Author(s)
This Baker Institute working paper also appears in the University of Cambridge’s Energy Policy Research Group’s working paper series as EPRG 2217.
Non-technical Summary
Saudi Arabia told the world in 2021 that it would strive for “net zero” greenhouse gas emissions by 2060, giving the kingdom 39 years to transform one of the earth’s most emissions intensive societies. At nearly 600 million tonnes, Saudi Arabia’s domestic carbon dioxide emissions in 2020 ranked ninth in the world, just behind South Korea and ahead of Canada. On a per capita basis, Saudi Arabia emits more CO2 than even the United States—17 metric tons a year versus 14 in the US—on average incomes just 75% as large.
But Saudi Arabia also has numerous advantages in decarbonization. The kingdom has an enormous resource base in renewable energy and feedstocks for clean fuels, as well as vast reservoirs of geological pore space that can be used for storing carbon. It has concentrated emissions sources that are clustered in close proximity to geological storage. Saudi firms and universities hold an impressive reservoir of human engineering talent and demonstrated expertise in transporting and converting energy, and in leveraging geology. The Saudi government also has a high level of funding and policymaking autonomy without veto wielders.
Combined, these factors provide a strong competitive advantage in carbon reduction. If it achieves a modest level of domestic success, the kingdom could later market carbon storage or offsetting services for other governments with fewer such attributes.
This paper lays out one potential step-by-step path toward decarbonizing Saudi Arabia, imagining a sweeping restructuring of a fossil fuel-driven society and economy. Transformational changes would alter energy consumption, electricity generation and storage, transportation and industrial operations. Many reforms made under the aegis of the Saudi “net zero” goal would serve other useful but unrelated purposes.
The paper also examines the credibility of the net-zero announcement and desirability of decarbonization for the Saudi regime and economy. What does Saudi Arabia gain by joining a movement that ostensibly seeks to end the combustion of oil, Saudi Arabia’s main export commodity and the source of roughly 80% of its government budget? As recently as the 2021 COP 26 in Glasgow, delegates from Saudi Arabia (among others) lobbied a UN committee to temper language urging a swift transition to cleaner energy.[1] That same year the Saudi oil minister vowed that his country would produce “every molecule” of its oil and gas reserves.[2] Are such actions compatible with the kingdom’s net zero goal?
And, given that prior grandiose energy initiatives were shelved soon after announcement, how seriously should observers treat the Saudi net zero commitment? At minimum, determining the regime’s level of compliance will require taking stock of whether Saudi Arabia reaches interim milestones toward the 2060 goal.
The Saudi government’s declaratory embrace of domestic decarbonization does not necessarily signal a change in climate strategy. Policymakers in the kingdom appear comfortable advocating diverging climate policies for Saudi Arabia, on the one hand, and for the rest of the world on the other.
Ultimately, the reward for successful implementation of Saudi Arabia’s Net Zero 2060 ambition could establish the kingdom as a credible player in the global climate arena, revitalizing the kingdom’s influence and allowing Saudi policymakers to shape the energy transition in ways that could retain a greater long-term role for hydrocarbons.
Abstract
Saudi Arabia’s stated goal of reaching net zero by 2060 puts the kingdom in a paradoxical position. The Saudi leadership proposes to decarbonize an oil-intensive society and economy while selling oil to the world. As such, the credibility of the Saudi commitment will remain an open question until concrete progress toward restructuring the kingdom’s energy system is demonstrated. Modest initial steps toward net zero include investments in renewables alongside pricing reforms of energy products and services. Another ongoing push involves oil-to-gas switching in the kingdom’s power sector, which can be augmented by carbon capture and storage and, eventually, gas-to-hydrogen substitution. Doubts and difficulties aside, Saudi Arabia holds major advantages in decarbonization. These include unused land with copious solar radiation, as well as geological storage near carbon emissions clusters. The kingdom is also equipped with relevant knowledge and investment capital. Fully compensating for reduced oil export rents may not be possible if worldwide carbon neutrality plans come to fruition. Despite the short-term benefits of high energy prices after the Russian invasion of Ukraine, economic and geopolitical decline is a likely medium-term outcome for the kingdom. However, there are also opportunities including replacing oil revenues with those arising from carbon disposal for countries and firms lacking the kingdom’s competitive advantages.
