Renewable energy companies in Europe have started presenting wind and solar as ‘freedom energy’ while they seek to wean the continent of Russian oil and gas.
Renewable energy companies in Europe have started presenting wind and solar as ‘freedom energy’ while they seek to wean the continent of Russian oil and gas. This is a message we heard at our Financing Wind Europe conference.
However, the memo has not reached Saudi Arabian oil and gas giant Aramco.
At the launch of its debut sustainability report last week, the company drew headlines for a plan to back 12GW of wind and solar projects by 2035; and reiterated its support for Saudi Arabia’s vision to back 58GW of renewables – including 40GW solar and 16GW wind – by 2030. And yet, the report is also clear that Aramco has little interest in either technology.
Instead, the main pillars of its sustainability plans are to lower the carbon intensity of its upstream oil and gas operations by at least 15% by 2035; reduce greenhouse gas emissions by more than 50million metric tonnes over the same period; and increase the use of blue ammonia and carbon capture, utilisation and storage technology. The role Aramco sees for solar and wind is to power its offices, production wells and other parts of its operations.
We welcome that as far as it goes, but its overarching message is that it is oil and gas, rather than renewables, that will be the driver of energy security as the energy transition is ongoing. The current crisis is a chance to address “chronic underinvestment in oil and gas production in recent years that has created a supply shortfall,” wrote its president and CEO Amin Nasser.
He warned this underinvestment could “create energy insecurity, rampant inflation, and social unrest” if it is not addressed; and added that “renewable alternatives are nowhere near ready to bridge the gap”.
The fact that Aramco has published a sustainability report at all is a cause for some celebration. It shows that the Middle Eastern company is taking part in the discussion on how best to tackle climate change: Aramco is looking to decarbonise its own operations by 2050 and is backing Saudi Arabia’s plan to achieve net-zero emissions by 2060. Whether it gets there is another matter.
Moreover, by focusing purely on the use of renewables for its own operations, Aramco has shown that its vision for renewables is limited.
A target of 12GW wind and solar by 2035 may look impressive in absolute numbers, but we should expect more from a company that is permanently battling with Apple for the title of world’s largest. By contrast, retail giant Amazon already has a portfolio of 15.7GW.
Finally, there is little indication that Aramco will make significant changes to its core business model. It has shown no appetite to move into the business of selling power rather than fuels, and even its use of natural gas to create ‘blue’ hydrogen – instead of renewables-powered ‘green’ hydrogen – puts it behind rivals like BP and Equinor.
We should not be surprised that Aramco is using the current energy crisis to make its case to pump more oil and gas; and we welcome the commitments that it does make to climate action in the report. But renewable energy is not central to its wider vision.
For renewables, the highlights of the report are the reiteration that Aramco invested in the 1.5GW Sudair solar project near Riyadh in 2021, alongside sovereign wealth vehicle Public Investment Fund and fellow Saudi firm ACWA Power. It is also pursuing a further two projects, totalling 2.3GW, with PIF.
We can also see Aramco’s slow progress on renewables as being in keeping with a lack of significant action on wind and solar by the Kingdom as a whole.
It is only last year that the nation’s first wind and solar farms were completed. The 400MW Dumat Al Jandal wind farm was developed by EDF Renewables and Masdar; and the 300MW Sakaka solar farm was developed by ACWA Power and AlGihaz Renewable Energy.
These will help the country to improve on the fact that just 0.1% of its overall energy mix came from renewable sources in 2020. But Aramco shows little appetite to help further redress that balance.
The World Bank has predicted that conflict in the Middle East could lead to a dramatic spike in oil prices, which is linked to increases in food prices – however it’s argued that the forecasts do not take into account the ability of energy storage to meet demand