After the glare of the morning sun, the research center is dark and cool. There, in front of a large monitor, an engineer clicked a slide to begin the day’s presentation to his attendees: Towards Zero Carbon, it read.
Judging by the slides, this is not an environmental group or a climate conference. TIME gained access to the normally secret research and development center of Saudi Aramco, the fossil fuel giant that dwarfs the likes of Exxon Mobil and Chevron. While the world’s largest oil exporter is busy pumping crude oil and filling it into the hulls of sea tankers, it is loudly voicing its intentions to achieve zero carbon emissions by 2060.
For Saudis, two-thirds of whom are under 35, climate change is not a distant issue. In summer, high temperatures often reach 120°F. Climate scientists said last year that they believe temperatures in the Middle East could become “potentially life-threatening” in the coming years. “These countries are already facing a crisis,” said Ali Safar, a regional analyst at the International Energy Agency in Paris. “They have skin in the game.”
The Saudis are to blame for global warming: Environmentalists say Saudi Aramco has produced more than 4% of the world’s greenhouse gases since 1965. On the edge of the Arabian Desert, Saudi Arabia has produced untold amounts of oil—about 267 billion barrels of proven oil reserves, about 15 percent of the world’s reserves—since the 1930s, when savages in California attacked an oil gusher, turning the tribal kingdom into a global oil powerhouse.
More than 80 years later, Saudi dominance in the oil world has hardly waned. It produces about 11 million barrels of oil a day – about one-tenth of the world’s production – and sells more than 7 million barrels on international markets, making huge fortunes for members of the ruling royal family and its state-owned company. Saudi Aramco, whose profits rose to around $110 billion last year.
However, a global crisis now looms over Saudi Arabia’s prized position after years of profitable production. Nearly all countries have pledged to reduce their use of fossil fuels, which are by far the largest source of greenhouse gases on Earth. This could lead to the most dramatic energy transition since the automotive era began over a century ago. The question for Saudi Arabia is whether it can join the global fight against climate change while the oil world remains a superpower, or whether its ability to diversify its economy away from over-reliance on oil comes too late, or otherwise justifies itself as a verbal promise. critics. .
If Saudi Arabia’s gamble pays off, it could emerge from the global energy transition as the world’s indispensable fossil fuel powerhouse, while ironically boasting clean energy and a clean power plant at home. “They like to have their cake and eat it,” said Jim Crane, an energy geopolitics expert at Rice University in Houston. “The Saudi ambition is to be the last man standing in the global oil market. deposits”.
The country has enough money to implement its grandiose plans. Aramco is currently the second most valuable company in the world (after Apple) with a market capitalization of over $2.3 trillion. The company nearly doubled its profits this year as gas station prices soared. The vast oil wealth has given the kingdom of just 35 million people enough influence to effectively set quotas within OPEC, an international cartel of 13 major oil producers that can influence global stock markets.
This unique status is likely to last for decades, especially considering that the country’s de facto leader, Crown Prince Mohammed bin Salman (MBS), is only 37 years old and is likely to rule for generations.
“Demand for oil will continue to rise,” said Saudi Energy Minister Prince Abdulaziz bin Salman – MBS’s half-brother – over tea in his office in Riyadh. “At what level, I don’t know,” he said. “Anyone who tells you they know exactly when, where, and how much is probably living in a fantasy world.”
Last February, MBS transferred $80 billion from oil companies to the State Investment Fund, or PIF, the country’s sovereign wealth fund, which he chairs. The fund’s assets have risen since the outbreak to about $620 billion as it bought Netflix, Carnival Cruise Lines, Marriott Hotels, California-based electric car maker Lucid Motors and other shares during the lockdown, which has been hit hard by the epidemic. global blockade.
These assets could help fund Saudi Arabia’s own energy transition. How this all happens – how carbon emissions are “regulated” – is the concern of many of the country’s top government engineers, Abdulaziz said. The effort has generated some interest from Western investors, whose concerns about human rights abuses in Saudi Arabia run counter to business imperatives.
