The year ahead for Mena energy

Yellow Door Energy

So, 2020 brought a global pandemic and 2022 a war in Europe. The first was cataclysmic for the energy industry; the second was disruptive but lucrative. 2024 is predicted to be the hottest year on record, but the Middle East’s core business will hope for no more geopolitical shocks or unforeseeable crises.

However, the chasms in the Gulf between conflict and security, poverty and wealth, a carbon-intensive present and a clean energy future, have rarely been so wide – they must be bridged in 2024.

While Cop28‘s declaration on moving away from fossil fuels will not have an immediate impact, it should accelerate other trends: the rise of renewable energy and electric vehicles, the push for hydrogen and carbon capture, and pressure on the oil and gas industry to clean up its act.

Cop29 in Azerbaijan, another oil-exporting state, may still progress carbon trading – an important area.

Oil and gas companies, including many state firms, made some big commitments at Cop28. Net-zero targets, corporate and national, have been normalised.

Attempts to reduce emissions pose a challenge to oil and gas demand, but any slowing will be gradual rather than sudden. The resilience of coal, the dirtiest fossil fuel, is an indication. It appeared to have hit a peak in 2013, but it set a new demand record in 2023

Still, Middle Eastern countries need to build on their energy advantages and deliver on promises. That includes cleaning up routine flaring of unwanted gas – which is a major problem from Algeria and Libya to Iraq and Iran. 

Only a few countries are capitalising on the region’s bountiful solar potential. The UAE, Morocco and Jordan have done well. Saudi Arabia, Oman and Egypt are catching up, and the region should far surpass the global goal of tripling renewable capacity by 2030.

But given the small installed base to date, that is a low bar. Cheap, clean solar power, used directly, supported by batteries, or transformed to hydrogen, should be an essential driver of regional industrialisation.

In terms of plans, the Mena region is one of the leading sites of hydrogen development globally.

But very few of these projects have yet made it to investment decisions, with Saudi Arabia’s Neom the most advanced. It should be fully operational in 2026, but it is important to get more projects over the line in 2024, with firm offtake for their product.

Similarly, carbon capture and storage (CCS) had a central role in the Cop discussions.

A long-term future for hydrocarbons in the global energy mix, and the viability of crucial heavy industries such as steel, fertilisers and cement, hinge on CCS.

The use of CCS has to scale up globally by some 40 times by 2030, becoming routine and repeatable, and the Middle East – Saudi Arabia and the UAE most prominently – should be at the forefront. Again, 2024 will be a pivotal year for progress.

Huge expansion projects

Having clinched one customer from China, Adnoc should be in a position to take an investment decision on its own new liquefied natural gas (LNG) plant.

The Abu Dhabi state oil company continues its aggressive overseas expansion: after taking majority control of fertiliser maker Fertiglobe, it has upped its bid for German chemicals maker Covestro to a reported $12.4 billion.

Further deals are likely. Its attempt to buy Israeli gas producer NewMed Energy, in collaboration with BP, has been stalled by regulatory issues and then the Israel-Gaza war. The company may now look elsewhere to expand its international upstream footprint.

Among Adnoc’s rivals, Saudi Aramco entered the LNG game cautiously in September and Qatar Energy will continue marketing LNG from its huge expansion projects. The Qatari company has enjoyed a run of overseas exploration successes, signing up several long-term Chinese buyers and moving into new hotspot Namibia. But it needs to spread its customers around more.

As Western companies pull back, there are plenty of undervalued international opportunities.

Middle East renewable companies such as Masdar, Acwa Power and Amea Power are also building up strongly in areas ignored by Western firms, in Africa and Central Asia.

The geopolitical picture

Politically, the Middle East began 2023 with a welcome diplomatic re-engagement between Riyadh and Tehran, mediated by Beijing.

Iran’s oil production gained strongly during the year as US sanctions enforcement apparently slackened.

Elsewhere, Libya’s oil industry showed significant revival and signs of international confidence, despite continuing political deadlock.

Iraq made progress on resolving the long-standing question of exports and marketing oil from the Kurdistan region, which was the root of the closure of the pipeline through Turkey in March.

But 2023 ended with part of the region again in flames: airstrikes and ground fighting in Gaza, as well as Houthi drones and missiles from Yemen that blocked much energy transit and other trade through the Red Sea.

Sudan’s disastrous civil war has brought great suffering, but oil exports through the pipeline from South Sudan continue unabated.

Europe is well into winter, but the weather has been mild and the same is forecast for January. Windy and wet weather help renewable output and diminish the need for gas and coal. The season is likely to end with record amounts of gas in storage, continuing to blunt Russia’s energy weapon.

That leaves two more tricky years for a global gas market that has lost its Russian safety valve, before a glut of new liquefied natural gas arrives.

Robin M Mills is CEO of Qamar Energy and author of The Myth of the Oil Crisis