Gulf oil producers do not envisage a post-2050 world devoid of hydrocarbons, even though two of the region’s biggest producers, the UAE and Saudi Arabia, have committed to net-zero carbon emissions by 2050 and 2060, respectively. Reconciling their future environmental commitments with their current reliance on hydrocarbons is going to be an arduous and expensive journey that starts with decarbonizing their oil and gas production to reduce their carbon footprint and increasing their domestic green energy production. With demand for oil and gas forecast to continue post-2050 — albeit at lower levels than now — their net-zero target does not equate to zero oil and gas production. Instead, their transition will differ from that of other countries and will happen at a different pace.
Both Saudi Arabia and the UAE are yet to publish their road maps to net zero or their national energy strategies to 2050. These strategies are expected to be predicated on the green economy’s continued reliance on oil derivatives for feedstock, ensuring a certain demand for oil and gas. In their future policies and plans, the Gulf’s biggest producers will need to account for the onset of peak demand at some point, either in this decade or the next, but none of their plans will see a world devoid of hydrocarbons. Whatever demand for fossil fuels still exists in the next three decades and beyond, regardless of shape and form, could certainly be satisfied by Gulf producers.
The onus on Gulf producers and OPEC in general will be greater as international oil companies continue to divest their assets away from oil and gas under pressure from stakeholders and financiers and transition to green energy. This divestment is akin to a shift in ownership rather than the killing of hydrocarbon assets. As the holders of the biggest traditional oil reserves and the cheapest barrels to produce, it is the national oil companies, mainly the biggest producers in the region, that will bear the responsibility of securing the energy transition and grab the lion’s share of whatever demand remains.