On a chilly winter morning on the outskirts of Riyadh, at the King Abdullah Petroleum Research Center in Saudi Arabia, better known by its acronym KAPSARC, about 15 experts gathered to strategize for TIME. Abdulaziz called the researchers “my young interns, no one over 30″. Many of them were women and many were educated in the United States.
The plans include a network of electric vehicle charging stations and a project to modernize offices and homes with low consumption power systems – about 33 solar and wind energy projects are under construction. They said that there would be no problem with financing all this if there was a royal mandate. “The king gave us the right to upgrade all buildings for energy efficiency,” said Mudhyan al-Mudhyan of the National Energy Services Corporation. “We have our own funds to finance all of our projects, so we do not need to go to a bank or any lending institution.”
Perhaps the biggest experiment is taking place in NEOM, a $500 billion futuristic city being built from scratch in the country’s northwest. In theory, it will be a testing ground for concepts such as air taxis and so-called green hydrogen powered by renewable energy, which MBS boasts will generate most of NEOM’s electricity. NEOM is building a $5 billion green fuel plant. “It’s a clear path from labs to research centers and full deployment of the technology,” said geologist Sadad al-Husseini, who previously headed Aramco’s exploration and production division and now leads the forecasting and production division of Husseini Energy Co., an analytical consulting firm. in Saudi Aramco’s hometown of Dhahran. Aramco’s research includes efforts to capture and reuse the carbon that Saudi oil fields release into the atmosphere. Saudi Arabia relies heavily on this strategy to meet its emissions targets. Although its effectiveness is still highly questionable, the Saudis have begun capturing carbon by transporting it from gas fields in the desert to factories 52 miles away to be converted into petrochemicals.
Engineers are also working on a way to transport “blue” hydrogen (extracted from natural gas) even to Europe and Asia. Saudi Arabia 2020 delivered the first shipment of blue ammonia to Japan for power generation and signed an agreement with Germany to develop green hydrogen. Aramco is also working on creating synthetic fuels from a mixture of captured carbon and hydrogen, which it claims will reduce pollution from the average car by 80%. The company says it plans to begin sales in 2025.
The fact that there is only one oil company in Saudi Arabia, and it is owned by the state, allows him to freely spend money on research. “You won’t find Exxon or Chevron or any of those companies focused on stuff like that,” Husseini said. “If you said, ‘Do a research project that won’t pay off in 20 years,’ they would say, ‘That’s not our job.’
With plenty of cash on hand, the engineers hope to create new exports for the country, especially hydrogen. “We can create a world-class engineering firm to design the kingdom’s hydrocarbon resources or plants and offer this service to anyone who is interested,” said Yehia Hoxha, an electrical engineer who graduated from Stanford University and is director of the Department of Energy’s Department of Energy. . In a green Saudi Arabia, the country will cut its fossil fuel consumption by about 1 million barrels a day, he said. He can then sell this oil on the world market and earn about $100 million a day at current prices. “This is how we demonstrated the economics of the project,” Hoxha said. He called the country’s plan “comprehensive and inclusive of all solutions. This is our way of paving the way for solutions, not just being part of them,” he said.
Climate scientists have dismissed this argument, accusing Saudi Arabia of “green laundering” by announcing its commitment to cut carbon emissions while aiming to increase oil production to 13 million barrels a day. Aramco’s carbon reduction does not include so-called Scope 3 emissions from oil consumption, which scientists say is a major source of greenhouse gases from fossil fuels. “Saudi Aramco’s approach to reducing emissions is not credible,” said a July report from the Carbon Tracker Initiative, a financial think tank based in London and New York. This is not only an earthly problem. Oil-loving Saudi Arabia may also one day see its energy companies’ revenues plummet as the world shifts to renewables. “Saudi Aramco is exacerbating rather than mitigating the transition risks it faces,” the report said.
Until recently, it was unthinkable that Saudi Arabia would be considered a pioneer in any global investment, let alone climate change mitigation, and indeed many doubted it. Foreign investment plummeted after Jamal Khashoggi, a Saudi journalist living in Washington, was killed in October 2018 and dismembered by Saudi agents at the country’s consulate in Istanbul, whose body was never found.