Introduction
In October 2021, Saudi Arabia told the world it would eliminate or offset its greenhouse gas emissions by 2060, adopting the same “net zero” target date as governments in China, Russia, Indonesia and Nigeria. A year earlier, the kingdom’s national oil company, or NOC, Saudi Aramco, announced it would decarbonize its own operations even earlier, by 2050.[3]
The gargantuan task of decarbonizing Saudi Arabia is evident in a few simple statistics. A country that ranked 41st in the world by population and 20th by economic activity consumed more oil in 2020 than any country outside the United States, China and India. On a per capita basis, Saudi Arabia emits more CO2 than the United States—17 metric tons a year versus 14 in the US—on average incomes just 75% as large.
A serious program to decarbonize Saudi Arabia would impose a sweeping restructuring of a fossil fuel-driven society and economy in less than four decades. Transformational changes would alter energy consumption, power generation and storage, transportation and industrial operations.
The Saudi government has hinted at its decarbonization path, with government statements and reports mentioning initiatives, favored technologies and investment targets. This paper extrapolates from those hints to lay out a plausible path toward decarbonizing Saudi Arabia’s energy and emissions systems. This work also examines potential secondary effects on the kingdom, as well as its competitive advantages and disadvantages.
Briefly stated, a net zero program might see demand-side reforms revoking fuel and utility subsidies, driving efficiency gains and technology switching, some of which would be legally mandated. The Saudi transport sector might shift toward electric vehicles, trading petroleum fuels whose export underpins the economy for a network of charging stations.
On the supply side, the transformation would push oil from the kingdom’s electricity generation sector, replacing it with new solar and perhaps nuclear power plants alongside electricity storage. An expansion of the power grid would supply the transport sector and extend electrification to replace fossil fuels in industry.
Desalination plants, refineries, petrochemical plants and other emitters in the kingdom’s industrial zones would see their emissions captured, compressed and piped to underground storage, perhaps in depleting oilfields or in vast aquifers below the western half of the Arabian Peninsula. Longer term, carbon capture would facilitate replacing natural gas with low-emission fuels based on hydrogen, including ammonia and methanol.
The reward for successful implementation of Saudi Arabia’s Net Zero 2060 ambition could be significant. A kingdom struggling to retain geostrategic importance as the world’s central banker of oil would leverage domestic decarbonization to establish credibility in the global climate arena, revitalizing the kingdom’s influence and allowing Saudi policymakers to shape the energy transition in ways that could retain a greater long-term role for hydrocarbons.
Saudi Aramco’s 2021 sustainability report suggests such an ambition. “Developing low-carbon products and solutions helps to sustain and diversify demand for oil and gas through competitive technologies,” the report states.[4]
Net zero success might also be economically counterproductive. A vigorous decarbonization push by Saudi Arabia could inspire other petrostates to pursue dramatic reductions of their own, perhaps making a more serious effort than some governments may find optimal. More broadly, any encouragement by Saudi Arabia toward decarbonization could inspire reductions in oil combustion outside the kingdom, which, all else constant, would reduce oil prices and rent flows to the kingdom. Therefore, a Saudi role that motivates global momentum toward climate action might be viewed negatively inside domestic policymaking circles.
For this reason and others, it remains possible that the Saudi leadership will not earnestly pursue its commitment to full decarbonization. Credibility of past Saudi environmental policy declarations has been lacking, which suggests a level of comfort with disregarding official targets. For instance, the Saudi government did not pursue a 2012 announcement to build 23.9 GW of renewables by 2020, nor a 2018 memorandum of intent to build 150-200 GW of renewables by 2030; while a 2011 plan to build 16 nuclear power reactors within 20 years was also shelved. [5] As of mid-2022, Saudi Arabia reported an renewables installation of just 700 megawatts.[6]
Decarbonization commitments of other regional governments have had mixed effects on energy policy. The UAE’s net zero goal appears to have led Dubai’s utility to convert the just-built Hassyan coal-fired power plant to run on natural gas.[7] But Turkey’s decarbonization commitment does not seem to be constraining policy. Ankara’s ongoing expansion of its coal-fired power generation was unaffected by President Erdogan’s declaration of intent to reach net zero by 2053.[8]
Therefore, any demonstrated lack of determination by Riyadh in pursuit of its decarbonization goals might also signal to other oil-exporting governments that climate commitments need not be adhered to in the near term.
