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Lloyd’s Register publishes executive briefing on Low Carbon and Politics in the Middle East

The latest executive briefing from Lloyd’s Register, “Low Carbon and Politics: the merging of two worlds”, provides insight as to how and why companies in the Middle East are exploring renewable energy and energy efficiency technologies.
Lloyd’s Register publishes executive briefing on Low Carbon and Politics in the Middle East

According to many Executives in the region, there remain continuing challenges and opportunities for renewable energy technologies in the region. Squeezed budgets from lower oil prices since mid-2014, coupled with rising energy demand means that the demand for renewable energy and energy efficiency technologies across the Middle East will increase significantly. This was discussed extensively in an industry roundtable at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) on the 8th November, attended by a cross-section of senior stakeholders from national and international oil companies, environmental companies, financial consultancies and academia and research.

Regional economies face a major challenge in how to establish a cost-efficient low carbon future while not jeopardizing their energy economics and security, which is presently still dominated by hydrocarbons. If those systems are relinquished too rapidly, rather than through a measured transition to renewables and energy efficiency, this could have a negative, even potentially destabilising effect on regional economies.

This is particularly true given that the growth of the low carbon market is not yet a major threat to the prominence of hydrocarbons, which participants at the round table felt will be a primary source of energy in the region for at least five decades yet. However, participants also agreed that the likely major current benefit offered by renewables is the ability to open a gateway for cost-cutting and operational efficiency.

“This is a timely issue, considering the International Energy Agency (IEA) recorded a 25 percent reduction in field investments in 2015 to $583 billion and said in September this year that oil prices could stay within today’s $50 a barrel range until mid-2017” said Alasdair Buchanan, Lloyd’s Register’s Energy Director, who added that the unnerving outlook for oil-centered economies in the Gulf, such as Saudi Arabia, Qatar, Kuwait and the UAE, can be increasingly offset by low carbon solutions.

The US Energy Information Administration (EIA) has forecast a 48 percent increase in global energy consumption between 2012 and 2040, with the global population expected to increase by 31 percent from 7.4 billion currently to 9.7 billion by 2050. The growth of renewable and energy efficient technologies is integral to meeting the increased demand for energy, while the environmental incentives underpinning political appetite for renewable energy policies and technologies are also stronger than ever, according to Buchanan.

Mr Buchanan also said that the Middle East would benefit from the signposts towards a low carbon future provided an integrated energy policy and that there is a considerable level of multilateral cooperation and collaboration already happening in this area. This has in turn created a strong and united movement for positive change with the adoption of new technologies helping to define a low carbon future with widespread and cost effective implementation.

Furthermore, simple economics are revolutionising the the accessibility of renewable and energy efficient technologies as they become more affordable. This in turn will trigger an unprecedented step-change in the current global low carbon ethos, with solar, wind and hydro heralding the birth of the world’s fourth industrial revolution, in association with nuclear.

Innovative uses of existing technologies are also being developed in the hope of raising awareness of efficient energy use amongst consumers, along with unprecedented subsidy cuts that have started being implemented in the Gulf since January 2015. For example, the current use of radio frequency identification (RFID) by Dubai’s Emirates National Oil Company (ENOC) at their retail stations to help motorists manage their fuel budgets.

Participants at the executive briefing unanimously agreed that the Paris Agreement spells a new chapter in the historically fragmented narrative of international climate policy. The success is best illustrated by the US and China’s agreement in September to formally ratify the Agreement – the world’s two largest economies that are responsible for 40 percent of global carbon emissions are now on board.

However, Governments and financial institutions in the Middle East and beyond must enhance existing frameworks that encourage exploratory projects. The executive briefing heard how successful R&D and the resulting renewable energy technologies rely heavily on a well-measured trial and error approach.

“All energy stakeholders need easy access to funding for R&D, which includes laboratories, testing sites and specialist human resources, as well as the means to share intellectual property (IP) and register patents that reach international standards” said Buchanon. “Siloed efforts are unlikely to succeed.”

Energy entities at the briefing said high quality education and an ability to think outside of the box lie at the heart of successful low carbon R&D, so governments and academia in the Middle East and beyond must continually bolster students’ learning of science, technology, engineering and mathematics (STEM). According to Buchanan, this would nurture the talent of the world’s future thermodynamic specialists, electrical engineers and low carbon economists. Such skills, along with an equally vital capacity to think critically and creatively, will create a holistic R&D workforce to spearhead the much-needed innovation that participants from wider industry explained is vital for the next generation.

Three key lessons can be learned from this year’s Lloyd’s Register Middle East executive briefing. The first of these is that low carbon technologies are compatible with current hydrocarbon operations. Secondly, supporting small and medium-sized enterprises’ (SMEs) entrepreneurial spirit is crucial. Finally, private-public partnerships are highly effective.

All three points can be applied to resolve the disparity between the region’s water scarcity and its growing population and booming industry. For example, Qatar already uses desalinated water to meet 99 percent of municipal demand, amidst a forecast that today’s population of 2.6 million is likely to multiply eight-fold by 2050.

“These briefings help to discuss and identify emerging risks and opportunities, to assess best practice and key stakeholder’s approach to sustainability, and to encourage ever-greater innovation in the region” said Buchanan. “It lies at the heart of what we believe to be essential for the future ‘health’ of the Middle East energy industry, as the implementation of new technology has safety implications which is fundamentally a driver for the industry’s future.”

Lloyd’s Register is a global engineering, technical and business services organisation wholly owned by the Lloyd’s Register Foundation. It is a UK charity dedicated to research and education in science and engineering, initially founded in 1760 as a marine classification society.

LR now operates across many industry sectors, with some 8,000 employees in 78 countries. It is working to advance the shared understanding of the challenges faced by the industry in the Middle East – and the wider global community.

For additional information:

Lloyd’s Register

Low Carbon and Politics: The merging of two worlds

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