Even as UN climate-conference delegates met near Paris on Friday seeking ways to reduce the globe’s dependence on high-carbon fuels like-oil, some of the world’s biggest petroleum producers vowed to keep pumping flat out.
The Organisation of the Petroleum Exporting Countries said on Friday that it would keep producing oil at current levels, which are estimated to exceed 31 million barrels a day.
But with petroleum prices continuing to plummet and world leaders intent on steadily reducing the burning of oil and-natural gas,-Opec, meeting in this holiday-bedecked city, might be celebrating what history could show to be Big Oil’s last hurrah. Some Opec members, including the UAE, have acknowledged that their economies need to diversify and wean themselves from an oil-rich diet.
In fact, the UAE’s delegation to the climate conference has pledged to increase their use of clean energy sources — a mere 0.2 per cent of the mix last year — to 24 per cent by 2021.
The UAE, whose seven members include Abu Dhabi, plan to use their oil wealth to lay the groundwork for the post-petroleum era — whenever it comes.
“I need to be living in a world where my grandchildren and my great-grandchildren will be able to live in a healthy environment,” said Ahmad Belhoul, chief executive of a state-owned Abu Dhabi company, Masdar, that is at work on various solar-energy projects for the government. Masdar will lead the renewable-energy effort, which will include building nuclear power plants.
The UAE, Belhoul said, need to have “a well-diversified economy that can work and deliver for them the economic activity and the jobs they require regardless of the future of oil.”
But, meanwhile, the pumping continues unabated. The UAE says they are producing close to 3 million barrels per day, up about 180,000 barrels per day from last year’s levels.
The dozen Opec countries, and other big oil producers like Mexico and Russia, find themselves in a double bind — pressed by the new low-carbon ethos represented by the climate conference and squeezed by a global oil glut that has caused prices to plunge more than 50 per cent since early last year. New supplies, led by shale oil from the United States, have caused the dollar-value oil revenues of Opec, Mexico and Russia to fall by half since 2014. Their response is to keep producing and selling, with an almost fire-sale desperation.
“Individual countries are trying to get every bit of revenue they can in this tough situation,” said Spencer Welch, an analyst at IHS, a research firm.
As Opec’s market clout has diminished, the organisation has become increasingly fragmented. Members including Venezuela and Algeria are urging production limits in hopes of propping up prices. But — Saudi Arabia — still the world’s single biggest petroleum exporter — argues, along with Kuwait and the United Arab Emirates, that production cuts would be pointless because they would only cede more of the global market to the shale producers in the United States and other rivals.
“What distinguishes Opec members from other producers, now that the group sets neither prices nor output quotas?” said Bhushan Bahree, an Opec analyst at IHS. “Nothing, really.”
Opec said on Friday that the group had decided to wait to make any changes in production quotas until it could see how much oil Iran would be exporting once Western sanctions are lifted. The group also wants to see what effect continued low prices might have on production levels from non-Opec producers.
“We need to wait and watch,” Nigeria’s oil minister, Emmanuel Ibe Kachikwu, who presided over the Opec meeting, told journalists Friday.
In a statement, Opec said that at its meeting the group stressed the importance of its members to be “actively and positively engaged” in the Paris climate negotiations and agreed that “climate change, environmental protection and sustainable development are a major concern for us all”.
Seth Kleinman, an analyst at Citigroup, in Vienna for the Opec meeting, said that on the climate issue, the biggest Opec exporter, the Saudis, were “damned if they do and damned if they don’t”.
New curbs on fossil-fuel consumption would put the Saudi economy at risk, he said. But the Saudis risk global scorn if they are seen as climate obstructionists, and Saudi Arabia knows its own environmental future hangs in the balance. Unless something is done soon about global warming, the sun-baked, arid Arabian Peninsula could become almost uninhabitable.
But Saudi Arabia, which is participating in the climate talks, has not yet been willing to make many concessions.
The country, which is a big consumer of its own oil and gas and was the world’s 11th-largest emitter of carbon dioxide in 2013, according to the Natural Resources Defense Council, has pledged to reduce its annual CO2 emissions by 130 million tons by 2030, compared with what the level would have been without intervention. But Saudi Arabia has not said what the level would have been otherwise.
The Saudi document describing the plan says that even this pledge is conditional on the economy’s continuing to grow with “a robust contribution from oil export revenues” and on international climate-change policies not imposing “disproportionate or abnormal burden on the kingdom’s economy.”
But like the UAE, Saudi Arabia acknowledges that climate concerns are a reason to make its economy more diversified and energy-efficient. Prince Mohammad Bin Salman, the 30-year-old son of Saudi Arabia’s king, is said to be leading the effort.
Sadad Al Hussaini, a former executive vice president of Saudi Aramco, the national oil company, who now heads his own consulting firm, said, “There is a big move to reduce energy consumption in the kingdom.”
The Saudi government, Al Hussaini said, is considering imposing tougher vehicle fuel-efficiency standards as well as raising the price of water derived from energy-intensive desalination plants. It is also studying the feasibility of collecting carbon dioxide emitted from factories and pumping it into ageing oil wells. That might squeeze more production from nearly depleted wells, but would at least offset some of the carbon debt.
But analysts caution not to expect any quick shifts by Saudi Arabia, which still depends on oil for nearly half of its economic output and 90 per cent of its export revenue. Though the country is a monarchy, analysts say, the leadership prefers to act on the consensus of the country’s technical experts and will be wary of upsetting constituents through raising fuel prices — particularly at a time when so much of the region is in political chaos.
In the UAE, a much smaller economy where the rulers take a more top-down approach, diversification has come much faster. Three-quarters of the economy now involves non-oil activities.
Belhoul, the chief of Masdar, which is leading the UAE’s energy-diversification efforts, recently showed a visiting reporter one of his company’s showcase experiments: a desalination project on the Arabian Gulf. Engineers are trying to harness the sun’s clean energy to transform seawater into drinking water — an energy-intensive process on which Gulf countries now expend large volumes of fossil fuels.
Although less than 1 per cent of his country’s energy now comes from clean sources, Belhoul said he was optimistic that climate concerns, along with ever-improving alternative technologies, would enable the UAE to meet their goal of 24 per cent by 2021.
“Renewable energy is no longer an expensive alternative — it is becoming a technology of choice,” he said. “Climate change is no longer an academic debate. It’s a reality.”