewhat more moderate trajectory than primary energy supply growth, reflecting increasing electrification. Electricity's share of final energy demand grows from 18% today to 32% by 2060.

Middle East and North Africa - Electricity generation by type - Energy Transition Outlook 2026

Electricity generation, including off-grid and BTM (PWh/yr)

Electricity generation, including off-grid and behind-the-meter (BTM), grows from around 2.4 PWh in 2026 to around 8.5 PWh by 2060. Fossil fuels supply roughly 82% of generation in 2026, falling to around 5% by 2060 as solar (reaching about 50% of generation) and wind (roughly 37%) come to dominate the mix.

 

Middle East and North Africa - CO2 emissions by sector - Energy Transition Outlook 2026

CO2 emissions by sector (GtCO2/yr)

Energy- and process-related CO2 emissions – after CCS, before direct air capture (DAC) – stand at 3.6 Gt in 2026, around a sixth (16%) more than in 2020, and are projected to decline to 2.9 Gt by 2060, about a fifth (22%) less than in 2026. The sectoral picture shifts substantially: the power sector, the largest single emitter in 2026 at a third (33%) of the total, sees the steepest decline of any sector (down three-quarters (75%) by 2060) as renewables take over generation, falling to just a tenth (11%) of emissions. Transport becomes the largest single-sector emitter by 2060 at around 29% of the total, even as its own emissions decline by 7%. The share of emissions from all other sectors grows slightly between now and 2060.

Key forecast findings: how the energy transition is unfolding

MENA remains dominant in oil and gas, with strategic diversification  

The Middle East and North Africa is a highly diverse region: wealthy oil and gas producers in the Gulf Cooperation Council (GCC) sit alongside lower-income countries such as Yemen, and major exporters alongside importers like Morocco and Turkey. Still, many countries in the region are oil and gas exporters, and hydrocarbons remain central both to MENA's economy and the geopolitics that affect it.

Middle East and North Africa - Shares in primary energy consumption - Energy Transition Outlook 2026

Fossil fuels will still dominate MENA’s energy supply in 2060

Despite recent progress in green initiatives, MENA is still projected to hold the largest share of global oil and gas production and consumption in 2060. Primary energy supply grows from 59 EJ/yr in 2026 to 79 EJ/yr by 2060 (Figure 1), with most of that growth occurring before 2035 as natural gas use rises from 34 to 39 EJ/yr. Growth slows thereafter, as electrification expands and non-fossil sources – which convert more efficiently to useful energy – make up a growing share of the mix.

Natural gas remains the largest primary energy source throughout our forecast, at 59% in 2026 and 38% in 2060, despite a declining share. Oil remains the second-largest source with its share falling from 32% in 2026 to 19% in 2060. By 2060, fossil fuels account for around 58% of MENA's energy mix, down from around 95% today (Figure 5). Solar and wind’s shares in primary energy supply grow from less than 1% now to around 19% (15 EJ) and 14% (11 EJ), respectively, by 2060. Nuclear’s share also grows, from under 1% to around 5% (just over 4 EJ).

Renewables reach just 37% of primary energy by 2060, the second-lowest share globally after North East Eurasia (15%), reflecting a relatively slow energy transition constrained by the availability of cheap hydrocarbons. Still, geographic and economic diversity across MENA means transition pathways will vary considerably from country to country.  

 

Middle East and North Africa - Shares in final energy demand - Energy Transition Outlook 2026

Electricity’s share of final energy demand reaches over 30% in 2060

Final energy demand is projected to rise by 40%, from 41 EJ/yr in 2026 to 58 EJ/yr by 2060 (Figure 2). Electricity's share of final energy demand grows from 18% to 31% (Figure 6), with electricity demand itself more than doubling by 2060 (Figure 7). 

Middle East and North Africa - Change in annual electricity demand - Energy Transition Outlook 2026

Space cooling and road transport are the two largest drivers of that growth, followed by buildings, manufacturing, and emerging sources of demand, such as data centres. Natural gas, meanwhile, holds a broadly stable share of about 40% of final demand throughout our forecast, even as its role in primary energy supply and power generation declines. Increasing electrification redirects gas use from power generation toward direct industrial and manufacturing use. Oil's share of final energy demand falls from above a third (36%) to below a quarter (23%).  

