Energy This Week: Oil deficit, new energy risks, "no stone unturned" for UAE H2, & 3°C hotter in Saudi Arabia

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Gaza and Ukraine conflicts warn of new energy risks

Oil prices slipped on Monday and were steady on Tuesday after the largest weekly gain in a month, driven by worries about supply due to the violence in Israel and Gaza, which took Brent above $90 a barrel. The most likely supply risks are a possible tightening of US sanctions enforcement on Iran and a slower pace of Saudi production increases in the face of an anticipated fourth-quarter deficit. For now, a wider conflict that seriously affects Middle East oil output appears unlikely. Talks on easing US sanctions on Venezuela over next year’s planned election could help restore some supply.

However, the tactics used by Hamas, the precautionary shutdown of Israel’s Tamar gasfield and, separately, so far unexplained damage to a gas pipeline between Finland and Estonia, are reminders of the perils of drone proliferation against critical energy infrastructure. Gaza’s only power plant closed down last Wednesday when fuel ran out.

Russian President Vladimir Putin said on Wednesday that Opec+ co-operation would continue, and his Oil Minister Alexander Novak appeared jointly on Russian state television with Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman. This helped to support oil prices on Thursday.

Prices then slipped back below $90 a barrel for Brent crude as the likelihood of an actual supply disruption seemed to ebb. Prices posted a big gain on Friday, though, with worries about a broader regional escalation.

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Opec and IEA differ again on oil outlook

The oil exporters’ organisation and the representative of consumers have not seen eye-to-eye much in recent years. Their latest near-term outlooks differ sharply. The International Energy Agency cut its forecast for demand growth for next year from one million to 900,000 barrels per day, although it raised estimates for this year by 100,000 bpd to 2.3 million bpd, based on stronger consumption in Brazil, India and China. It expects global production to rise by 1.5 million bpd this year and 1.7 million bpd next year, tipping a sizeable deficit into surplus.

Meanwhile, Opec maintained its oil demand forecasts for this year and the next at 2.44 million bpd and 2.25 million bpd, respectively. With non-Opec output expected to rise 1.4 million bpd next year, and revised up to 1.7 million bpd this year, the market would be staring at a large deficit if Opec does not increase output. The crucial difference is the bullish Opec outlook on China for next year, versus the IEA’s view of a “deteriorating economic climate”. China’s slowing growth , its declining population, and its shrinking room for fiscal stimulus, are expected to be a major headwind for commodities in the coming years.

However, Saudi state oil company Aramco likes China, the world’s leading oil importer. It has signed an initial agreement to buy 10 per cent of Shandong Yulong Petrochemical, a large Chinese refining and petrochemical corporation. This follows a similar deal in July with Rongsheng Petrochemical, and preliminary discussions with Jiangsu Eastern Shenghong, as it looks to strengthen its footprint and secure crude outlets in China.

QatarEnergy has agreed to supply 3.5 million tonnes of liquefied natural gas to France via TotalEnergies, starting in 2026 for an exceptionally long 27-year term. The deal is crucial to bolster European energy security and replace the losses of Russian gas supplies.

OQ Gas Networks raised $750 million in Oman’s biggest IPO, pricing it at the top of its range. The company, which holds a monopoly over the country’s gas transport infrastructure, offered 49 per cent of its shares.

Abu Dhabi-based marine contractor National Marine Dredging Company is “open to any market ” as it plans to expand globally, says its chief executive Yasser Zaghloul.

After a five-year wait, Sharjah-based Crescent Petroleum finally put into effect three contracts to develop oil and gasfields in Iraq. Iraq’s oil ministry says the blocks, in the north-easterly Diyala and southern Basra provinces, will produce 400 million cubic feet of gas daily within one and a half years, helping to bridge the country’s chronic gas and electricity shortages.

Also in hopes to alleviate its power deficit, Iraq inaugurated with Saudi Arabia a platform for exchange of electricity that would also allow Iraq to trade with other GCC countries. Up to $200 million to $300 million worth of electricity could be exchanged annually

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'No stone unturned' for UAE hydrogen

The UAE intends to become a major producer and exporter of the clean fuel, says Sharif Al Olama, Undersecretary for Energy and Petroleum Affairs at the Ministry of Energy. It will develop at least two hydrogen “oases” or hubs, and Fujairah could be a third. He was speaking at an energy event in the north-eastern emirate attended by Sheikh Mohammed Al Sharqi, the Crown Prince of Fujairah.

“Momentous achievements ” in fusion energy gives hope it could be available in time to contribute to 2050 climate targets, says Rafael Grossi, director general of the International Atomic Energy Agency. He also sees conventional nuclear power using Cop28 to position itself as “part of the solution”.

Mena businesses are crucial to speeding the region’s energy transition, writes Kelsey Goodman, community engagement lead at the World Economic Forum.

DP World, the Dubai-based global ports operator, has raised $1.5 billion from a green sukuk to fund decarbonisation projects. DP World aims to cut its carbon footprint by 28 per cent by 2030 and to be carbon-neutral by 2040.

