December 8, 2023 [Oil Price]- As much of the world accelerates its plans for decarbonization, developing its renewable energy capacity to shift away from fossil fuels, it is becoming apparent that many major oil players are unwilling to follow this strategy to combat climate change.
While countries such as the UAE and Saudi Arabia have announced ambitious green energy plans, they are not hiding the fact that they will continue to push their oil and gas agendas for decades to come. A recent investigation has shown that Saudi Arabia has plans to artificially raise global oil demand, creating a whole host of moral questions about the future of global energy.
A recent U.K. investigation by the Centre for Climate Reporting and Channel 4 News showed officials from Saudi Arabia’s Oil Sustainability Programme (OSP) admitting that the Saudi government is planning to boost demand in Africa and Asia for petrol, oil and diesel products, as part of a public program by the Ministry of Energy. In a recording, an undercover reporter asks, “My impression is that with issues of climate change, there’s a risk of declining oil demand and so the OSP has kind of been set up to artificially stimulate that demand in some key markets?” The Saudi official responds, “Yes. It is one of the aspects that we are trying to do. It’s one of the main objectives that we are trying to accomplish.” The official goes on to say that the plan is supported by the Saudi ruler Crown Prince Mohammed bin Salman.
The plan includes a fleet of power station ships off the coast of Africa, using heavy fuel to generate electricity. It also aims to develop technologies to launch ‘supersonic’ commercial aviation, which would require around three times more kerosine than conventional air travel. Saudi Arabia also plans to increase the number of combustion engine vehicles in the Asian and African markets to drive up fuel demand. Meanwhile, officials stated that they aim to counter market incentives and subsidies for electric vehicles at a global level, to maintain the international reliance on fossil fuels, particularly in emerging markets such as Africa.
Saudi Arabia has hardly hidden the fact that it intends to continue pumping crude for as long as possible, so long as the global demand is there. In fact, Saudi Arabia is expected to boost its crude output by over 1 million bpd to more than 13 million bpd by the end of 2026 or the start of 2027, it announced in May. Prince Abdulaziz bin Salman said that Saudi Arabia expects to maintain that level of production if demand permits. Saudi Arabia is the second-largest oil-producing member state in the Organisation of the Petroleum Exporting Countries (OPEC), which has a major role in determining global crude production and pricing.
In September this year, OPEC responded to an International Energy Agency forecast that suggested that the demand for fossil fuels would peak before the end of the decade by saying the narrative was “extremely risky,” “impractical” and “ideologically driven.” The secretary general of OPEC, Haitham al-Ghais, explained “Cognisant of the challenge facing the world to eliminate energy poverty, meet rising energy demand, and ensure affordable energy while reducing emissions, OPEC does not dismiss any energy sources or technologies, and believes that all stakeholders should do the same and recognize short- and long-term energy realities.” This statement reinforced OPEC’s stance on fossil fuels, suggesting that it believes a weakening global demand for oil and gas is still a long way off.
Despite the clear ambitions of Saudi Arabia and OPEC to maintain, or even increase, oil output – so long as the demand is there – the recent phrasing of ‘artificially’ creating oil demand has drawn criticism. This news came just days before the beginning of the COP28 climate summit, which is being held in Dubai. There has been widespread criticism around the latest summit, with worries that the aims for a green transition being promoted at COP are at odds with the objectives of the UAE and other oil-producing Middle East states.
This once again raises the question of the need for funding for developing states to participate in a green transition. The head of the World Bank, Ajay Banga, recently emphasized the need for rich countries and companies to help developing countries leapfrog over fossil-fuelled economic growth in favor of developing their renewable resources. Banga said that this would be the only way to achieve net-zero carbon emissions by 2050, in line with the Paris Agreement’s aims, to restrict global heating to below 2oC.
Recently, there has been greater optimism around the funding of projects in developing countries to support a green transition. Last week, Indonesia announced a $20 billion investment plan to develop its renewable energy capacity with funding coming from global lenders. Shortly after, Mozambique approved an energy transition strategy worth $80 billion, appealing for funding from wealthy nations. Mozambique is home to one of the largest untapped coal reserves in the world, as well as lots of offshore natural gas, which could remain largely untapped if it is successful at financing its renewable energy sector to support economic growth. Financing schemes such as these could help counter the ambitions of oil-rich countries and major fossil fuel companies to maintain the global demand for fossil fuels by supporting economic growth through the development of renewable resources worldwide.
Pro Trial: Access 12,600 Tank Terminal and Production Facilities
12,600 tank storage and production facilities as per the date of this article. Click on the button and register to get instant access to actionable tank storage industry data