Middle East and North Africa - Final energy demand by sector - Energy Transition Outlook 2026

Demand sectors 

Transport will remain the largest energy demand sector in the region until 2035, when the buildings sector takes over as EV uptake improves energy efficiency, tempering transport energy demand (Figure 8). The gap widens sharply through 2060, when buildings reach 21 EJ/yr compared to 15 EJ/yr for transport, up 75% and 25%, respectively, from 2026. Manufacturing also grows from today’s 10 EJ/yr to 14 EJ/yr in 2060. Non-energy oil and gas use (feedstock for petrochemicals and other non-combustion applications) stays broadly flat at around 5 to 6 EJ/yr throughout our forecast. 

Middle East and North Africa - Transport energy demand - Energy Transition Outlook 2026

Transport 

Road transport continues to dominate transport sector energy demand (Figure 9), but the subsector’s energy mix is gradually diversifying away from oil across all modes of transport.  

Passenger road transport energy demand stays roughly flat, but oil’s share in meeting this demand falls from 91% to 75% as electricity’s share rises to 20%. Commercial road transport follows a similar pattern, with oil’s share of energy supply falling from 91% to 72%. 

EV targets remain ambitious in several countries. The UAE aims for 50% of all passenger vehicles and 70% of buses sold nationwide to be electric by 2050. Saudi Arabia targets 30% of vehicles in Riyadh to be electric. Oman aims for 35% of new vehicle registrations to be EVs by 2030. Turkey aims for EVs to be 20% or more of the total vehicle fleet by 2034 and 30% of new car sales by 2030. A major limiting factor in the region remains widespread fossil-fuel subsidies, particularly for gasoline, which continue to reduce the economic incentive to shift away from oil despite their well-known distorting effects. 

Aviation energy demand grows the fastest of any transport subsector in relative terms – more than tripling from 0.75 EJ/yr to 2.3 EJ/yr. The share of oil in the aviation energy mix falls from 100% to 60% as bioenergy and hydrogen-derived fuels account for the rest, consistent with the region's ambitions in sustainable aviation fuel (SAF). 

Maritime shows the most dramatic shift of all: demand stays roughly flat (0.85 EJ/yr) but oil's share collapses from 90% to just 12% by 2060, as hydrogen derivatives, mainly ammonia (18% share by 2060), bioenergy (25%), and natural gas (17%) take over. 

Middle East and North Africa - Buildings energy demand - Energy Transition Outlook 2026

Buildings 

Buildings is the fastest-growing demand sector through 2060 (Figure 10). Electrified end-use drives most of the growth. 

Energy demand from appliances and lighting (including data centres) more than doubles, from 3.2 EJ/yr to 7.1 EJ/yr. Data-centre energy demand grows from today’s negligible amount to just below 1 EJ/yr by 2060, when such centres will have a total installed capacity around 36 GW in the region. That still leaves MENA a small player globally: we project data centre energy demand to reach around 20 EJ worldwide by 2060 (851 GW installed capacity), with China and North America together accounting for half of it. 

Space cooling is the fastest growing subsector of all in relative terms, more than tripling from 1.2 to 4.5 EJ/yr, driven by rising temperatures, population growth and living standards, and remains almost entirely electric.  

Cooking, water heating and space heating remain gas-dominated throughout the outlook period, with gas accounting for roughly 80%, 85% and 90%, respectively, of these subsectors’ energy demand. Overall demand grows modestly, from 7.3 to 9.1 EJ/yr across these three subsectors.

Middle East and North Africa - Manufacturing energy demand - Energy Transition Outlook 2026

Manufacturing 

Manufacturing energy demand grows by around 41% over the outlook period, from 10 EJ/yr to 14.0 EJ/yr (Figure 11). The region’s abundant, low-cost gas provides a competitive edge in energy-intensive industries such as fertilizers and alumina production, while carbon prices remain low. This gas advantage also supports cost-competitive hydrogen production, enabling cheaper low-carbon products. Yet despite this capacity, current manufacturing efforts and ambitions remain relatively modest, with the region's potential for manufacturing underutilized due to structural and strategic challenges tied to its historical dependence on oil, limited industrial diversity, and global competition.  

Across manufacturing, natural gas remains the dominant carrier and grows its share (57% to 68%) as it displaces coal, which falls by two-thirds. Electricity's share also grows, from 20% to 27%, while hydrogen's role stays marginal even by 2060, at around 1% of manufacturing energy demand.