Only by observing interim progress can the sincerity of the Saudi net zero commitment be determined. One milestone comes in 2030, the date by which the kingdom has pledged to reach its Paris Agreement goal of a reduction of 278 million tonnes of CO2 per year (below a 2019 baseline of 580 million tonnes).[9] Some $187bn has been earmarked toward 2030 climate targets including GHG reduction.[10]
Inherent Contradictions
The specter of the world’s premier petrostate making a serious bid at full decarbonization is not without its contradictions. Saudi Arabia’s net zero pursuit comes alongside plans to ramp up production and export of oil, the source of more than a third of the world’s fuel-based emissions.[11] Saudi Aramco in 2020 announced capital investment aimed at boosting production capacity from 12 to 13 million barrels per day by 2027. [12] Leadership messaging on the energy transition has been mixed. Regular statements underscore the view that fossil fuels must remain a key part of the future energy mix and oppose a global transition away from fossil fuels.
Saudi Arabia’s updated Paris climate pledge, or NDC, more than doubles its emissions reduction target to 278 million tonnes of C02 equivalent through massive installations of renewable power and hydrogen production along with efforts to capture and sequester emissions. But the document also exemplifies the policy dichotomy, declaring that cutting Saudi emissions by 2030 is contingent upon “a robust contribution from hydrocarbon export revenues to the national economy.”[13] And, as mentioned above, Aramco states that it seeks to leverage transition technologies to “sustain and diversify demand for oil and gas.”[14]
Clearly, the kingdom’s planners are counting on oil and oil-based products remaining important exports for decades. This is borne out by forecasts depicting a long and slow energy transition. Even scenarios modeling a rapid transition retain demand for oil as a petrochemical feedstock and fuel for heavy and specialized transport. Saudi Arabia’s Paris NDC makes no suggestions for abating or mitigating combustion emissions from the kingdom’s oil exports.
Further contradictions are evident in contrasting attitudes toward an energy transition inside versus outside the kingdom. There are numerous tangible benefits from a major shift to renewables inside the kingdom. Replacing carbon-based power and transportation with cheaper clean electricity allows for increased hydrocarbons exports and revenues, since domestic oil and gas consumption is heavily subsidized and exports are priced on global benchmarks. Indeed, several utility scale renewables installations were under construction, as will be discussed. Reducing subsidies and imposing other market-based economic reforms remains attractive regardless of decarbonization goals.
Outside the kingdom, however, a transition from combustible fuels to clean electricity—coupled with efficiency mandates and bans on internal combustion engine vehicles—threatens Saudi Aramco’s oil income. If no replacement is found for oil’s contribution to the Saudi government budget, usually between 80% and 90% of the total, the kingdom’s patronage-based governance model will be undermined.
In 2022, however, that was not the case. The Russian invasion of Ukraine and a stronger-than-expected pandemic recovery provided Saudi Aramco with record revenues of nearly $88 billion in the year’s first half, including nearly $1 billion per day in the spring.[15] Longer term, however, changes in vehicle propulsion promised by automakers and nearly three dozen national governments look likely to shave down oil demand (although one 2019 estimate suggests a worldwide ban on ICE engines in light vehicles would only cut oil demand by around 15 million b/d).[16]
Within Saudi Aramco a similar internal-external conflict is apparent. Saudi Aramco is the largest single commercial entity producing carbon-based fuel in the world. (Fig. 2, below) Combustion of Aramco’s oil and gas accounted for roughly 5% of global emissions in 2018,[17] and about 4% of total historic atmospheric accumulations since Saudi oil production began in 1938.[18] The success of global climate action hinges on halting or abating GHG emissions from combustion of oil and gas marketed by Saudi Aramco.
But abatement plans of Saudi Aramco ignore the so-called Scope 3 or combustion emissions. The plans focus on much smaller emissions from Aramco’s “wholly owned and operated assets” (Scope 1 and 2 emissions).[19]
Oil and gas production are the source of roughly 14% of GHG emissions within Saudi Arabia and Aramco has agreed to eliminate or offset those emissions by 2050. Such a commitment is aimed not at constraining the NOC’s business model but enhancing the competitiveness of Aramco’s oil exports. Carbon has emerged as a new arena for competition among global oil producers, particularly as global oil production plateaus and begins to decline.
“When it comes to oil and gas, the future now clearly belongs to the lowest cost, least-carbon intensive producers,” CEO Amin Nasser has stated. “We intend to be one of those producers.” [20]
Rent windfalls in 2022 provided capital for NOCs like Aramco to invest in reducing their emissions and providing clean energy for the domestic market. However, that did not appear to be happening.
