ESG Series: GCC region and the energy transition

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Executive summary│GCC region and the energy transition

Strategically positioned to become a vital global decarbonisation vanguard

A harmonised strategy in balancing energy transition with energy security considerations

 

 

 

 

 

 

 

 

Well positioned to play a key role in the energy transition - both in clean molecules and electrons

 

 

 

 

Over USD630bn in GCC investment opportunities across the energy transition landscape

 

 

• With global efforts towards the energy transition increasingly being recognised, regulators and policymakers in the GCC economies (Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain) have incorporated decarbonisation plans into their national vision transformation programmes.
• To achieve net zero targets across the region, extensive investments are being undertaken to decarbonise high-carbon emitting sectors in hydrocarbon production, power generation and industrial production, with the velocity of execution contingent on technological advancement and availability, as well as an increase in the private sector participation.
• Having said that, a recalibration of the energy trilemma post-COVID from sustainability towards energy security and affordability (see here and here), is witnessing GCC transition targets take a pragmatic approach that is pro-growth and pro-climate.
• This just-and-orderly transition strategy that the GCC region is navigating recognises that sustainable systems are more value creating than traditional ones, but shutting down the old conventional economy too quickly threatens to push the price of building a cleaner new economy out of reach.

• We hold conviction that the GCC region remains well positioned to capitalise on its comparative advantages of low-cost positioning across the energy value chain, geographical proximity to key import markets and its constructive regulatory backdrop to become a vital global decarbonisation vanguard.
• These favourable characteristics, combined with a constructive macro backdrop for a region that remains in a league of its own (see here), will enable these economies to strengthen their pedigree beyond conventional fossil fuel energy sources in becoming a global hub for both clean electrons (solar, wind, EVs and energy storage) and clean molecules (hydrogen, carbon capture and bioenergy), in our view.

• Our bottom-up project-by-project examination signals over USD630bn of investments necessary through to 2035 to facilitate the region to achieve its ambitious decarbonisation targets.
• This quantum is led by four strategic areas that are at the centre of the GCC countries’ energy transition plans, namely: (1) the burgeoning role of natural gas as a transition fuel; (2) the development of attractive renewables capacities; (3) an expansion in carbon sequestration and clean fuel offerings through a rising focus on clean technology investments; as well as (4) investments in critical infrastructure and logistics to support the transition.