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Saudi climate pledge could boost CCUS investment, hydrogen output, renewable capacity

26 October 2021 Max Tingyao Lin

Saudi Arabia raised its climate goals with a decarbonization roadmap that experts said could prompt large investments in carbon capture as well as promising boosts to its renewable energy and hydrogen production capacity.

During the Saudi Green Initiative Forum held in Riyadh over the weekend of 23-24 October, Crown Prince Mohammad bin Salman said the country aims to achieve carbon neutrality by 2060, with initial investments of more than SR 700 billion ($187 billion).

The country's de-facto ruler said: "We will reach the net-zero target for 2060 with our carbon circular economy approach [among other decarbonization projects]."

Saudi Arabia, the world's largest crude exporter, is advocating an approach that aims to reduce CO2 emissions from the country's business and industrial operations, recycle carbon, reuse, or dispose of it. This would require technologies still under development.

The country will initially target cutting CO2 emissions by 278 million metric tons (mt) annually by 2030, more than doubling its previous reduction goal of up to 130 million mt, according to the crown prince.

According to the latest International Energy Agency (IEA) data, Saudi Arabia emitted 495.2 million mt of CO2 in 2019.

Speaking in the same forum, Energy Minister Prince Abdulaziz bin Salman said Saudi Arabia will reduce its emissions via carbon capture, utilization, and storage (CCUS) and direct air capture, among other means.

In the runup to the COP26 climate change conference in Glasgow, the country also launched the Middle East Green Initiative on 25 October in a bid to raise SR 39 billion ($10.4 billion) to fund carbon capture-related technologies and provide clean energy to help feed people across the world.

Saudi Arabia will contribute 15% of the estimated project costs and seek the remainder from other countries in the Middle East.

The crown prince, often known by his MBS initials, did not detail whether the roadmap total includes the carbon capture plan contribution.

As part of the country's decarbonization roadmap, national oil company Saudi Aramco—the world's largest oil producer—pledged to cut Scope 1 and 2 GHG emissions across its wholly-owned operated assets to net zero by 2050.

"The road ahead will be complex, as the world's transition to a more sustainable energy future will require collective action and major technological breakthroughs," Aramco CEO Amin Nasser said 23 October.

Saudi Basic Industries Corp (SABIC), the chemical producer 70% owned by Aramco, has committed to carbon neutrality by midcentury.

More carbon capture

Paola Perez Pena, principal research analyst for clean energy technology at IHS Markit, expects the latest initiatives to accelerate the development of CCUS projects in the country.

"There was already a lot of interest in this technology to reduce emissions, but not the right policies and regulations to scale up the industry," Perez Pena told Net-Zero Business Daily. "This pledge could play a key role in developing the policies that the industry needs for sectors with high cost of capture, like industrial sectors."

The country already has some of the region's largest existing carbon capture projects. Since 2015, Aramco has operated a CCS plant with an annual capacity of 800,000 mt at the Hawiyah gas production facility. The CO2 is used to enhance oil recovery in the Uthmaniyah field.

In the same year, United—a SABIC affiliate—commissioned a 500,000-mt-a-year plant to capture CO2 from the production of ethylene glycol at its Jubail site.

Important next steps, said Perez Pena, would be to develop funding mechanisms to mitigate costs and establish a regulatory framework for monitoring CO2 storage.

"Saudi Arabia could play a leading role globally in CCUS development," said Perez Pena, given that the country has low-cost energy from both renewable and non-renewable sources as well as significant potential for CO2 storage.

"[Those are the] two things that are quite important to develop CCUS projects. Additionally, there is a strong labor force with transferable skills," she said.

Renewables ambition

Meanwhile, analysts expect Saudi Arabia to continue adding renewable energy to its power mix, even though the progress could be slower than its official target.

In 2019, the country announced it would aim to have 27.3 GW of renewable energy capacity installed by 2024 and 58.7 GW by 2030. But IHS Markit data showed less than 500 MW of solar photovoltaic (PV) and no wind power installed as of the end of 2020.

Silvia Macri, principal research manager for Africa and Middle East power and renewables at IHS Markit, said the country is experiencing challenges in tender procurement and project implementation.

"Although an acceleration in renewables build-out is possible…it is unlikely that the kingdom will meet its 2030 target," Macri said.

While Saudi officials focused more on CCUS in the latest green initiatives, Macri said the country will still seek to rely less on oil in its domestic electricity generation.