Middle East and North Africa - Installed capacity - Energy Transition Outlook 2026

Electricity mix: Fossil fuel share drops from 82% in 2026 to 5% in 2060 

The region’s power sector undergoes a major transition, with total power generation, including off-grid and behind-the-meter generation, increasing from 2.4 PWh in 2026 to 8.5 PWh by 2060 (Figure 3). Renewables become the dominant source of power generation, with their share rising from 15% in 2026 to 55% in 2040 and around 87% by 2060. Renewables take the lead by 2040, comprising approximately 20% solar+storage, 30% solar and 37% wind by 2060, while nuclear supplies a further 5% of generation. Figure 12 shows the development of installed capacity, including off-grid and behind-the-meter generation. By 2060, installed solar and wind capacities increase 23-fold and 33-fold, respectively. 

Across the region, especially in the GCC, green initiatives complement fossil-fuel strategies as countries scale up renewables to meet domestic needs and free up hydrocarbons for export. Moreover, Egypt is executing its 2024–2030 strategy in real time: renewable capacity reached 9.5 GW by mid-2026, on track for a targeted 11.2 GW by year-end as new solar projects that include battery energy storage come online, with the government still holding to its 42% renewables-by-2030 target (Egypt Oil & Gas, 2026). Morocco is running ahead of its own schedule: renewables already reached 45.5% of installed capacity by mid-2025, putting its 52%-by-2030 target within reach as early as 2028, backed by a newly announced USD 16bn plan to add nearly 16 GW of renewable capacity over the next five years and the 305 MW Noor Atlas solar programme now under construction (IEA-PVPS, 2026; Industrial Info Resources, 2026). Turkey, the region's clear wind and solar leader, saw solar capacity alone reach 25.8 GW by early 2026 – a 540% increase since 2014 – en route to a 120 GW combined solar-and-wind target by 2035, backed by a distinctive storage mandate requiring new renewable projects to install battery capacity equal to their own generation capacity. This requirement has produced a 33 GW battery pipeline, greater than the EU's biggest markets combined (Ember, 2026). 

Fig 13 - Middle East and North Africa - Existing and proposed interconnections by 2035 - Energy Transition Outlook 2026

Grid readiness varies across MENA, and the Gulf states hold a genuine advantage: their electricity systems were built out largely toward the end of the 20th century, giving the region a comparatively modern, robust grid. Unlike almost all other world regions, renewable growth in the Gulf is unlikely to be hampered by the kind of grid constraints already limiting deployment elsewhere in the short term – but that advantage has a shelf life. Like most grids worldwide, the Gulf's was designed to move power from large gas plants to cities and industrial zones, not to handle variable renewable generation, distributed generation, or storage, all of which will play a growing role in the region's power system. From 2035 onwards, the grid could become a bottleneck if expansion and upgrades do not keep pace with renewable capacity growth. 

Transmission and distribution lines have grown by 30% over the past decade – in line with the global average – but we expect that pace to double over the next decade, delivering a further 50% growth. Regional interconnectors, already long in use, are seeing rising utilization as variable renewable generation grows (Figure 13). Plans are underway to extend that network further, including new links to Europe via Greece and Spain, and earlier-stage proposals to connect to the Indian subcontinent. Alongside these physical links, the Pan-Arab Electricity Market initiative to establish a common regional electricity market aims to enable cross-border power trade and add further flexibility to the system. 

That head start shows up directly in deployment outcomes. Towards 2035, we expect installed solar capacity in MENA to be largely unaffected by grid bottlenecks. The main reason is timing: renewables expansion in the region is still at a comparatively early stage, giving grid investment more room to keep pace. Even so, the region's lack of domestic manufacturing for key grid components means it remains exposed to supply-chain delays, regardless of how much headroom the grid itself has. 

Middle East and North Africa - Utility scale storage energy capacity - Energy Transition Outlook 2026

MENA currently has only 60 GWh of storage capacity, just 2% of global capacity. Storage will grow alongside projected renewable generation to maintain grid stability and flexibility: we expect capacity to grow 10-fold by 2030, reaching 7,700 GWh by 2060, or 11% of global capacity by then (Figure 14). 

Chinese production of Li-ion battery storage has brought down prices and is enabling installations. Battery sizes are also increasing, in both utility-scale and co-located projects, and the duration of power provided is growing in line with that size – from 2-hour provision dominating today to 4 hours.

Middle East and North Africa - Short term flexibility by technology - Energy Transition Outlook 2026

Thermal power plants currently provide around 90% of short-term flexibility in the power system, but this role will gradually shift to battery storage, which also has a quicker response time. By 2045, batteries (including utility-scale, co-located, and EV vehicle-to-grid) will supply over half of short-term flexibility, a milestone the region reaches two years ahead of the world at large (Figure 15).