NOCs with large resource bases had invested less in diversification and transition technologies than shareholder-owned counterparts. Research from Wood Mackenzie shows that, as of early 2022, Aramco had not announced any capital commitment to decarbonization or transitioning to clean energy.[21] (In 2021 Aramco’s $315 million in “sustainability” research amounted to a third of its R&D budget but just 1% of its $32 billion capital spending.[22]) The lack of decarbonization investment extended beyond Aramco to NOCs in Qatar, UAE, Iran, Algeria, Russia and Mexico. None of the world’s major state-owned oil firms had dedicated more than 5% of investment capital toward decarbonization or renewables. By contrast, shareholder-owned IOCs had allocated an average of 15% and European IOCs 20%.[23] Some IOCs have introduced net zero plans that go well beyond Aramco’s to include Scope 3 emissions.[24]
Investment allocations comprise another important indicator in tracking adherence to net zero commitments by Saudi Arabia and by Saudi Aramco.
Current GHG Emissions Accounting
The task of decarbonizing Saudi Arabia should not be underestimated. At nearly 600 million tonnes, Saudi Arabia’s domestic CO2 emissions in 2020 ranked ninth in the world, just behind South Korea and ahead of Canada. At 17 tonnes per capita, Saudi emissions were nearly quadruple the world average. As shown in Fig. 1 below, power generation accounted for 40% of the kingdom’s emissions, with another 40% from industry (including refining and petrochemicals) and the oil and gas sector. Transport added a further 19%, with the building sector contributing just 1%.[25]
Figure 1: Saudi CO2 emissions by sector since 1970 (Source: EDGAR 2022)
Figure 2: Top 20 global sources of fossil fuels and implied GHGs emitted during combustion in 2018. (Source: Carbon Majors Database 2020 https://climateaccountability.org/carbonmajors_dataset2020.html) A Bloomberg estimate of Aramco’s Scope 3 (combustion) emissions put them at 1.6 billion tonnes, just over 4% of the global total. (Source: David Fickling and Elaine He, “The Biggest Polluters are Hiding in Plain Sight.” Bloomberg, Sept 20, 2020; https://www.bloomberg.com/graphics/2020-opinion-climate-global-biggest-polluters-scope-3-emissions-disclosures)
Steps to Net Zero in Saudi Arabia
Hydrocarbon exporting and carbon-intensive economies are those most exposed to economic damage from the energy transition. The disruption involved in replacing fossil fuels with renewables and low- or zero-carbon substitutes is expected to be costly, particularly in the initial decades, before allowing for a potential return to profitability in later decades.[26]
The carbon intensity of the Saudi economy also presents policymakers with a number of inexpensive opportunities to reduce emissions while improving economic competitiveness. Chief among these is a reduction in oil use. In 2021, the kingdom consumed an average of 3.6 million barrels per day of oil and gas liquids.[27] Almost a third of that was burned to produce electricity, roughly 430,000 b/d of crude oil and 600,000 b/d of refined products, on average.[28] In most of the world, oil combustion in power generation was displaced decades ago by cleaner and cheaper substitutes. Expunging oil from the domestic power sector is attractive for reasons of competitive cost and efficiency, as well as environment.
How might a plan to reach net zero in the kingdom start? The following sections propose one potential pathway that begins with subsidy reform and efficiency improvements, then shifts toward decarbonizing power and transport. Further steps target the industrial and oil and gas sectors. Of course, retracting subsidies on energy products and services is politically difficult and could divert actual decarbonization to start elsewhere.
Eliminate Subsidies to Improve Efficiency
Under the net zero plan, subsidized energy prices inside the kingdom, serving to encourage fossil fuel consumption and emissions, will come under intense pressure for reform. The net zero goal aligns with already strong aspiration for rationalized prices and energy efficiency.
