January 27, 2021, 6:52 PM GMT+2 Updated on January 28, 2021, 3:00 AM GMT+2
- World’s main oil exporter says it wants to be carbon neutral
- Energy minister says latest virus waves won’t hit oil demand
Saudi Arabia wants to emulate Germany’s success with renewable energy and be a pioneer in hydrogen production, as the world’s biggest exporter of oil seeks to diversify its economy.
“We will be another Germany when it comes to renewables,” Energy Minister Prince Abdulaziz bin Salman said Wednesday on a panel at the Future Investment Initiative conference in Riyadh. “We will be pioneering.”
The kingdom is working with many countries on green and blue hydrogen projects and those to capture carbon emissions, he said.
The green version of the fuel, which produces only water vapor when burned, is made with renewable energy, typically solar and wind power. The blue type is produced from natural gas, with the greenhouse gas emissions being captured so they can’t escape into the atmosphere.
While hydrogen is seen as crucial for the switch from oil and gas to cleaner fuels, the technology to make it is still comparatively expensive.
State energy giant Saudi Aramco is leading the nation’s efforts with blue hydrogen. When it comes to green hydrogen, Pennsylvania-based Air Products & Chemicals Inc. and local firm ACWA Power International are building the world’s biggest such plant at Neom on the Red Sea coast.
Prince Abdulaziz said Saudi Arabia planned to convert half its power sector to gas, while the remainder would be fueled by renewable energy. Presently, the kingdom burns plenty of oil in its power plants.
The country is committed to carbon neutrality, he said, without giving a time frame for achieving that. And reaching the goals set out in the Paris climate agreement will help the Saudi economy become less reliant on oil, he said.
Saudi Arabia’s past efforts to boost renewable-energy production have met with little success. Germany, a country not known for sunny weather, has become one of the world’s biggest producers of solar energy, largely thanks to heavy government subsidies that helped spur the industry.
The kingdom is not worried about the impact of the latest coronavirus wave on oil demand, Prince Abdulaziz said in a separate interview at the same conference.
“There is not yet anything that would make us more concerned,” he said.
Saudi Arabia and other members of the Organization of Petroleum Exporting Countries are benefiting, he said, from Riyadh’s decision earlier this month to unilaterally cut crude output by 1 million barrels a day in February and March.
That move has helped raise Brent oil prices by more than 7% this year to around $55 a barrel.
The reduction in supplies by Saudi Arabia, as well as those announced by Iraq, will ensure that 1.4 million barrels of oil will be held back from the market each day in February, Prince Abdulaziz said. The figure will rise to 1.85 million barrels daily in March, he said.
Several major economies, including Germany and China, have tightened lockdowns in recent weeks. Despite that, oil inventories continue to fall, especially on ships, he said.
That’s “a good sign,” the minister said. “And I hope these lockdowns will not become more serious. But we remain ready. Vigilance is our motto.”
— With assistance by Anthony Di Paola
(Updates oil prices in 13th paragraph. An earlier version corrected the first deckhead and eighth paragraph to state that the government says it wants to be carbon neutral.)