Emerge, a joint venture of Masdar and France’s EDF, will install a 524-kilowatt solar system at Miral’s Yas Bay Waterfront.

Lithium is the crucial ingredient for batteries and electric vehicles. Chile, with the world’s largest known reserves of the light metal, is looking for Japanese investment in mining, and assistance in developing its own processing and manufacturing capability. South Korea’s Kia has introduced new electric vehicles , including one whose rear seat folds into a bed, and which includes a fridge.

France is powered mostly by nuclear reactors but the government seeks to double its renewable capacity by 2035 to between 140 gigawatts and 175 gigawatts from wind, solar and hydroelectric sources, along with targets for more biogas, renewable and synthetic fuels, hydrogen and carbon capture, as well as the quadrupling of electric car charger numbers.

Global spending on climate technology dropped sharply , by 40 per cent, in the last year, exactly the wrong trend, even though investment here did hold up a bit better than in other sectors as financial conditions tightened. And a key new report from the IEA found that electricity grids are not advancing fast enough to support the energy transition – grid connections are not keeping up with new renewable projects. The world needs to double grid spending to $600 billion a year by 2030, to build or revamp 80 million km of electricity lines.

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Water conservation in the Gulf as Saudi Arabia faces prospect of 3°C temperature rise

In a world warming by 3°C above pre-industrial levels, Saudi Arabia could suffer from water shortages, extreme heat, coral bleaching, more desertification and increased electricity needs for cooling, finds the Climate Futures Report. “Climate change doesn't only challenge our environment, it affects every facet of our lives – our health, food, water, as well as our economy,” said Princess Mashael AlShalan from non-profit Aeon Collective, one of the authors.

More than 80 per cent of underground water resources are exhausted in parts of the GCC, and residents should use lower-quality water rather than drinking water to irrigate gardens, says a study in the journal Heliyon.

From a hot to a cold part of the world, almost half of Antarctica’s ice shelves have shrunk during the past 25 years, mostly on the southern continent’s western side where they are exposed to warmer water.

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UN and Pope Francis weigh in on climate talks as Cop28 looms

Pope Francis received Cop28 President-designate Dr Sultan Al Jaber at the Vatican last week on Wednesday, and discussed the role of faith leaders in tackling the climate challenge. Dr Al Jaber, who is also the UAE's Minister of Industry and Advanced Technology, then moved to China, where he met the country's special climate envoy, Xie Zhenhua, and the Minister of Industry and Information Technology, Jin Zhuanglong, to discuss the climate event and decarbonisation. A UAE delegation to the Belt and Road Forum was led by Sheikh Saud bin Saqr Al Qasimi, Ruler of Ras Al Khaimah.

World Bank president Ajay Banga has spoken of the multilateral lender’s developing approaches for longer-term lending, lower interest rates and other methods to boost green finance. The World Bank and International Monetary Fund met last week in Marrakesh to mobilise financing and consider how to protect the most vulnerable nations from the effects of climate change. Jihad Azour, director of the IMF’s Middle East and Central Asia department, told The National that the UAE’s Cop28 team was “very active to have the most inclusive Cop; a Cop that also provides a voice to the south, as well as to new types of issues … this Cop will be a turning point, especially addressing some of the issues [such as] fragmentation, cost of financing – higher for longer [interest] is not great – and how international institutions should calibrate their interventions to help”.

The world is “dangerously off-track ” on the sustainable development goals, said UN Secretary General Antonio Guterres in prepared remarks at the World Investment Forum in Abu Dhabi on Monday. He called for more investment in agriculture and renewable energy in developing countries. Francesco La Camera, director general of the International Renewable Energy Agency (Irena), told the World Investment Forum in Abu Dhabi on Tuesday that “we must acknowledge the disparity between developing and developed countries” in spending on renewable energy.

The UAE’s permanent representative to Irena, Dr Nawal Al Hosany, said the soft power of the Emirates would be essential to reaching concrete agreement at Cop28.

The UN Development Programme’s global director of climate change, Cassie Flynn, believes the conference comes at a “pivot point ”. “Even if we turned off all the emissions right now, we are locked into this reality for the next 20 to 30 years,” she told The National at Mena climate week.

Protecting the planetary environment for future generations is one of the most pressing existential questions , Mohammad Al Gergawi, the UAE’s Minister of Cabinet Affairs, told the opening of the Global Futures Councils meeting in Dubai.

Although “everything is tough” and there are “lots of differences”, there’s hope for an “ambitious outcome” from Cop28, says Alison Campbell , the UK’s lead climate negotiator, to The National. Britain’s official climate watchdog, however, worries that recent policy backtracks by Prime Minister Rishi Sunak, such as delaying the ban on sales of new petrol and diesel cars, will make it hard to reach net-zero or the country’s 2030 target.

Cop28 and the national focus on climate issues has given a great boost to interest in learning about climate change. Enrolment in Zayed University's sustainability programme has quadrupled over the past year. The Ministry of Education has launched a climate action strategy that aims to inspire students and young entrepreneurs, and UAE pupils are designing and building their own electric cars as they take part in the Formula 24 race.