Every country has its own future energy pathway


COP 29 will convene in Baku, Azerbaijan, in November 2024, aiming to build on the successful presidency of an OPEC Member Country, the UAE, at COP 28.

Azerbaijan is a valued member of the Declaration of Cooperation (DoC) between OPEC and non-OPEC producers and a key player in fostering oil market stability, maintaining energy security and reducing emissions. This approach is increasingly vital, as by 2045, global primary energy demand is projected to increase by more than 23% and the global population by 1.5 billion people. Additionally, about 500 million people are expected to move into cities worldwide by 2030. To put this figure into a more understandable context, it equates to more than 225 new cities the size of Baku.

Against this backdrop, Azerbaijan and the UAE exemplify the importance of striking a balance between reducing emissions and delivering the affordable energy products and services that people need. Indeed, their pragmatic policies today serve as valuable models for navigating the complexities of tomorrow’s energy landscape.

Commitment to tackling climate change

Following Azerbaijan as host of COP 30 in 2025 is another OPEC+ Charter of Cooperation (CoC) member, Brazil. The make-up of this troika of countries highlights the commitment of OPEC and its partners in the DoC and CoC to address climate change and reflects the fact that the group has been serious and active partners in all related UNFCCC negotiations to date and will remain so moving forward.

As we look ahead to COP 29, it is crucial for future energy security and emission reduction efforts that all Parties take into account the totality of formulations outlined in the ‘Outcome of the first global stocktake’ from COP 28. Notably, paragraph 28 emphasizes the need to recognize “different national circumstances, pathways, and approaches” and transition “in a just, orderly, and equitable manner”.

On the former, every nation has its own energy pathway to a sustainable energy future, in keeping with the principle of ‘common but differentiated responsibilities’.

However, despite 700 million people having no access to electricity and 2.3 billion lacking clean cooking solutions, Sustainable Development Goal 7 (SDG-7) on affordable and clean energy does not appear to receive the attention that SDG-13 on climate action does.

Indeed, while stringent borrowing requirements in the ‘Global South’ increasingly limit capital for hydrocarbon projects under the guise of Environmental, Social, and Governance criteria, these areas currently also receive less than 5% of investments targeting renewable energy, despite representing 85% of the world’s population.

Hampering progress in developing countries

This is unfairly hampering the developing world’s ability to make progress using its own natural resources and is as unconducive to mitigating energy poverty as it is to lowering emissions. The sense of inequality is exacerbated by historical data on global cumulative CO₂ emissions. According to ourworldindata.org, from 1850 to 2022, the G7 contributed over 43%, the EU 27 close to 17%, while OPEC accounted for only around 4%. Moreover, today Africa accounts for a mere 4% of the world’s annual CO₂ emissions. In light of this, developed countries have a clear obligation to deliver the financing and technology promised in the Paris Agreement promptly, especially as former UN-Secretary General Ban-Ki Moon recently noted that global climate financing needs to grow by three to six times from current levels by 2030 for the world to achieve its climate goals.

When looking to our energy future, it is also important to highlight that despite $9.5 trillion spent on ‘transitioning’ over the last 20 years, wind and solar power provide just 4% of the world’s energy today, while hydrocarbons remain at over 80%, a similar level to three decades ago. To be clear, OPEC is not against renewables. The world clearly requires all energies to meet rising energy demand. Instead, these statistics highlight the importance of policymakers recognizing all energy sources’ current capabilities and contributions.

Energy mix of the future

According to OPEC’s 2023 World Oil Outlook, oil is projected to retain the largest share of the energy mix at around 30 per cent in 2045, with global oil demand expected to increase to 116 million barrels per day (mb/d) by then, driven by the non-OECD region.

Given that the developing and developed world will rely heavily on hydrocarbons long into the future, calls to reduce emissions must be balanced with the understanding that investing in new hydrocarbon projects is also essential for global energy security.

Indeed, it is not an exaggeration to suggest that failure to invest appropriately in all energies will ensure that there will be nothing just, orderly or equitable about the world’s medium- and long-term energy security prospects. After all, the global oil sector alone requires cumulative investment of around $14 trillion through 2045 to continue delivering the energy security, affordability and convenience that oil and its broad array of derivatives provide to the world.

In this regard, it was heartening to talk with the President of Azerbaijan, His Excellency Ilham Aliyev, at Baku Energy Week in early June. His recent comments that abundant hydrocarbons are a “gift from God” and that as head of an oil- and gas-rich country “we will defend the right of these countries to continue investments and to continue production,” underscores the essence of every country having their own energy pathway.

It was also an honour to speak again with His Excellency Mukhtar Babayev, Minister of Ecology and Natural Resources of Azerbaijan, and President-Designate for COP 29, in Baku, after welcoming him to the OPEC Secretariat in May, where we offered our full support to him and his team in the lead-up to COP 29, and thanked him for Azerbaijan’s inclusive approach.

This collaborative spirit is essential when considering the future of energy and underscores that the oil industry, renewables and emission reduction efforts are not the competitors some may think.

Crucial fiscal support 

Instead, the reality is that oil and its derivatives provide crucial fiscal support for numerous countries, many of whom rely on revenues from the oil industry to fund government budgets, support economic activities, diversify economies and mitigate against any potential adverse socio-economic impacts of transitioning.

Hydrocarbons also power the transportation and construction industries necessary for renewable infrastructure development. For example, depending on their size, wind turbines require between 200 and 1,400 litres of lubricants for the smooth operation of their gearboxes, bearings, hydraulic systems and transformers, while resins produced with ethylene are also needed to waterproof the turbines themselves. Without petrochemical-based products, the mass production of solar panels would be similarly impossible.

In addition, the oil industry is actively working to reduce emissions through operational efficiencies and advanced technologies. It is optimizing extraction and refining processes – including excellent reservoir management practices – and engaging in flare minimisation and reducing methane leaks. This is evidenced by 52 major oil and gas companies agreeing at COP 28 to end gas flaring by 2030, and have near zero methane emissions and align with net-zero by 2050.

Prioritising just, orderly and stable energy pathway

Furthermore, the industry is scaling up carbon capture utilisation and storage, and developing clean hydrogen technologies, direct air capture, and carbon dioxide removal, all within the concept of the circular carbon economy. In Saudi Arabia, for example, Saudi Aramco is creating one of the largest CCUS hubs in the world in Jubail Industrial City.

Ultimately, to build on COP 28’s momentum, COP 29 must prioritise just, orderly and stable energy pathways that have both energy security and emissions reductions at their heart. National circumstances, and common but differentiated responsibilities, should be borne in mind at all times too, and adequate climate financing provided to the developing world without further delay. All Parties should also remember that the oil industry, renewables and efforts to reduce emissions are not as at odds with each other as many people think.



www.energyconnects.com

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