Some of the region's fastest-growing demand sources – space cooling, desalination, and EVs – can be used efficiently in demand-response programmes to spread peak demand and take advantage of peak solar supply. Improvements in AC units and buildings’ energy efficiency allow spaces to be cooled with less energy while storing cooler temperatures for longer. Desalination plants can ramp up production during peak supply and store the excess water. EVs can function as batteries via vehicle-to-grid technology if smart charging is implemented.

Middle East and North Africa - Oil and gas production - Energy Transition Outlook 2026

Geopolitics is testing MENA’s role in global oil and gas 

Our updated model shows conflict in the region directly impacting the 2026 numbers. Crude oil production stood at around 22.0 Mbpd in 2026, down sharply from around 30.0 Mbpd in 2025 as the Strait of Hormuz closure and damage to regional infrastructure took hold. We expect this to recover to around 30 Mbpd by 2030 (Figure 16) as bypass pipelines scale up and, assuming de-escalation, shipping normalizes. 

Middle East and North Africa - Natural gas exports - Energy Transition Outlook 2026

The region's gas export destinations continue shifting toward Asia (Figure 13): by 2060, India alone accounts for around 61% of MENA's total gas exports, up from 11% in 2026, consistent with the more than five-fold growth we now project in the Indian Subcontinent's own gas import demand. Rising demand sees export to Japan, South Korea and China also increase, before dropping after 2040 in Japan and South Korea and beyond 2050 in China. South East Asia is racing to build import capacity. Regional projects under development would add up to 121.3 Mtpa (167 Bcm) of new regasification capacity if all proceed, with Thailand alone planning to double its own capacity to 30 Mtpa (41 Bcm) by 2030 (Zero Carbon Analytics, 2026). This reallocation toward South and East Asian buyers was already underway before 2026, but the conflict has added further motives: buyers who experienced a month of Qatari force majeure and Hormuz closure are, on current evidence, not walking away from Gulf gas, but they are diversifying supply contracts and storage more aggressively than before (Odoardo, 2026). 

Middle East and North Africa - Hydrogen and derivatives production - Energy Transition Outlook 2026

Hydrogen and derivatives: an old market and a new one emerging side by side 

To reduce reliance on oil and gas revenues, the region continues to position itself as a hub for low-carbon hydrogen and its derivatives. Two distinct markets are developing in parallel. The traditional ammonia and methanol markets, supplying fertilizer and petrochemicals, remain large and continue to grow. Ammonia feedstock supply increases from 26 to 40 Mt/yr between 2026 and 2060, while methanol feedstock doubles from 20 to 40 Mt/yr. Alongside this, an entirely new market is emerging for ammonia and methanol produced as low-carbon energy carriers for transport. This market grows from essentially zero in 2026 to 8 Mt/yr and 19 Mt/yr, respectively, by 2060. 

Total hydrogen production (for feedstock and energy use combined) grows from 15 Mt/yr in 2026 to 37 Mt/yr by 2060 (Figure 18). Gas-based reforming will remain the largest production pathway throughout, but its composition shifts sharply, from almost entirely unabated reforming (99%) in 2026 to low-carbon hydrogen (electrolysis and gas reforming with CCS) accounting for more than 50% in 2050 and reaching to 67% of production (24.5 MtH₂/yr) by 2060. 

Middle East and North Africa - Hydrogen and derivation export - Energy Transition Outlook 2026

Saudi Arabia, UAE, and Oman continue to have the region's most ambitious hydrogen strategies on paper, though 2026 has made clear how much distance remains between target and delivery. Saudi Arabia's NEOM green hydrogen project is roughly 90% built and targets commissioning in 2026–2027, but with only a fraction of its planned ammonia output under firm offtake contract, its commercial viability remains genuinely uncertain even as construction nears completion (Merani, 2026). The UAE's target of 1.4 MtH2/yr by 2031, scaling to 15 MtH2/yr by 2050 (GH2, 2025), rests partly on Masdar, which has pushed its own 1 Mt/yr green hydrogen goal beyond 2030 with no firm new date, citing persistent cost and demand challenges (Parkes, 2024). Oman's target of 1–1.25 Mt/yr of green hydrogen by 2030, rising to 8.5 Mt/yr by 2050 (Al-Rawahi, 2025), looks unlikely to be met on schedule either, with analysts expecting the programme to consolidate into a narrower set of bilaterally contracted projects rather than reach its original economy-wide scale (Sidhu, 2026). 

