9 billion ft3/d, the majority of which is shipped to Europe. In July 2021, state-owned Sonatrach reached an agreement with Spain’s Naturgy to increase the capacity of the Medgaz natural gas pipeline that runs beneath the Mediterranean between the two nations. The US$90 million project will involve the installation of a fourth compressor capable of increasing capacity by 2 billion m3/y. When the work is completed in late 2021, the total capacity will be 10 billion m3/y, representing about 25% of Spain’s natural gas consumption.
Hydrogen The push is on to find alternatives to fossil-based fuels. BloombergNEF estimates that the market for ‘green’ hydrogen – a non-carbon emitting fuel produced through renewables and electrolysis – could be worth up to US$700 billion within three decades. Saudi Arabia is following a multi-pronged strategy to reduce its reliance on conventional crude. Various sources have projected that hydrogen could replace 25% of all oil demand by 2050. Saudi Aramco recently announced an initiative to develop hydrogen fuels through a number of methods. The country is already one of the world’s largest producer of ‘grey’ hydrogen, primarily for upgrading crude. A major focus will be to capture the carbon emitted during the production of grey hydrogen and sequester it in order to create ‘blue’, or carbon neutral, hydrogen. Saudi Arabia’s ACWA Power Corporation and US-based Air Products & Chemicals have entered into an agreement to construct a US$5 billion plant in the desert city of Noem to produce green hydrogen through the use of solar-powered electrolysis. While acknowledging that green hydrogen is much more expensive to produce than grey hydrogen, the country expects economies-of-scale and new technologies to reduce the price to comparable levels by the end of the decade. A comprehensive dedicated infrastructure, including speciallydesigned hydrogen pipelines, will be needed to service domestic and export markets. In May 2021, Dubai launched the first industrial-scale green hydrogen plant in the Gulf. In conjunction with Siemens Energy, the Dubai Electricity and Water Authority (DEWA), the Rashid Al Maktoum Solar Park uses solar power during the day to produce hydrogen, which is then burned at night to create electricity. Plans are to scale the plant up to produce 5GW of clean energy by 2030. Oman’s national oil company, OQ, has partnered with Hong-Kong based InterContinental Energy and a subsidiary of Kuwait to build a multi-billion dollar facility that would use 25 GW of renewable energy to produce green hydrogen, making it the largest proposed green hydrogen facility in the world. In early 2021, Helios Industries announced plans to build a green ammonia production facility in the Khalifa Industrial Zone Abu Dhabi. The plant, costing an estimated US$1 billion, will produce 40 000 tpy of green hydrogen using a solar grid and electrolysis. Output will be converted into 200 000 tpy of green ammonia, reducing CO2 emissions by 600 000 tpy. As part of its ambitious plans to be a world leader in renewables, Egypt’s Ministry of Electricity and Renewables
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announced that it was studying a plan to spend up to US$4 billion to build a green hydrogen plant. The initiative is part of the country’s goal to produce 42% of its energy from renewables by 2035.
The future Environmental pressure has resulted in several significant events over the course of 2021. In May, a Dutch court ordered Royal Dutch Shell to accelerate its carbon emission-reduction target, ruling that it had to reduce GHG emissions by 45% by 2030, based on 2019 levels. That same month, activist shareholders elected three candidates to ExxonMobil’s 12-member board. Three of the largest pension funds in the US supported the initiative, designed to accelerate the IOC’s transition from fossil fuels to clean energy in an effort to sustain long-term profitability. BP and Eni have announced that they will reduce oil and gas production and become net-zero energy businesses by 2050. But the victories against IOCs could end up handing control of fossil fuels to National Oil Companies (NOCs), such as those found in MENA. State-controlled oil companies are largely shielded from shareholder activism and NGO pressure. The use of oil and gas is expected to increase over the next several years before renewables and EVs make a dent in demand. In the meantime, Saudi Arabia, UAE, Iraq and others could see market share increase as Western oil companies recede from the marketplace. Armed conflict continues to roil the region. The longstanding war between Saudi Arabia and Yemen continues, with Houthi forces (seen as a proxy for Iran), remotely attacking Saudi Arabian petroleum assets; in March 2021, drone and missiles struck Saudi Aramco’s export facility at Ras Tanura refinery. In late August 2021, drones attacked a tanker in the north Arabian Sea off the coast of Oman, killing two. The US and UK governments condemned Iran for the attack. Many MENA countries also face financial worries. Wood Mackenzie estimates that OPEC+ saw approximately US$335 billion in ‘lost’ revenues due to the COVID-related collapse in demand. The shortfall is having a significant impact on countries that rely heavily on oil revenues. Oman’s deficit soared to an estimated 18% in 2020, fueling unrest; in May 2021, protests rocked the cash-strapped country as young citizens took to the streets to protest the poor economy and lack of jobs. For years, Algeria has suffered from poor governance and over-reliance on petroleum revenues; analysts estimate that the government needs US$135/bbl to break even. During July 2021, the country’s oil producing regions in the northeast were gripped by unrest as unemployed youth fought with security forces in the streets. Although the recovery in demand and prices and the sale of oil and gas related assets has relieved some of the immediate pressure, jurisdictions throughout MENA face difficult decisions; governments will have to make tough choices regarding public subsidies and greater political expression to ensure stability in the region.
