The oil market has had a somewhat muted reaction to recent attacks on oil tankers, appearing to have set aside concerns about the diplomatic storm brewing in the Middle East and instead focusing on the latest oil demand projections.
Energy security and climate change present a dual challenge for the Gulf Arab states. With domestic demand for energy rising overall at a rate of some 5 percent per annum, and climate change presenting new energy- and economy-related uncertainties, the need for alternative, efficient, low-carbon energy sources becomes more pressing.
Responding to this dual challenge, all of the Gulf Arab states have adopted targets and initiatives toward deploying renewable energy and energy efficiency to both enhance energy security as well as eliminate their carbon footprint. However, upon examination, these initiatives are seen to be by and large focused on the electricity sector with limited consideration of the water desalination, industrial, and transportation sectors. In addition, there is a lack of clear strategy of how such targets can be achieved.
In order to make the transition toward secure, efficient, and low-carbon energy systems (which encompass all the components related to production, conversion, delivery, and end use of energy by sectors such as industry, transportation, construction, and agriculture) a fresh outlook on how the dual energy challenge can be tackled is needed, along with a holistic understanding of energy systems themselves. This can be achieved through four guiding steps: first, define the need for alternative energy sources; second, identify alternative (sustainable) energy options; third, define energy consumption per sector; and, fourth, define sectoral and intersectoral transition strategies. Oman’s case is an illustrative example.
Define the Need for Alternative Energy Sources
Oman faces unprecedented challenges that motivate the search for alternative energy resources. These include limited oil and gas reserves, increasing domestic energy demands, and high per capita carbon emissions.
In comparison to its neighbors, Oman has the smallest fossil fuel reserves. At just 0.7 trillion cubic meters, Oman has the smallest gas reserves in the Gulf region, after Bahrain, at 0.2 trillion cubic meters. Compared to Saudi Arabia with 266.2 billion barrels, Oman has the smallest oil reserves in the region, standing at 5.4 billion barrels at the end of 2017. Furthermore, Oman’s crude oil reserve-to-production ratio, which is a measure used by companies and governments to predict the lifetime of remaining amounts of fossil fuel resources, is 14 years and for natural gas it is 27 years, compared to 75 years and 82 years for crude oil and natural gas in Saudi Arabia, respectively. In fact, since 2008 Oman has been importing natural gas from Qatar via the Dolphin pipeline system.
Oman’s semiarid environment, reliance on air conditioning, rising standard of living, growth in energy-intensive industrialization, population growth, introduction of new households, and infrastructure investments are factors behind the dramatic increase in domestic demand for energy. For instance, total domestic use of natural gas tripled from 381,519 million standard cubic feet in 2008 to 1,447,422.2 million standard cubic feet in 2017.
Additionally, the domestic increase in energy demand, which is 100 percent reliant on oil and gas, has contributed to incremental increases in total greenhouse gas emissions in Oman, which have grown by over 452 percent between 1970 and 2012 and are projected to grow by an average 5 percent per year. The energy sector accounted for 90 percent of greenhouse gas emissions in 2014, followed by emissions sourced from bunker fuels, industrial activities, agriculture, and waste.
These three challenges need to be taken into consideration when planning Oman’s future energy mix.
2014 Greenhouse Gas Emissions per Sector in Oman
Identify Alternative (Sustainable) Energy Options
In practice, different energy sources are needed to meet the increasing demand, preferably with limited or no carbon emissions. At present, virtually 100 percent of Oman’s energy needs are currently met by fossil fuel resources, namely oil and gas; renewable energy accounts for less than 1 percent of total energy generation.
A study by Oman’s Authority for Electricity Regulation indicates the existence of significant renewable energy sources in Oman, especially wind and solar. In particular, the study notes that if all available solar and wind resources were harnessed, a total of 3,970 megawatts of electricity capacity could be sourced from renewables. This accounts for around 68 percent of total electricity installed capacity in Oman in 2018. This means, according to the study, Oman cannot completely rely on available solar and wind energy sources to meet its energy needs. Therefore, development of alternative energy sources, along with renewables, is needed.