The region's overall hydrogen trajectory is smaller than we projected a year ago. The ETO 2026 forecast for global hydrogen demand over the entire outlook period is roughly half of that in ETO 2025, as the surge in announced projects over the past several years has not converted into firm offtake prospects at the pace earlier assumed. MENA's national hydrogen strategies (NEOM, the UAE's targets, Oman's programme) are explicitly export-oriented, even though most current production still serves large, established domestic ammonia and methanol feedstock markets. However, our estimates show that these strategies are unlikely to be fully realized. We expect that by 2060, exports will account for around 20% of total hydrogen and derivatives production. It is precisely this export-oriented capacity that is most exposed to weaker global demand. Global correction – not the conflict, nor anything specific to MENA's own consumption – feeds straight through to a smaller regional build-out, with knock-on effects for CCS. 

MENA is also increasingly exporting these products. The region already exports substantial volumes of traditional ammonia and methanol as feedstock, although the ongoing conflict has reduced exports to around half their previous-year level. As Figure 18 shows, exports of hydrogen, ammonia, and methanol, including both feedstock and energy carriers, grow from around 0.7 MtH₂eq/yr in 2026 to 1.5 MtH₂eq/yr in 2030 and around 7 MtH₂eq/yr by 2060, on a hydrogen-equivalent basis (Figure 19). 

Middle East and North Africa - CCS by sector - Energy Transition Outlook 2026

Carbon capture: ambition intact, but scaled back from a year ago 

Historically, regional CCUS deployment was closely tied to enhanced oil recovery (EOR). That focus is now shifting decisively toward value-chain decarbonization. The shift is driven by both external market pressure and an internal strategic push to diversify economies, with operators increasingly exploring storage and utilization options to support broader decarbonization in hydrogen production, power, and manufacturing. The move from ‘CCUS-for-EOR’ toward ‘CCS1-for-industrial-abatement’ marks an important shift in the region's own approach to carbon capture, from an oilfield tool toward an industrial decarbonization strategy. 

Carbon capture, utilization and storage (CCUS) remains critical to decarbonizing hydrocarbon production and unlocking blue hydrogen, but our updated modelling shows a materially smaller build-out during our forecast period than we projected a year ago. The growth is still considerable, with region-wide captured emissions growing, from 3 MtCO2/yr in 2026 to 17 MtCO2/yr in 2030, 35 MtCO2/yr in 2040 and around 120 MtCO2/yr by 2060 (Figure 20). However, our estimates are less than half of last year's projected 260 MtCO2/yr by 2060. 

The cause traces directly back to global hydrogen demand rather than to the conflict. Blue hydrogen (from steam methane reforming with CCS) is by far the largest driver of regional CCS. With the global hydrogen outlook much less optimistic, and MENA's hydrogen strategy fundamentally export-led, the region has less reason to build out blue hydrogen capacity. This is also clearly reflected in the composition of the regional CCS market. In 2060, hydrogen production is expected to account for approaching half of captured carbon (45%, ~55 MtCO2/yr), while gas processing would account for roughly 12% (~15 MtCO2/yr). Gas processing, however, remains the dominant source of captured carbon through the 2020s and 2030s, before hydrogen and power overtake it. This means that the sector most responsible for the smaller CCS number is also the sector that still dominates what CCS remains. 

 

On the ground, the region's CCUS project pipeline remains active despite the demand headwinds described above. Two facilities are already operating:  

  • ADNOC's Al Reyadah in Abu Dhabi is the first commercial-scale CCUS project in the Middle East. It has captured up to 0.8 MtCO2 from Emirates Steel since 2016 for use in EOR. 
  • Saudi Aramco's Hadiyah NGL recovery plant captures around 1.5 MtCO2/yr, most of it for EOR.  

Two larger projects are under construction:  

  • ADNOC's Habshan CCUS facility, sanctioned in 2023, is targeted for completion in 2026 and will roughly triple ADNOC's total capture capacity to 2.3 MtCO2/yr. 
  • Backed by a USD 1.5bn EPC contract with Larsen & Toubro, Aramco's Jubail project – a hub-and-spoke model aggregating emissions from multiple industrial emitters – aims to capture 9 MtCO2/yr from 2027, on the way to its goal of 44 MtCO2/yr in 2035 (Eren, 2026).  

Qatar’s planned Ras Laffan CCS expansion has become more uncertain. This 4.1 MtCO2/yr facility, which Qatar Energy contracted to Samsung C&T for around USD 1.4bn in November 2025, was positioned as the anchor for scaling beyond 10 MtCO2/yr by 2030. Its near-term timeline is now genuinely uncertain due to the recent conflict. 