Major increases in administered prices were imposed in 2016 and 2018, which succeeded in dampening demand for transport fuels and electricity. Saudi demand for oil appears to have peaked in 2016 and dropped by almost 10%, or 367,000 b/d, through the end of 2021.[29] (Fig. 3)
Figure 3 Domestic demand for oil and natural gas liquids has slipped since subsidy reforms of 2016 and 2018 (Source: BP 2022)
Saudi energy prices are still well below global averages. Saudi gasoline was cheaper in August 2022 than all but 18 other countries, averaging 62 US cents/liter ($2.35/US gallon). Diesel in the kingdom, at 17 cents/liter (63 cents/gal) was cheaper than everywhere except Libya, Venezuela and Iran. Residential electricity prices, starting under 5 US cents/kilowatt-hour, were a third of the US average and just 15% of those in Britain.[30] (Fig. 4)
Further increases would align Saudi energy prices closer to world prices, encouraging efficiency and technology switching. Higher prices would also reduce the financial penalty on Saudi Aramco for domestic sales. Weakening domestic demand would allow surplus oil to be exported at market prices or used as feedstock for higher value-added petrochemicals or fertilizer. While subsidy reforms are already a priority among Saudi technocrats,[31] public opposition has slowed implementation,[32] even with cash compensation under the Citizens Account Program.
The Saudi net zero goal provides a rationale for further price increases, which could give policymakers political cover for reforms of distortionary subsidies valued at more than 5% of GDP. (Fig. 5) The IMF and World Bank have urged continued subsidy retractions, with the World Bank stating in 2022 that the energy efficiency improvements flowing from subsidy reforms are “the single most important element of moving to net zero emissions.”[33]
Figure 4: Power prices in US cents per kWh. Prices remained low by world levels in Saudi Arabia and its GCC neighbors (depicted in red), all of which were in the lowest quintile (Source: World Bank 2022)
Figure 5: Subsidized energy products and services (in USD billions, left axis) accounted for more than 5% of 2020 Saudi GDP (in % of GDP, right axis) (Source: World Bank 2022)
Power Sector Decarbonization
A sincere net zero plan would make an early effort to decarbonize the power sector, followed by a concerted shift in energy consumption away from direct fossil fuel combustion and toward electricity. As shown in Fig. 1, 40% of the kingdom’s emissions flow from power generation, split between natural gas (61%) and oil-based fuels including crude oil and heavy fuel oil comprising nearly all the rest. (Fig. 6) Further, some 70% of power production is used to cool buildings.[34]
Figure 6: Saudi Arabia generated 357 terawatt-hours of power in 2021, less than one TWh of which (about 0.2%) was generated using renewables. (Source: BP 2022)
Much of this decarbonization can be achieved from a massive expansion of renewables alongside oil-to-gas switching. Eventually, nuclear power could play a role. The kingdom’s comparative advantage in solar generation is well known. But Saudi Arabia is also home to uranium deposits that the government plans to leverage in a future nuclear power program.[35]
Solar power development is underway. Contracts for nearly 5GW of renewables capacity had been awarded as of Spring 2022 (Fig. 7) and another 15 GW were to be granted by the end of 2023. These projects represent the initial stages of a pledged 58.7 GW renewables installation announced by Saudi energy minister Prince Abdulaziz bin Salman; part of a goal for renewables to generate half the national power supply by 2030, with natural gas covering the other half.[36] (A World Bank study projects an installation of 40 GW of solar PV, 16 GW of wind power, and 2.7 GW of concentrating solar power.[37])
Figure 7: Saudi renewables capacity awards planned for 2022 and 2023, a total of 3.1 GW (Source: MEES 2022)
Reaching the 50% goal in just over seven years is unlikely. In 2021, just 0.2% of Saudi electricity was generated from renewable sources.[38] Investments far beyond those cited in Fig. 7 will be required.
While the kingdom’s plans to deal with its emissions-rich power sector will help achieve its net zero target, there are rational economic reasons for replacing costly and dirty oil-fired generation with cheaper solar, wind and natural gas.
Saudi Arabia, like its GCC neighbors, enjoys the world’s lowest cost solar generation, due to copious solar radiation and large amounts of vacant land close to load centers. Recent power purchase contracts between developers and government-owned utilities have breached the 2 US cents per kilowatt-hour threshold.[39] Daily peak demand corresponds relatively well with solar power production, particularly in inland areas. Coastal areas are more problematic for solar due to humid evenings encouraging consumption after dark.
Wind generation appears less competitive, with the exception of consistent wind resources in western Saudi Arabia near 8 meters per second. Overall wind potential is low, with speeds averaging just over 5 m/s, well below the global average for windy regions of 11m/s.[40]
Beyond just building out renewables to replace oil-fired generation, the kingdom will also need to neutralize the emissions of its remaining gas-fired power plants. This involves replacing gas with renewables (which allows gas to be used in higher value applications in petrochemicals, fertilizer and hydrogen), or capturing the emissions of combusted gas. The energy minister also hinted at solutions for this as well. “We believe that carbon capture, utilization and storage, direct air capture, hydrogen and low-carbon fuels are the things that will develop the necessary ingredients,” Prince Abdulaziz said in 2021.[41]
The kingdom will also need to generate more electricity overall. That is because power demand, already growing at an average rate of nearly 5% per year over the last decade[42] will expand further as other sectors are electrified. Growth will be tempered by success with efficiency initiatives mentioned above.
