Browse
related articles
Riyadh plans to spend $170bn over the next five years on energy and oil refining efforts; the country's state-owned oil company, Saudi Aramco, will bankroll little more than half this endeavour, according to the Saudi Gazette. The energy giant called it unrealistic for Saudi Arabia to plough into alternative energy sources when the No. 1 cash crop of oil has built its wealth, the report states.
"I don't think that's surprising," said Eurasia Group energy analyst Will Pearson of the guarded approach, adding that Saudi Aramco has long been hesitant given the state's status as the world's leading oil producer.
Without a "huge, revolution[ary], game-changing technology," an abrupt shift in the "fuel mix" is doubtful, said Pearson, who puts more stock in green technologies gradually scooping up market share. Given the abundance of other resources, the Saudi government is more likely to make such nascent energy sources a smaller part of its overall budget, he argued.
Oil sector dependence
Despite trepidation, the Gulf country has been drawn to the "relatively unproven technologies" of biofuels and electric vehicles even though, for the most part, "people are going to be dependent on the oil sector for transport," Pearson told OilPrice.com. Given its access to sunlight, Saudi Arabia has great potential to become a major solar player but has not made "too much concrete progress so far," he said.
Saudi Arabia is also taking aim at clean water. In a nation where water is scarce, Riyadh plans to build a desalination plant to deliver cheaper, cleaner water.
Yet growing pains are bound to accompany this push away from traditional oil and gas, analysts warn.
"You have to come up with the right regulatory regime," Pearson said. While some companies are already doing "quite well" in this young energy category, traditional fossil fuels are still a less costly option, he said. An international carbon price would help but "I don't think there's been a lot of progress on that," he said.
The bottom line is that the new industry has to beat traditional hydrocarbons, said Molly Williamson, a consultant and scholar at the Middle East Institute in Washington focused on Middle East and energy issues. "If you develop an alternative energy source that is effective, that is available, that is reliable, but it is the equivalent of $12 a gallon for gasoline, it's not going to make it," she charged.
Though it's uncertain how much these new technologies will cost, "what we know is it isn't cheap," Williamson told OilPrice.com. "You're looking at a long-term projection of unknowable cost. The people that can do that now are the people who can afford it." This includes not just Gulf nations, she explained, but countries with hard-currency reserves.
Targets on renewable
What is promising is that many Gulf Cooperation Council countries, as well as oil-producing regions in the Middle East and North Africa, are actually announcing "targets for renewables," investigating financing mechanisms, and laying the groundwork to bring new types of energy "into the fuel mix," said Pearson.
The eager drive toward alternative energy is, in part, a bid to meet two of the fastest-growing markets in the world: China and India, Williamson maintained. "The United States has been saying on the record, publicly, repeatedly, we don't want foreign oil," she explained.
Staff