Beyond point-source carbon capture, carbon dioxide removal (CDR) technologies remove CO2 directly from the atmosphere. In the MENA region, bioenergy with CCS (BECCS) will pick up after 2030, and direct air capture (DAC) after 2040, reaching a combined 48 MtCO₂/yr in 2060. For details about CDR, see Chapter 5 of Energy Transition Outlook 2026. 

Emissions trajectory and carbon pricing 

Emissions decline gradually despite expanding renewable power, leaving the region well above net-zero pathways and highlighting the limited effect of current carbon pricing. Energy- and process-related CO2 emissions (after CCS, before DAC) stand at 3.6 Gt in 2026. They increase to 3.9 Gt in the mid-2030s, plateau toward 2040, then fall to 2.9 Gt by 2060, a fifth (22%) less than in 2026. This shallower decline than we projected a year ago is consistent with the more moderate near-term decarbonization pace evident across several regions.  

As shown in Figure 4, power, the largest sectoral emitter in 2026 at a third (32%) of the total, sees the steepest emissions decline of any sector, down three-quarters (75%) by 2060 as renewables take over generation. We estimate that the power sector will account for just 11% of emissions in 2060. 

Transport becomes the largest single-sector emitter by 2060 at around 29% of the total, even as its own emissions decline by 7%.  

Key policy observations

The region is predominantly focused on implementing existing energy and climate policy frameworks.

Climate

Few countries (notably Turkey and the UAE) have submitted quantifiable 2035 targets in updated nationally determined contributions (NDCs). The UAE's Climate Change Law reached full compliance, mandating all public and private entities to comply with legally binding requirements to measure (Scope 1&2), report and reduce GHG emissions by May 30, 2026. Scope 3 reporting anticipated to become mandatory by 2027.

Power

Renewables are mainly supported through government-awarded tenders securing long-term power purchase agreements (PPAs). Key targets include the UAE’s 32% clean electricity by 2030, Saudi Arabia’s 130 GW and 50% renewable electricity by 2030, and Turkey’s 120 GW wind and solar capacity by 2035. Grid investments are also expanding, including Turkey’s planned USD 80bn to 2035.

Storage

Storage support is increasingly integrated into renewable programmes through dispatchability requirements. Saudi Arabia and UAE account for over 65 GWh of announced or planned capacity (IndexBox, 2026).

Transport

EV policies are emerging such as fleet penetration targets in UAE, Saudi Arabia, and Qatar, coupled with incentives including discounted registration and tolls, free charging, and charge point roll-out.

While no legally binding sustainable aviation fuel (SAF) mandates exist, Qatar, Saudi Arabia, and the UAE promote production and exports in state-backed projects (sovereign wealth funds, national oil companies).

Buildings

Countries primarily implement energy-efficiency standards, including Saudi Arabia’s mandatory building codes with minimum requirements (ACEEE, 2025), UAE’s standards covering energy efficiency, water management, and sustainable building materials.

Rooftop solar adoption is gaining traction through net-metering frameworks or mandates (Israel, Turkey).

Hydrogen

Gulf Cooperation Council countries pursue low-carbon hydrogen and ammonia through state-led investment. Regionally, over USD 150bn is announced for renewable hydrogen (CARE MENA, 2025) yet uncertain future demand weighs on project development and bankability. The H2Global mechanism is emerging as an instrument to secure supply and offtake, such as between Germany and Egypt (Fertiglobe).

CCS

Gulf countries’ state-led investments advance direct air capture and CO2 value chain development beyond conventional oil and gas, aiming for industry decarbonization and low-carbon product exports, while Egypt plans carbon capture and storage (CCS) for fertilizer and ammonia decarbonization. The UAE’s CCS framework was published in December 2025 (SCFEA, 2025).

Carbon pricing

Carbon pricing remains limited, constraining commercial deployment of low-carbon alternatives, although Turkey’s 2025 Climate Law established a carbon pricing framework and plans a pilot Emissions Trading System (power and manufacturing) in 2026. Saudi Arabia and the UAE continue involvement in voluntary carbon markets.

Taxation

Fossil-fuel support measures, such as negative taxation (i.e. subsidies) in transport, hinder substitution by keeping prices artificially low.

 

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Mahnaz Hadizadeh

Mahnaz Hadizadeh

Principal Engineer

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References versions

References versions

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