"This is…simply a complement to existing initiatives aiming to decarbonize the energy mix," she said. "As oil and gas are key industries in the country, a focus on how to decarbonize those operations is particularly relevant in a process that involves a radical change in the way Saudi Arabia deals with energy production and consumption."

The 415-MW Dumat al-Jandal wind project and the 30-MW NADEC solar PV plant are among the renewable projects currently under construction in the country.

Earlier this month, the energy ministry shortlisted the bidders for four solar PV projects with a total capacity of 1.2 GW.

In IHS Markit's base case, the installed capacity of concentrated and PV solar power in Saudi Arabia is expected to reach just over 20 GW in 2030 and almost 110 GW in 2050. Wind power is forecast to remain below 5 GW in 2030 and amount to less than 15 GW in 2050. The outlook focuses on domestic power demand and excludes renewables dedicated to green hydrogen production.

Use of renewables could be key to Saudi Arabia's industrial transformation, Perez Pena said. "Renewables' cost is low and very competitive, especially for solar PV … CCUS will become relevant for hard-to-abate industries, not for power generation," she said.

A hydrogen giant?

Another promising industrial area is hydrogen, and Prince Abdulaziz said Saudi Arabia is aiming to produce and export 4 million mt of the zero-carbon fuel by 2030. This includes blue hydrogen produced from gas reforming with carbon-capture technology and green hydrogen from renewable energy.

In September 2020, Aramco generated 40 mt of ammonia from blue hydrogen and transported the fuel to Japan in the world's first such shipment.

Prince Abdulaziz said some gas from Aramco's $110 billion Jafurah gas project will be used to produce blue hydrogen, without providing additional details. The shale project, estimated to have 200 trillion cubic feet of rich raw gas, is expected to begin production in 2024.

NEOM, a Saudi state-owned company established to develop a city sharing the same name in Tabuk, has agreed to develop a $5-billion green hydrogen and ammonia project with ACWA Power and Air Products.

Helios Green Fuels is aiming to produce 240,000 mt of hydrogen per year in NEOM from 4 GW of dedicated solar and wind power, which will be converted into 1.2 mt of ammonia. The project could be commissioned as early as 2025.

Last December, the German government granted €1.5 million ($1.74 million) to Thyssenkrupp for designing a 20-MW electrolyzer prototype for the NEOM project.

"We're putting our money where our mouths are…We will tomorrow be asking people, asking countries such as Japan or the EU: give us your future demand to enable us to start working," Prince Abdulaziz said.

"Because we would like to be ahead of everybody in the game, and we would like to be the biggest supplier," he added.

Mixed responses

Saudi Arabia, one of the world's largest GHG emitter per capita, will also be joining the Global Methane Pledge to help reduce the world's methane emissions by at least 30% over the next decade.

Among other decarbonization initiatives, the country will plant more than 450 million trees while rehabilitating 8 million hectares of degraded lands.

Among the Gulf states, the United Arab Emirates aims for net-zero emissions by 2050, while Bahrain is targeting 2060.

In the UN's methodology for calculating national carbon budgets, GHG emissions from the combustion of fossil fuels are counted against consuming nations rather than producing countries.

Saudi officials said the country would not reduce oil or gas production or yield market share for decarbonization, arguing that it needs revenue generated from energy sales to invest in abatement technologies.

"Our economic growth is driven by exports of energy resources…that will contribute to meeting the Nationally Determined Contributions," Prince Abdulaziz said. "If our exports are maintained, our ability to reduce [emissions] will be happening."

Saudi Arabia's oil production will grow by 7.1 exajoules and gas by 4.7 exajoules between 2019 and 2030, outpacing all other G20 nations, according to the latest Production Gap Report.

Greenpeace Middle East and North Africa called Saudi Arabia's latest initiatives as "nothing but fossil fuel propaganda ahead of COP26," the UN climate summit scheduled to be held 31 October-12 November.

The environmentalist group said the viability of carbon capture and storage at scale remains largely unproven, and that Saudi Arabia should prioritize phasing out fossil fuels and develop more renewable energy instead.

However, some in the public sector welcomed the country's new pledges.

UK Prime Minister Boris Johnson said the net-zero target is "a major step forward," while COP26 President Alok Sharma said he hopes the "landmark" announcement will galvanize ambition from others during the summit.

"The threat of climate change is universal.… Pledges from major fossil-fuel producers, and their implementation, are vital to reach international climate goals," IEA Executive Director Fatih Birol said.

Posted 26 October 2021 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability

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