Coping with intermittency will require backup generation and demand-side management tools such as load-shedding discounts. Backup generation candidates are natural gas with CCS, electricity storage systems like batteries, and—eventually—clean fuels like biogas or hydrogen. Nuclear power can also be paired with battery storage and used both as a replacement for thermal generation and a source of backup for renewables.[43]
Transport
The second most obvious candidate for decarbonization is the transport sector, responsible for 19% of the kingdom’s CO2 in 2020. Decarbonization of both power and transport sectors would eliminate roughly 60% of Saudi emissions.
Light-duty vehicles, which make up just over half of the kingdom’s transport energy demand (Fig. 8), represent the initial market for electrification. The kingdom and some of its neighbors had already embarked on electric vehicle strategies, including attracting manufacturers. Saudi Arabia’s venture with Lucid Motors was expected to assemble 155,000 cars a year and sell 100,000 EVs to the Saudi government, while Saudi firm Electromin announced it had been contracted to install vehicle charging points.[44] The government’s Saudi Green Initiative set a goal of 30% vehicle electrification in Riyadh by 2030.[45]
In the neighboring UAE, manufacturer M Glory began building an assembly plant for 55,000 EVs per year in Dubai[46] while China’s NWTN agreed to build a similar-sized plant in Abu Dhabi.[47]
Despite initial progress, decarbonizing the transport sector is more difficult than eliminating emissions from the electric power sector. While some transport modes work well with electrification – personal vehicles, public transport buses and trains, delivery fleet vehicles and bicycles – others do not. Efficiency measures[48] can reduce emissions from long-distance freight transport, aircraft and shipping, but total elimination may require offsets.
Research suggests some heavy transport modes may be more efficiently converted to hybrid (bio)diesel or hybrid gasoline systems, or perhaps hydrogen fuel cells or even compressed (bio)gas. Shifting between transport modes—for example moving heavy diesel truck traffic to electrified rail—is another crucial component.[49] Air carriers are already experimenting with biofuels, while hydrogen (ammonia) and methanol (mainly from biomass) are among future potential sources in shipping.[50]
It bears noting that Saudi Arabia’s net zero goal does not require it to concern itself with international aviation and shipping, which are tallied on external accounts. As Fig. 8 shows, domestic shipping and aviation represent small contributions to Saudi transport emissions.
Figure 8: Energy demand in the Saudi transport sector. (Source: International Energy Forum (IEF). 2021. “Saudi Energy Efficiency Program.” 2022. https://www.ief.org/ via KAPSARC.) Notes: LDV = light-duty vehicles and includes sedan cars, sport utility vehicles (SUVs), minivans, and any other road vehicles that weigh less than 3,500 kilograms (kg); HDV = heavy-duty vehicles (also called commercial vehicles, i.e., trucks, buses, and other road vehicles that weigh more than 3,500 kg).
Subsidy reforms in 2016 and 2018 have reduced the average 7% yearly growth rate of Saudi fuel demand and improved fleet efficiency. Oil demand in the kingdom declined by an average of 1% per year between 2016 and 2021, BP data show.
Industry
Industrial emissions in Saudi Arabia—including the oil and gas sector itself—comprise the final 40% of the kingdom’s emissions. Decarbonizing industry is well known as a challenging proposition. However, Saudi Arabia has declared its intention to develop two of the most promising industrial decarbonization technologies, CCS and hydrogen.[51]
One of the most difficult industries to decarbonize is the petrochemical business, which, in Saudi Arabia is largely based around ethylene, a plastics precursor. Ethylene is produced using high temperature steam to crack hydrocarbons, derived from oil (naphtha) or gas (ethane).
In one sense, petrochemical production represents a climate-compliant use for hydrocarbons. The oil and gas feedstocks are converted—usually to plastic—rather than combusted, and their carbon content is retained within the final product. Of course, any carbon sequestered can be released if plastics are incinerated.
