In with green hydrogen, out with black gold: Will this be a blueprint for the Middle East’s energy transition or is there something else in store?

The winds of change, which are sweeping over the global energy industry, will be increasing their intensity over the coming years with no corner of the world left unaffected, including the Middle East. This region carved its place in the energy sector, thanks to the oil and gas boom, however, it cannot escape the transition to low-carbon and green energy sources, which is making inroads worldwide. Recent developments put the spotlight on the region’s attempts to pivot towards renewables and green hydrogen while building a more sustainable oil and gas sector.  

At the height of the global energy crisis, which led to tighter gas supplies, higher prices, and an uncertain outlook last year, the International Energy Agency (IEA) looked into the ways producers in the Middle East and North Africa could free up more natural gas for export to avert global shortages while advancing the clean energy transition, as these producers have been a cornerstone of the global energy system for decades.

In line with this, replacing low-efficiency gas power plants with renewables could free up more natural gas for export and strengthen the region’s infrastructure for the clean energy transition. Putting this in place would enable the region to gain gas export revenues while boosting local economies and clean energy supply chains.

Rystad Energy recently pointed out that one of the leading global drivers of offshore oil and gas growth would be coming from the sizable expansion of offshore activities in the Middle East, as offshore upstream spending in the region could surpass all others for the first time, lifted by mammoth projects in Saudi Arabia, Qatar and the UAE.

The region’s offshore spending growth appears set to continue at least for the next three years, growing from $33 billion this year to $41 billion in 2025. Rystad underscores that these countries are tapping into their vast offshore resources to meet rising global oil demand, backed by the necessary capital and infrastructure to outpace other producers.

As explained by the CEO of the UAE’s ADNOC, the world needs all the energy solutions it can get, including oil, gas, solar, wind, nuclear, and hydrogen to enable energy security. This was also hammered home by the CEO of the Saudi oil and gas giant, Aramco, who outlined in September 2022 that ramping up oil and gas investments and devising a “more credible” energy transition roadmap was required to usher in a more secure and sustainable energy future.

According to Wood Mackenzie, the Middle East can help in ushering in the much-anticipated sustainable future, as it is a good example of the energy super basins of the future, which can fulfil three key criteria, covering abundant resources, access to low-cost renewables, and hub-scale carbon capture and storage (CCS) opportunities.

On a quest to shed some more light on the evolving energy landscape in the Middle East, Offshore Energy obtained insights from James Larnder, Managing Director at Aquaterra Energy, who claims that the Middle East is undergoing two parallel transitions, one towards new energies such as renewables and green hydrogen and then another towards a more sustainable oil and gas sector, exploring new engineering and procurement approaches. He also contemplates how the Middle East’s energy transition could create a more international supply chain.

“Now, as we embrace a global energy transition, companies in the region are pivoting to become new forms of energy superpowers. They have no intention of relinquishing the winning positions they have built for themselves, and nor should they. As a new-look Middle Eastern energy sector emerges, however, it may be more than the energy sources that change. There is reason to think the future is one that leans more heavily and readily on international supply chains, particularly for offshore developments, in a mutually beneficial exchange,” elaborated Larnder.

Aquaterra Energy’s Managing Director further emphasises that there has never been a singular one-size-fits-all energy transition while in the Middle East, at least two parallel transitions are currently taking place. In one corner is the transition to low-carbon and renewable sources, since countries are aware that the region’s hydrocarbon revenues will not last forever. Bearing this in mind, the UAE aims to generate 50 per cent of its electricity from renewable sources by 2050 and Saudi Arabia plans to install 58.7 GW of renewable energy capacity by 2030.

While the Middle East is “blessed with abundant sun and wind potential for renewables,” Larnder points out that there are opportunities for the region to recreate its status as an energy exporter through new markets such as green hydrogen, as cheap and plentiful renewable electricity is a key ingredient for its commercial production, which would enable the region to become “the world’s green hydrogen hub.”

“However, the allure of the new shouldn’t blind us to the transition opportunities available with today’s methods and technologies. In its Stated Policies Scenario (STEPS), the IEA does not expect oil demand to peak until the mid-2030s, and envisages fossil fuels will still account for 60 per cent of the global energy mix by mid-century. Oil and gas – and Middle Eastern oil and gas specifically – will be with us for decades to come, but that doesn’t mean that nothing will change,” outlined Larnder.

In light of this, the Middle East’s second transition is happening within the oil and gas sector, which is taking steps to curb its operational emissions and optimise efficiency. To this end, Aquaterra Energy’s Managing Director outlines that the region is “increasingly getting to grips with a rising number of brownfield projects reaching the end of their expected lifespan over the next few years.” Some of these are reaching their retirement and decommissioning stage, while the lifespan of others will be extended.

“By maximising the lifespan of existing sites, the need for new ones can be minimised, providing a dual benefit of reduced costs and emissions. In the coming years, brownfield projects may even be at the forefront of the energy transition in the Middle East with the potential for CCS projects, to use these depleted reserves to store sequestered carbon dioxide,” underscored Larnder.

For Larnder, both of these transitions, which are gaining ground, are joined by a gradual one in business practices, where Middle Eastern business and engineering personnel have worked on and studied energy projects worldwide. Aquaterra’s Managing Director claims that nearly 59,000 Saudi Arabian students are currently studying abroad, including more than 30,000 in the U.S. and 8,000 in the UK.

“Together, these shifts open the door for new engineering and procurement approaches – in both new and heritage offshore energies. For example, operators which have taken the same broad approach to drilling literally hundreds of wells offshore are now more open to alternative methods, such as deploying modular platforms installed with jack-up rigs for increased efficiency and time to first oil and employing riser analysis techniques honed in environments such as the North Sea,” added Larnder.

Furthermore, Aquaterra’s Managing Director delves deeper into this by explaining that using modular, flexible designs, these platforms can be adjusted to the needs of the field and save up to 30 per cent in steel weight over traditionally designed jackets. Using fabrication facilities in the region would help slash transport-related emissions that would be created by importing a platform or components from elsewhere while further emission cuts can be achieved if these materials are sourced in the region. Larnder also emphasises that the Middle East is “being touted as a potential hub for the nascent green steel industry.”

Observing such practices is expected to enable the Middle East’s oil and gas sector to continue its decarbonisation journey while also pursuing the development of new energies. Larnder believes that this offshore fabrication and installation approach can be applied to the region’s future offshore wind sector, with potential locations in the Red Sea, Persian Gulf, and Gulf of Oman, bringing new opportunities for green hydrogen production.

“Embracing change and operating efficiently and sustainably within oil and gas while investing in diversification efforts, offers a blueprint for long-term success in the region. To achieve this, operators need supply chains that can help them meet their production targets, reduce costs, maintain high safety and environmental standards, and support the development of local content and expertise. Suppliers who can deliver on these requirements will find themselves in high demand,” concluded Larnder.

Aquaterra Energy has made multiple contributions towards more sustainable oil and gas production, including the completion of the engineering design of a Sea Swift-type offshore platform for the Zandolie field. This is an unmanned gas-producing platform, which uses a combination of power generated by a wind turbine and a solar bank, with a battery for storing any excess energy.

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