Falih warns against rapid energy transition
Former energy minister says world will need Saudi oil
At same time, Saudi Arabia building hydrogen sector
OPEC kingpin Saudi Arabia is likely to continue exporting oil at the same levels “for decades to come,” even as the world hastens the shift towards renewables, its former energy minister Khalid al-Falih said Nov. 21.
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Speaking at the G20 summit in Riyadh, Falih, who served as energy minster from 2016 to 2019, cautioned against a rapid transition to renewables, citing potential damage to the economy.
“The kingdom believes that the energy transition that the world is going to need all energy sources, and that the transition from fossil to all-non-fossil fuels is a multi-decade, perhaps a multi-generational, journey that we have to take deliberately and carefully and make sure it does not disrupt and break the global economy,” said Falih, who is currently Saudi Arabia’s investment minister.
Saudi Arabia is the world’s largest exporter of crude and has touted its low cost of production as enabling it to remain top dog, even if global demand for oil subsides.
It exported 6.066 million b/d in September, according to the latest data from the Joint Organizations Data Initiative, up from 4.98 million b/d in June when it made deep production cuts in concert with OPEC and several allies to combat the impact of the coronavirus pandemic.
Those cuts have since been partially eased. Prior to the pandemic, Saudi crude exports typically averaged around 7 million b/d.
Falih said he expects Saudi Arabia to maintain its robust exports, but also highlighted the kingdom’s efforts in developing its ammonia industry under its energy transition plans.
“I wouldn’t be surprised if we continue to export at the level we are exporting for decades to come, in terms of oil and gas, because the world needs it,” Falih said. “But at the same time maybe we will be exporting the same level of energy that is generated from renewables and exported in different forms. One of them will be blue and green ammonia.”
In September, state-owned Saudi Aramco and Saudi Basic Industries Corporation (SABIC) shipped 40 tons of high-grade blue ammonia to Japan for use in zero-carbon power generation. Ammonia contains about 18% hydrogen by weight and releases no CO2 emissions when combusted in a thermal power plant.
Falih said Saudi Arabia seeks to ship cargoes of blue ammonia around the globe, as well as build its green ammonia capabilities. Blue ammonia is produced from hydrocarbons, while green ammonia comes entirely from renewable sources.
“This is part of an alignment we have with Japan over a number of years that we are going to work with them,” Falih said.
“Capturing energy in Saudi Arabia from renewable sources as well as fossil fuels, dealing with the carbon through CCS, capturing the carbon, maybe storing it in reservoirs or maybe converting it to marketable products, then converting hydrogen to ammonia and shipping it to faraway locations, like Japan, Korea, Europe, is part of this energy transition that is enfolding,” he added..
This ethos has motivated the kingdom’s “Circular Carbon Economy” plan that it is pushing as part of its G20 presidency throughout 2020.
Very little detail including timelines and targets has been released about the scheme, which has been endorsed by the ministries of all of the G20 countries.
Notably, it does not call for a reduction in hydrocarbon production and exports, but rather that efforts are made to capture or reabsorb carbon emissions from these activities.