The process of cracking naptha or ethane is the main emission source since it requires burning fossil fuels, mainly natural gas, to produce process heat. Creating a single kilogram of ethylene creates about 2 kg. of carbon dioxide emissions along with other pollutants. Globally, ethylene production was the No. 4 source of industrial emissions in 2020, emitting 230 million metric tons, nearly as much as Spain.[52]
Options for decarbonizing petrochemical plants include using clean electricity or hydrogen as heat sources, or capturing and sequestering emissions using CCS. Aramco is also experimenting with direct crude-to-chemicals conversion which would eliminate some energy-intensive processes.
The geographic clustering of Saudi Arabia’s industrial sector, along with advantageous geology, simplifies decarbonization. Most Saudi industry is concentrated in three regions, as depicted on the map below (Fig. 9). Such clustering is ideal for capturing, gathering and storing emissions underground. Industrial clusters can become hubs for stripping carbon from flue gases, by reducing infrastructure requirements and costs for CCS, and for future re-fueling of plants with clean fuels like hydrogen.
Figure9: Large stationary emissions sources by type in Saudi Arabia. (Source: Liu et al., The role of CO2 capture and storage in Saudi Arabia’s energy future. International Journal of Greenhouse Gas Control, 2012; dx.doi.org/10.1016/j.ijggc.2012.08.008 )
Carbon Capture and Storage
Saudi Arabia, like other fossil fuel-linked countries and firms, has been a proponent of carbon capture and storage. This is due to the technology’s attributes as both a source of fossil fuel demand and a method for abating its emissions. Both attributes serve to preserve fossil fuels in a climate compatible energy mix. Capturing and sequestering carbon is also a key component of Aramco’s blue hydrogen and blue ammonia ventures.
The kingdom also has numerous physical characteristics rendering it an ideal location for CCS.
Two capture projects already exist in the kingdom. Saudi chemical firm SABIC has captured CO2 since 2015 at an ethylene glycol plant. The 500,000 metric tonnes of carbon captured per year is not stored underground but used as a feedstock for fertilizer, methanol, and liquefied CO2 used in the food and drink industry.[53] A second facility operates at Uthmaniyah, which captures and sequesters up to 800,000 metric tons/year of CO2 from a natural gas processing facility.[54]
Saudi Arabia’s 2021 UN climate pledge details plans to transform the emissions-rich industrial cities of Jubail and Yanbu into centers of carbon capture. Aramco plans to capture 11 million tonnes per year by 2035 en route to achieving the promised elimination or offsetting its direct and supply chain emissions (Scope 1 and 2).
Aramco’s 2021 sustainability report estimated Scope 1 emissions at 52.3mn tonnes of CO₂ equivalent, and Scope 2 emissions at 15.5mn tonnes, for a combined 68mn tons. (Fig. 10)[55] Without CCS, Aramco’s emissions would rise, given plans to increase oil production capacity to 13mn b/d, alongside expansions in refining and gas production.
Figure 10: Saudi Aramco's 2020 Scope 1 and 2 emissions accounting from its 2021 sustainability report. (Source: Saudi Aramco 2021) Note that these totals include only emissions from wholly owned and operated facilities and do not include joint ventures. Adding in joint chemical and refining ventures would add as much as 28 million tonnes of additional yearly emissions, according to Bloomberg. Adding in Scope 3 emissions from combustion would increase the total by some 1.6 billion tonnes. (Source: Akshat Rathi and Matthew Martin, “Aramco’s New Disclosures Still Exclude Vast Majority of its Emissions.” Bloomberg, April 6, 2021; https://www.bloomberg.com/news/articles/2021-04-06/aramco-s-new-disclosures-still-exclude-vast-majority-of-its-emissions)
Were the kingdom to pursue capture of 11m tonnes of CO2 per year at recent US cost estimates, initial capture costs would range from $200 million to $2.2 billion per year, depending on purity of the waste stream. (Table 1) High purity CO2 streams that do not require separation from other waste gases are cheapest to capture. Transport and sequestration would add additional costs. One study estimated these costs at $17-$23/tonne in the US context.[56]
Table 1: CCS costs in the US context for industrial carbon streams of various CO2 concentrations. Estimates do not include cost of transport or sequestration, or cost reductions from learning by doing, efficiency improvements, or technological advances. (Source: Harvard Belfer Center 2022)
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Ammonia production |
Hydrogen production |
Natural gas power plant |
Cement production |
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Low |
High |
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