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Low carbon and politics in the Middle East

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Hydrocarbon Engineering,

A new white paper launched on 12 December reveals that squeezed budgets from lower oil prices since mid-2014 and rising energy demand will significantly heighten the demand and use of renewable and energy efficiency technologies across the Middle East.

Lloyd's Register hosted an industry roundtable discussion at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) on 8 November, inviting a cross-section of senior stakeholders from national and international oil companies, environmental companies, financial consultancies and academia and research. Participants debated the challenge that regional economies face in establishing a cost efficient low carbon future while not jeopardising their energy economics and security.

Most participants were of the view that the growth of the low carbon market is not a threat to the prominence of hydrocarbons, which will be a primary source of energy for at least five decades. Instead, renewables opens a gateway for hydrocarbon producers, and wider industry, to expand the scope of their R&D to cut costs and enhance operational efficiency.

“This is a timely issue, considering the International Energy Agency (IEA) recorded a 25% reduction in field investments in 2015 to US$583 billion and said in September this year that oil prices could stay within today’s US$50 a barrel range until mid-2017,” said Alasdair Buchanan, Lloyd’s Register’s Energy Director.

Buchanan stated that the unnerving outlook for oil-centred economies in the Gulf, such as Saudi Arabia, Qatar, Kuwait and the UAE, can be increasingly offset by low carbon solutions.

Causes of renewable innovation

The growth of renewable and energy efficient technologies is integral to meeting the 48% increase in global energy consumption that has been forecast by the US Energy Information Administration (EIA) between 2012 and 2040, with the world’s population expected to swell by 31% from today’s 7.4 billion to 9.7 billion by 2050.

Buchanan said: “The environmental incentives underpinning political appetite for renewable energy policies and technologies are also stronger than ever.”

“The Middle East would benefit from an integrated energy policy, which would provide signposts to guide all the stakeholders towards a low carbon future. There is a considerable level of multilateral cooperation and collaboration already happening here – this has created a strong and united movement to see positive change. The adoption of new technologies to help define a low carbon future with widespread and cost effective implementation is the next step in helping the region realise this vision.”

Innovation is affordable

Simple economics are revolutionising the accessibility of renewable and energy efficient technologies as greater affordability triggers an unprecedented step-change in the world’s ethos of low carbon. The growth of renewable energy technologies – from solar, wind, hydro and nuclear – heralds the birth of the world’s fourth industrial revolution.

Innovative uses of existing technologies are also being developed in the hope of raising awareness of efficient energy use amongst consumers, along with unprecedented subsidy cuts that have started being implemented in the Gulf since January 2015. For example, Dubai’s Emirates National Oil Company (ENOC) is using radio frequency identification (RFID) at their retail stations to help motorists manage their fuel budgets.

Creating a regional roadmap

Participants at the executive briefing unanimously agreed that the Paris Agreement spells a new chapter in the historically fragmented narrative of international climate policy. The success is best illustrated by the US and China’s agreement in September to formally ratify the Agreement – the world’s two largest economies that are responsible for 40% of global carbon emissions are now on board.

However, Governments and financial institutions in the Middle East and beyond must enhance existing frameworks that encourage exploratory projects. The executive briefing heard how successful R&D and the resulting renewable energy technologies rely heavily on a well-measured trial and error approach.

“All energy stakeholders need easy access to funding for R&D, which includes laboratories, testing sites and specialist human resources, as well as the means to share intellectual property (IP) and register patents that reach international standards. Siloed efforts are unlikely to succeed,” highlighted Buchanan.

Skills: a front line ambition in the Middle East and beyond

Energy entities at the briefing said high quality education and an ability to think outside of the box lie at the heart of successful low carbon R&D, so governments and academia in the Middle East and beyond must continually bolster students’ learning of science, technology, engineering and mathematics (STEM).

“This would nurture the talent of the world’s future thermodynamic specialists, electrical engineers and low carbon economists,” said Buchanan. “Such skills, along with an equally vital capacity to think critically and creatively, will create a holistic R&D workforce to spearhead the much-needed innovation that participants from wider industry explained is vital for the next generation.”

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