Last year, the CIA concluded that MBS should have authorized the arrest or murder of Khashoggi, given his “absolute control” over the Saudi security services. Amid global outrage over the gruesome murder, corporate executives and Western officials boycotted that year’s Future Investing initiative, MBS’s Davos-style flagship conference in Riyadh.
However, three years after Khashoggi’s death, foreign investors have returned to Saudi Arabia in a big way, attending the MBS Saudi Arabia Green Initiatives conference last October and being seduced by a plethora of potential deals in one of the world’s largest energy schemes. As war broke out in Ukraine, Saudi officials invited leading Wall Street investors to a road show in New York in early April to unveil their new city, NEOM, a key element of the country’s green plan.
There is a growing belief among investors and politicians alike that the prince can outlive almost any world leader – which is why President Biden eventually visited Riyadh in July and even touched Touch’s fist. “The idea that you are going to get rid of the MBS and replace it with a Canadian parliament is extremely naive,” said David Rendell, a longtime US diplomat in Riyadh and author of a book about the Crown Prince. “The other option is al-Qaeda.”
There was a palpable relief that Khashoggi’s death had little effect on business. “I think you can say that we have moved forward,” said Husseini, a longtime Aramco executive. “People can strike a pose and say, ‘Oh, I’m never going there,’” he said. “But there are foundations in the world. You have to support the economy.”
This is evident from the Saudi stock exchange, known as Tadawul, which is owned by the government through its sovereign wealth fund. Its chief executive, Khalid al-Hussan, believes that about 14 percent of the shares are owned by non-Saudis, who buy the shares through some 2,600 publicly traded institutional investors. When Tadawul was partially listed last December, it was bombarded with subscriptions from foreign investors that were 10 times the offer price, Hussan said. “I have met with over 100 international investors,” he told me the day I applied.
But for the Saudis to continue attracting new investors, they will increasingly need (at least on paper) companies committed to fighting climate change. “In the future, we will increasingly face this kind of pressure in the US and Europe,” Hussan said. According to him, concern for the environment “will guide their investment decisions.”
There is a strong belief at Saudi Aramco’s R&D center in Dhahran that it will not only remain a colossal oil company, but will expand despite the climate crisis. Saudi Aramco engineers believe that the transition to energy should be focused on extracting cleaner oil, and not on reducing its production.
Company researchers say they are already working with automakers (who declined to name) to switch to hydrogen engines, such as the green hydrogen-powered Nissan sedan parked at the front door. A short drive away is the company’s new artificial intelligence hub, dubbed 4IR (Industrial Revolution Four). One exhibit shows Aramco planting mangroves near its massive Ras Tanura oil refinery in the Persian Gulf; vegetation acts as a natural carbon sequestration system, extracting emissions from the air and absorbing them in swamps.
But the heart of the 4IR building is a large circular control room, similar to NASA’s ground control room in Houston. There, engineers track 5 billion data points in real time with 60 drones and a fleet of robots, tracking every drop of oil pumped by Aramco in hundreds of fields. Screens surround the walls, displaying a stream of graphs and data that information engineers say they can use to analyze how to continue producing oil while reducing emissions. “It’s all about efficiency and sustainability,” someone said as they led me through the center.
For environmentalists, Aramco’s efforts seem like the last gasp in the big oil companies’ bid to stop the global climate movement. “Saudi Aramco has no plans to cut oil and gas production by 2030,” international environmental law group ClientEarth said in a statement. It says the government “has a long history of combating climate change.”
Energy analysts say the Saudis, who have produced oil cheaper than anyone else since the 1930s, are well positioned to find a solution to the climate crisis and put it into practice. “They have accumulated a lot of experience and potential. They have pipeline infrastructure, port infrastructure,” said IEA’s Safar. The country now needs to end its over-reliance on oil revenues and move towards cleaner energy sources — a daunting two-headed challenge, Saffar said. “If you can get them to work in the same direction, you can really make a difference,” he said. The question is whether the rulers of Saudi Arabia are ready to go for it, even at the risk of huge profits. — Salkier Burga, Leslie Dickstein and Anisha Kohli/New York
Post time: Dec-26-2022