Energy efficiency, which is not a physical source of energy but is as important as alternative energy supplies, has received insufficient attention until recently. The launch of an energy efficiency awareness campaign is promising, but application of energy efficiency measures such as energy consumption reduction targets is recommended, especially given that the per capita electricity consumption in the Gulf is the highest in the world.
Nuclear, waste-to-energy, wave energy, off-shore wind energy, and the role of carbon capture and storage are other potential alternative energy sources, but their feasibility has yet to be investigated in Oman.
Define Energy Consumption per Sector
To plan a future energy mix, defining energy consumption per sector is as important as defining greenhouse gas emissions per sector. In Oman, industrial projects (such as petrochemical industries, cement, and refineries) were the major consumers of natural gas in 2016, followed by oil fields, power generation, and industrial areas (i.e. free economic zones) accounting for 55 percent, 22 percent, 19 percent, and 2 percent of total gas consumption, respectively.
2016 Natural Gas Use per Sector in Oman
To date, efforts to integrate alternative energy sources such as renewables are focused on the power and oil field sectors. In terms of the power sector, several renewable energy initiatives have already been adopted, including a 10 percent renewable electricity supply target and the Sahim rooftop solar photovoltaic installation initiative. In terms of oil fields, Petroleum Development Oman, the largest producer of oil and gas in the country, developed a 7 megawatt solar project to produce steam for enhanced oil recovery processes to replace the use of gas, and most recently Miraah, a 1 gigawatt solar enhanced oil recovery project.
The industrial sector, which is a major consumer of energy as well as a major source of carbon emissions, has received insufficient attention in terms of integrating alternative energy sources. Similarly, energy needs of the transportation sector are 100 percent met by petroleum products: Vehicles consume 93 percent of oil used domestically and the other 7 percent is used as jet fuel. Electric vehicles are a promising option and regulations need to be established for their utilization. Indeed, the first electric-car charging station at Sultan Qaboos University launched on January 21, as part of the Middle East edition of the Global Electric Vehicle Road Trip; this is promising and could stimulate future action toward using electric cars in Oman.
Define a Sectoral Energy Transition Strategy
Having defined energy consumption per sector as well as greenhouse gas emissions per sector, the next challenge is to establish a sectoral energy transition strategy.
To do so, it is important to realize that changes in energy systems involve not only changes in technologies but also a variety of elements including regulations, business models, markets, user practices, infrastructure, and networks of actors or culture. Therefore, the establishment of an energy transition committee, consisting of public-private networks, that oversees the transformation of each energy sector is recommended. The roles of the committee include to: establish a sectoral transition vision, define the alternative energy sources and technologies, identify the barriers to making the transition, and, most important, identify the policy incentives to overcome identified barriers. Given that energy system transformation is not an easy task and is a lengthy process, especially in economic systems with vested interest in fossil fuels like Oman, it is important to allow room for experimentation and learning-by-doing. Also, since the transition toward alternative energy sources is nascent in Oman, programs that support research and innovation as well as raising awareness are essential components of a sound energy transition strategy.
The recently established Energy Lab, led by the national economic diversification program, Tanfeedh, is indeed promising, especially as it consists of not only new technology frontrunners but also incumbent energy regime members such as the Ministry of Oil and Gas. However, it is important that the search for alternative energy sources does not serve the vested interests of incumbent energy regime members. Furthermore, it is important to consider the interactions between sectors for which intersectoral energy policies can be adopted.
These four guiding steps, although not exhaustive, are crucial to ensure tackling the dual challenge of energy security and climate change in a holistic manner without looking at a single energy sector in isolation. This is important in order to avoid future unintended environmental, economic, or political consequences. Examples of these consequences include increasing greenhouse gas emissions associated with building more water desalination plants to meet the increasing water demands; extra costs required to rebuild an infrastructure that accommodates new technologies such as electric vehicles; or the conflict of policies between sectors. Finally, defining an energy transition timeline and maintaining momentum in the form of regular consultations among policymakers are key.
is a research scholar at Georgetown University. Before joining Georgetown, she served as a visiting scholar at the Arab Gulf States Institute in Washington looking at the potential for climate policy integration into Saudi Arabia’s economic diversification strategies.
Tim Callen, mission chief for Saudi Arabia at the International Monetary Fund, spoke with AGSIW about Saudi Arabia's economic reform agenda.
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