Prince Abdulaziz bin Salman, Minister of Energy, expressed optimism, saying that the Kingdom will emerge from the energy transition as a winner, as it is considering raising its production capacity to more than 13 million barrels per day, and at the same time increasing its investment in clean energy sources.
The oil and gas sector has faced tremors in recent weeks as a result of developments in major companies, such as ExxonMobil and Chevron facing sharp environmental criticism from shareholders, and Shell receiving a court order to reduce absolute carbon emissions by 45 percent by 2030.
But as international oil companies struggle to adapt to the uncertainties surrounding the energy transition, Saudi Arabia, the leader of the Organization of the Petroleum Exporting Countries, sees only opportunities.
In an interview with reporters after the “OPEC” meeting on the first of June, the Minister of Energy said that the Kingdom’s abundant natural resources and low cost means that the Kingdom for the foreseeable future will continue to be a dominant provider of multiple forms of energy. “I invite the world to accept this fact, because we will be at the forefront.”
“I only know one thing, I know what the kingdom wants to do and what it wants to achieve, and most importantly what we are capable of,” he added, “Our low-cost oil production, low-cost gas production, low-cost renewable energy production, and we will be without doubt the least expensive producer of hydrogen production.”
Pushing production to more than 13 million barrels
Because of the abundance of low-cost oil reserves, the Kingdom and other Gulf oil states are in a position to be the most resilient in terms of oil production at all times, and the low carbon intensity of their production seems to have put them in a strong position in the accelerating energy transition, as they can provide “cleaner barrels from its competitors.
The current increasing pressure on international oil companies to sharply reduce their carbon footprint provides another advantage for the likes of Aramco, and the global economy is still dependent on oil, and imposing pressures on suppliers, not final consumers, to end this dependence, is in the interest of producers, who do not face such These regulatory burdens and pressures from shareholders, such as Aramco.
And “Aramco” has the capacity to produce 12 million barrels per day, not counting the kingdom’s share of the Saudi-Kuwaiti neutral zone of 50 percent, and in March 2020 amid a short price war with Russia, he announced an increase to 13 million barrels per day.
After halting investments in major offshore projects due to the price clash last year, Saudi Aramco has finally increased its investments in exploration and production to pre-pandemic levels, and service companies are looking to benefit from the increased bidding activity.
So far, there is no specific date for reaching 13 million barrels per day, but Aramco officials have confirmed their commitment to this goal, and Prince Abdulaziz has even indicated that Aramco may raise production to more than 13 million barrels per day, as it wants to benefit from the disruptions of the energy transition. .
After Prince Abdulaziz told reporters that plans to expand production are still a priority, he said, “Never be surprised if we come back to you with an additional announcement in due course,” adding that this would be “subject to what we are guided by, not for a scenario more like a sequel to La La Land.” Criticizing the latest report of the International Energy Agency on zero neutrality.
Prince Abdulaziz reiterated the possibility of announcing additional expansion on the 3rd of June at the St. Petersburg International Economic Forum.
He did not announce any details, but the Kingdom, as is the case with its neighbor, the UAE, wants to prepare to increase its production to the greatest extent in the coming years to avoid being faced with confined assets, as capital expenditures on exploration and production for Saudi Aramco jump to their highest level since late 2019 including Equivalent to billions of dollars.
A powerhouse in renewable energy
Even with the opportunity that the energy transition presents to low carbon-intensive producers like Saudi Arabia to increase their share of the oil market, this does not mean that Riyadh will not seek to expand its scope to include clean energy resources as well, quite the contrary.
Saudi Arabia is not only a country rich in petroleum reserves, but also has large areas of its land, with high levels of exposure to sunlight, ideal for producing low-cost solar energy.
The Saudi government announced in April that it had achieved a record low energy cost tariff of 1.04 US cents per kilowatt-hour for the Shuaiba Solar Project. However, although renewable energy can displace oil from power stations to be exported afterwards, and can facilitate the process of exporting electricity to neighboring countries, it is not expected to constitute a huge new flow of revenues for the Kingdom, and here comes the role of hydrogen.
Hydrogen is an essential component of the energy transition, whether it is “blue hydrogen” where carbon capture and storage reduces emissions, or “green hydrogen”, where the fuel is produced from renewable energy sources.
Green hydrogen has a more promising future than any other clean energy fuel source, although blue hydrogen is currently more commercially viable, and the Kingdom has the largest tangible large-scale development plans for this fuel in the region.
The Public Investment Fund is currently working with the American Industrial Gas Company Air Products and the Saudi private energy company ACWA Power to build a green hydrogen plant worth five billion dollars and a capacity of four gigawatts in northwest NEOM.
The “Helios Green Fuels Project” is planned to start in NEOM in 2025, and will produce 650 tons per day (237,000 tons per year) of hydrogen, which will then be converted into ammonia for export.
As for potential markets, NEOM CEO Seifi Qasemi recently said: “For our project, the green hydrogen project, I think the biggest potential markets will be in Europe, not in the United States or other parts of the world. That’s how things are now, but it could change.” I think the Kneum project has a bigger potential market than expected to be Europe.”
Previous hopes have been dashed in the kingdom, but momentum in the renewable energy sector is finally picking up.
Source: Mais Oil Specialized Bulletin MEES