Accelerating Middle East Downstream Decarbonisation: Perspectives

When considering the impact of climate change, the Middle Eastern region possesses unique advantages that can greatly contribute to accelerating the pace of decarbonization.

Industry leaders from SABIC, ARAMCO, OQ, ENOC, EXXONMOBIL, HONEYWELL, TOTAL ENERGIES, SCHNEIDER ELECTRIC, AXENS, OMV, WOOD, ART HYDROPROCESSING, ARTHUR D. LITTLE, INTERCONTINENTAL ENERGY and ANGARA shared with us their perspectives on the region’s decarbonisation journey.

Here're some key takeaways:

1. The downstream industry will continue to be a crucial provider of clean and affordable energy. These advantages are primarily derived from the region's geographic location, the abundance of natural hydrocarbon resources, and renewable energy sources such as wind and solar power. These factors will play a vital role in the Energy Transition (ET), boasting impressive key performance indicators (KPIs) and available capital.
2. Given the immeasurable costs and efforts associated with the transition, collaborations will be essential for achieving climate targets.?Regardless of the size and wealth of individual companies, no single entity will be able to tackle the magnitude of what lies ahead. While the future remains uncertain and unpredictable, the industry can enhance its preparedness for various scenarios it may encounter. By joining forces, innovating, and implementing solutions, significant strides can be made. This collaborative approach is already taking shape through numerous operating joint ventures, which ensure commitment from all involved parties while mitigating market risks.
3. Regional producers are currently undergoing asset and mindset restructuring, heavily investing in expanding and optimizing their existing assets.?By embracing evolving technologies within these assets, a substantial reduction in carbon footprint can be achieved. The value of natural hydrocarbons has been reimagined, generating robust margins even in a long-term declining market. These strong margins will support the development of future capital necessary to sustain transition efforts.
4. The lack of a common and stable regulatory policy landscape hinders the industry's unified development. Currently, each producing company sets its own targets and commitments for 2030, 2040, and 2050, aiming to accelerate its transformation efforts. However, the pace of progress varies across facilities, and the absence of a shared policy framework remains a significant challenge.?Unclear policies and directions create a need for incentives to align the objectives of all involved parties and safeguard the ongoing multi-billion investments.?Nonetheless, the lack of regional regulations also presents an opportunity for megaprojects to proceed. While this is the present state in the region, external regulations, such as the EU's Carbon Border Adjustment Mechanism (CBAM), will impact local production and exports, leading to enhanced carbon management regulations. The transition speed may need to be adjusted to ensure that specific targets and milestones are met by each company individually.
5. There is limited availability of biogenic feedstock and waste in the region, particularly in relation to the growing significance of Sustainable Aviation Fuel (SAF) on a global scale. However, we are also witnessing another emerging mega-trend known as Power-to-Liquids (PtL) technology. The region boasts an extremely low Levelized Cost of Electricity (LCOE), providing an opportunity for producers to generate clean and renewable synthetic fuels and chemicals. In terms of mobility, synthetic fuels powering hybrid powertrains are seen as the most efficient way to facilitate comfortable long-range travel.
6. Green Hydrogen will serve as a significant lever rather than a one-size-fits-all solution for renewable energy challenges. Green Hydrogen has the potential to balance specific processes. For instance, PtL (Power-to-Liquids) through the FischerTropsch route requires Hydrogen, while grey CO2 remains an abundant resource. Hydrogen can also serve as a balancing battery in renewable energy scenarios where solar and wind installations are interconnected. When there is an imbalance between solar energy during the day and strong winds at winds at night, Hydrogen can be utilized in fuel-cell configurations to meet renewable electricity demand.
7. Current electrolysis processes have yet to be scaled up to certain levels. The anticipated availability of renewable energy will create new opportunities for collaborations that were not previously feasible, allowing for the utilization of blue hydrogen until green hydrogen becomes more widely accessible.

Have we truly comprehended the magnitude of the energy transition and who will bear the ultimate cost?

Join us in Riyadh this coming October to hear from an influential group of industry leaders as they will answer this and many other questions facing the downstream sector in the context of the energy transition. For more information, visit: europetro.com/esfmena

This article is an extract from the ESF MENA Advisory Meeting. Read the full report HERE