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Navigating the Future of the Energy Transition in the Middle East Gulf Economies Post COVID-19

Document Cited in Related
Vincent
Date01 August 2020
DOI10.3366/gels.2020.0031
Published date01 August 2020
Pages217-222
Author
Introduction<xref ref-type="fn" rid="fn1"><sup>1</sup></xref>

The adoption of renewable energy has been advancing in the Middle East2, and increasingly in the Gulf since 2014.3 Renewable energy investment in Arab nations grew nine-fold from $1.2bn in 2008 to $11bn in 2016.4 Projects in the pipeline reached seven-gigawatt hours leading to the cost of solar photovoltaic (PV) prices to be $0.03 per kilowatt-hour, less than what utilities within the region pay for natural gas generation.5 Renewable energy is slowly progressing but on the right track.

However, one thing to bear in mind is that the energy transition will not happen overnight. The context of our work revolves around the impact of the oil price shock, COVID-19, and navigating what the future of the energy transition for gulf economies. Our work briefly mentions the notion of a ‘Just Energy Transition’ as future considerations in our concluding remarks.

Considering recent events, Middle East petroleum producers were first negatively impacted by the collapse in oil prices. Then the COVID-19 pandemic happened and ‘eroded a third of global energy demand, halted investments in ongoing as well as future projects, and raised uncertainty of future employment’, mainly in the petroleum sector.6 This chapter examines the added value of the petrochemical industry, the role of renewables and the decarbonisation of mobility.

 Twin-shock leads to the economic downturn

The oil price shock of demand destruction resulting from COVID-19 containment measures, and the oil price war over market shares before April2020's OPEC++ agreement is having a devastating impact on the region's economies creating social and political risks.JP Morgan estimates that for the fiscal year 2020, oil demand is forecasted to average 90.4 million barrels per day (mbd), equivalent to a loss of 9.5 mbd year-on-year7. Meanwhile, Goldman Sachs analysts expect Brent oil to average $30–40 per barrel in the second half of 20208. This is forcing governments in the region to slash their spending and adopt austerity measures while cutting aid and remittances to neighbouring countries. Mitigation against these adverse effects can come through the exports from the value-added petrochemicals sector despite the ongoing energy transition.

 Petrochemicals to play a vital role

Despite the call to diversify away from hydrocarbons, petroleum is still relevant now and in the future. In general, everything humanity derives from a crude oil base.9 From one barrel there are numerous petroleum...

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