Saudi Arabia’s net zero goals in the spotlight
Saudi Aramco says it hopes to achieve net zero SCOPE-1 and SCOPE-2 greenhouse gas emissions across its fully owned operations by 2050, but warns that achieving this in less than three decades will not be easy.
Saudi Arabia is showing increasing commitment to becoming a low carbon energy supplier, but it nevertheless intends to increase its oil and gas production for decades to come.
State-controlled Saudi Aramco says it hopes to achieve net zero SCOPE-1 and SCOPE-2 greenhouse gas (GHG) emissions across its fully owned operations by 2050 “because we are deeply committed to playing a leading role in helping ensure a stable and inclusive energy transition,” according to Aramco’s chief executive Amin Nasser. But he warned last week in a 2021 annual results call for analysts that “the way to net zero will not be a straight line, achieving this in less than three decades will not be easy.”
Saudi Arabia’s GHG emissions reduction strategy focuses on carbon capture, utilisation and storage (CCUS); on switching half its power generation mix to renewables; on further reducing its oil and gas industry’s carbon intensity – one of the lowest globally at 11.2 kg/bl of oil equivalent for the upstream; on becoming a main producer and exporter of hydrogen – both blue and green; and on boosting energy efficiency in its industrial and residential sectors.
Jury out on CCUS
CCUS is at the heart of Saudi Arabia’s Circular Carbon Economy model, which Riyadh hopes would preserve its role as one of the world’s largest oil and gas producers. But the jury is out on the efficacy of CCUS. Some energy experts say CCUS, which depends on nascent technologies, does not offer a timely option for a large-scale drastic reduction of CO2 emissions. Although sequestered CO2 can be reused in industries such as cement and steel, markets for it still do not exist, so commercial incentives are absent. CCUS “could be part of the solution, but we would caution against making it the centre of a decarbonisation initiative, because a lot more than that needs to be done to offset their carbon emissions,” says the International Energy Agency’s Ali al-Saffar.
Ian Thom, Wood Mackenzie’s Research Director for Upstream Oil and Gas, is more upbeat on Aramco’s CCSU plans, pointing out that it has large depleted oil reservoirs that can be used to store sequestered CO2, and that it is already injecting CO2 into the giant onshore Ghawar field. “CCS technology across the world is a big and established sector. The challenges are not so much on the reservoir side, they are more about capturing the CO2 at source, and potentially purifying the gas,” particularly when it is at low concentrations, he told Gas Outlook. says. “So in many respects that is why we might see an integrated and hub type approach where there is a defined industrial cluster where the CO2 points can be connected up into the injection points.”
Aramco’s recently issued Annual Report indicates that the company “is developing a carbon capture and storage hub to permanently sequester captured CO2 emissions underground.”
Saudi Arabia plans to become a major producer and exporter of blue hydrogen by 2030, utilising gas from the unconventional Jafurah gas field and capturing the resulting CO2 in the process.
But Riyadh’s blue hydrogen plans are “questionable” because its production requires “a significant amount of energy and of natural gas,” Mia Moisio of Germany’s independent private New Climate Institute said. “Locking in natural gas to a new technology, in our view, is not a sustainable way forward.” She advocates focusing instead on green hydrogen, which Saudi Arabia plans to produce using 4 GW of wind and solar power in the northwest at a £5 billion facility equally owned by ACWA power, Neom and US company Air Products and Chemicals, which will be the sole off taker and exporter of the 650 t/d ammonia produced. Output is expected to begin in 2025, although this could be delayed.
But the manufacture of blue hydrogen is likely to provide a bridge to the eventual large-scale manufacture of green hydrogen, enabling Aramco to scale up its hydrogen production and widen its market penetration more rapidly, says Thom.
Other promising plans include targeting 50 percent of power generation from renewables – mainly solar power – by 2030. The country will have to accelerate its solar power push to achieve that goal. Its overall power generation increased to 365.16 TWh in 2019, with a mere 0.02 percent provided by renewables, mainly solar, according to an IHS Markit report.
Plans to install 27.3 GW of renewables – mainly solar power – by 2023 and 58.7 GW by 2030 were announced by the National Renewable Energy Programme in 2019. But by June 2020, only 330 MW of utility-scale solar photovoltaic projects and only one 2.5 MW wind demonstration project were operational, according to the report.
The target of sourcing 50 percent of power generation from renewables by 2030 can be achieved “if they step up investment in those in the next five years,” Thom told Gas Outlook. “But clearly the pace of the past five years they’ve gone at will not get them there,” he adds.
Aramco has made a start, taking a 30 percent stake in the 1.5 GW Sudair Solar PV plant project, in which ACWA Power and the sovereign wealth Public Investment Fund are also participating. The project will cost an estimated $1 billion, and Aramco will hold a 30 percent share.
But Aramco – the country’s sole upstream producer – regards global plans to achieve net zero emissions by 2050 as unrealistically ambitious. Nasser attributes current oil and gas market tightness and high prices to a “totally unrealistic energy transition plan” as well as the geopolitical situation and a lack of investment in the hydrocarbons sector.
Saudi Arabia believes that even when demand for oil shrinks as the energy transition progresses and alternative energies help to meet growing demand, its low-cost, low CO2 intensity oil – one of the lowest in the world at 11.2 kg/barrel of oil equivalent (boe) – will be competitive as other producers lose market share. Aramco is therefore boosting its 12 million b/d crude capacity to 13 million b/d by 2027.
“As demand for energy continues to grow in response to an expanding world population and rising living standards, we believe oil and gas will still play a vital role for decades to come,” says Nasser. “The suggestion that hydrocarbons can be quickly eliminated from the global energy mix is unrealistic, and we believe oil and gas will still be required in a net zero world,” he adds.
Given its massive hydrocarbon reserves of 253.6 billion boe and 196.9 billion bl of crude and condensate reserves, Aramco is keen to avoid seeing its assets stranded. Moreover, some believe the Saudi economy remains insufficiently diversified to enable the government to end its reliance on the dividends, royalties and taxes it earns from Aramco, which together contribute around 60 percent of budgetary income.