On the face of it, COP26 in Glasgow and ADIPEC in Abu Dhabi were two very different forums. The first, a global summit to combat climate change with a strong undercurrent of environmentalist protest; the second, the biggest gathering of the oil and gas firms deemed responsible by many for global warming.
But there was enough overlap in the agendas and outcomes of both events to reach the conclusion that there is a consensus climate change is the big issue facing the world today, and that the hydrocarbon industry has recognized that and is stepping up to play its part. Not that the hydrocarbon sector was officially represented in Glasgow.
The organizers decided quite early on that official delegations could only come from government and government-related entities, which left the industry outside the main forum, in the cold (literally). At the ADIPEC forum in balmy Abu Dhabi a few days later, it was clear from speaker after speaker that many of the concerns of Glasgow had been noted, especially by the Middle East-based organizations that had made both trips.
In fact, the final declaration from Glasgow contained few items that ADIPEC delegates could regard as controversial. The 1.5 per cent centigrade limit for global warming was not set as a hard-and-fast target in the COP26 agreement. Rather, it was “kept alive” as an aspiration, to be further debated at COP27 in Cairo next year and might very well be further kicked down the road to COP28 in the UAE the year after.
Delay the friction
That is no immediate headache for the hydrocarbon producers, but there could be more friction when the big energy consuming nations are asked to prove that they have hit the targets of the “nationally determined contributions” set out by the UN climate change watchdogs to reduce emissions.
The showstopper in Glasgow was the last-minute drama about coal, and the insistence by China and India that coal should be phased “down” but not “out”. That too is not really an issue for the oil and gas producers, who can sell more of their (cleaner) products to the large Asian economies if coal production is reduced.
Better aim for transition funds
The financial resolutions of the COP26 were also a compromise the oil companies could live with. The developed countries did not meet their pledge of $100 billion financing for the less developed to ease the energy transition, but there was sufficient consensus in both Glasgow and Abu Dhabi on the need for a transition fund, and on the crucial issues of a global carbon market.
Other Glasgow outcomes – like reforestation, methane mitigation, the focus on hydrogen as a fuel of the future, and critical US-China co-operation – were welcomed in Abu Dhabi just as warmly as they had been in the previous week at COP26. Despite the feeling that the can was being kicked down the road to some degree to Egypt and the UAE, there are still urgent priorities facing energy policymakers and corporations in the Middle East.
It is significant these priorities have been set not by the UN climate change organizers, but by the regional hydrocarbon producers themselves. For example, the two biggest oil producers in the Arabian Gulf – Saudi Arabia and the UAE – have both set ambitious medium-term goals to accelerate the energy transition.
The UAE has outlined plans to reduce CO2 emissions from power generation and water desalination by 50 per cent over the next decade, alongside a big expansion in renewables, and alternatives like hydrogen and nuclear, that will help the Emirates to get to the goal of net zero carbon emissions by 2050.
Saudi Arabia – which has pledged to get to net zero by 2060 – is committed to phase out the burning of oil in domestic power generation altogether by 2030, replacing it with renewables like solar and wind to complement cleaner gas power. The scale of the challenge is illustrated by the fact that renewables only account for about 1 per cent of Saudi energy generation currently.
The biggest difference between COP26 and ADIPEC was also the most telling. The Glasgow forum heard multiple calls for an immediate end to investment in fossil fuels. In stark contrast, ADIPEC spent a good deal of time bemoaning the low levels of investment in oil and gas in recent years.
One UAE energy leader said some $600 billion was required just to keep up with demand for hydrocarbon power for the rest of this decade. Both Saudi Arabia and the UAE are convinced of the need for more oil and gas to fuel global economic growth and are aggressively increasing their supply limits to this end.
Producing and exporting more oil while attempting to adhere to ambitious climate change targets remains the big conundrum for the big regional hydrocarbon powers – especially given the accelerating deadline for meaningful action on global warming.