Middle East & Gulf States Network
The Middle East and Gulf States region includes major energy producers but also some of the fastest-growing energy consuming countries. The diverse regional community provides national Member Committees and their members with opportunities to expand and deepen their network and engage around activities and events – from young energy professionals to CEO and Ministerial level – on topics of interest to the members.
Regional action priorities that support the Council’s mission and humanising energy vision are agreed on an annual basis by national Member Committees in the framework of a Regional Action Plan. In 2021, key topics of interest to members in the region included the future of hydrogen in the region, the development of a circular carbon economy framework as a comprehensive approach in utilising all available levers for emissions reduction, and conversation about inspirational projects for sustainable energy.
Each month, the Middle East regional network meets to discuss matters of mutual interest, drive collective activities, and keep each other updated on relevant developments and events.
As part of World Energy Week LIVE 2021, a conversation focusing on Circular carbon economy in the Middle East was convened. Participants discussed, how currently mature solutions to address climate change such as energy efficiency and renewable energy are necessary but not be enough to achieve the goals set in the Paris Agreement. They highlighted that in the Middle East and Gulf States, there is a need to develop and deploy technologies of varying maturity to address emissions reductions across multiple sectors. Participants debated how a circular carbon economy framework may provide a comprehensive approach in utilising all available levers for emissions reduction and thereby. address the challenge of climate change while generating socio-economic value by creating valuable products from CO2.
Energy in the Middle East
REGIONAL OVERVIEW & CONTEXT
The global shocks in energy demand, which led to unprecedented oil price crashes in 2020 have had a significant impact on those countries that rely economically on oil production. However, many Middle East producer countries are already well aware of these economic risks and have begun efforts to diversify their economies to be less reliant upon oil and gas revenues. The pandemic has therefore reinvigorated the energy agenda of the Middle East and Gulf States region by reaffirming their existing plans to diversify their economies and accelerate transition. There is a strong ongoing impetus for innovation to enable new energy transition solutions that will contribute to economic diversification and establish a circular carbon economy with Carbon Capture Utilisation and Storage (CCUS) for energy transition.
The region’s energy producers already had plans to diversify their economies and reduce their reliance upon hydrocarbon revenues. The pandemic’s impact reducing demand in the short term and longer-term concerns about demand destruction combined with lower oil prices helped to reaffirm these existing diversification plans. During its pandemic lockdown, Saudi Arabia pressed ahead with the rollout of its smart meter programme, which should be complete in early 2021.
CRITICAL UNCERTAINTIES & ACTION PRIORITIES
Geopolitical risk emerges as a main Action Priority and remains a perennial area of concern given the risks associated with lower fiscal buffers that may delay some key infrastructure investment and development projects. This highlights the need to encourage more private investment in the economies of the MEGS region as a way of creating new jobs outside the state sector, which remains the biggest employer in much of the region.
One of the countries in the region that faces the biggest geopolitical risk is Lebanon, where poverty levels were rising even before the massive explosion at Beirut port, which devastated large parts of the capital and exposed deep political divisions in the country. Hopes that offshore gas exploration would yield positive results were dashed when the first exploration well showed the presence of a hydrocarbon system but no reservoirs. In contrast, Iraq, the second largest producer in OPEC after Saudi Arabia, has suffered from the collapse in oil prices in 2020 and lower production as part of a collective agreement by OPEC and other producers led by Russia to cut oil supply in order to balance markets. The country found itself ending 2020 struggling to meet public sector salaries and pensions because it relies almost exclusively on oil exports for nearly all its budget revenues and the economy has not been diversified away from oil.
Decarbonisation and the drive to more sustainable energy systems, a process that has been off to a slow start in all but a handful of countries in the MEGS region. In 2020, the Organization of the Petroleum Exporting Countries (OPEC) said it expects oil demand to peak before the middle of the century. This has provided impetus to decarbonise the oil and gas sectors and develop a circular carbon economy, starting with wider adoption of (CCUS) technology to deliver carbon-neutral fuels to consumers. Saudi Arabia and the UAE have also embraced the concept of a circular carbon economy to reduce, reuse, recycle and remove CO2 from the energy produced, while developing alternative fuels, including renewable energy, nuclear power and green and blue hydrogen
Energy efficiency is a Action Priority in the region to reduce consumption, particularly in countries like Iraq and Kuwait, where energy prices remain heavily subsidised although no longer sustainable in a low oil price environment.
Economic trends emerged as a critical uncertainty and area of concern. This reflects mounting pressure on a number of countries in the region to increase spending to manage the health crisis and introduce fiscal measures to support their economies. This strained the economies of some countries such as Iraq, Kuwait, Oman and Bahrain to the point that Iraq struggled to meet public sector salaries at the end of 2020. Saudi Arabia, the region’s biggest oil producer and exporter, trebled value added tax, which helped to boost non-oil income. The UAE, which has a more diversified economy than the other Gulf states, suffered from the drop in tourism, air travel and the slowdown caused by COVID-19. The pace of growth in the near term will depend on a recovery in these key sectors.