This week the MENA (Middle East North Africa) region is hosting its second ever Climate Week, which is an important opportunity for the region to convene and discuss its climate priorities and actions. This convening is a particularly critical step forward for the Gulf Cooperation Council (GCC) countries — where economic growth has been closely tied to fossil fuel production — to implement action around climate.
Saudi Arabia and the UAE, in particular, have set goals of achieving net zero CO2 emissions by 2060 and 2050 respectively. Both countries have also laid out plans for power sector decarbonisation through the rapid expansion of renewable energy and development of nuclear power.1 Carbon capture and storage (CCS) must also play a key role in reaching these climate targets on schedule, particularly as a means of addressing hard-to-abate emissions from industries such as petrochemicals, cement, and steel. CCS can also contribute to accelerating decarbonisation of the power sector and the conversion of hydrocarbon fuels to low-carbon alternatives. The IPCC’s latest report has made clear that carbon capture and storage is a critical element in climate change mitigation pathways that avoid massive reductions in energy demand.
The Gulf region offers an attractive environment for rapid scale up of CCS, due to the extensive suitable geology for CO2 storage and the presence of National Oil Companies (NOCs) which possess the requisite economic resources and expertise to meet this challenge. Both Saudi Arabia and the UAE have a clear opportunity to become world leaders in demonstrating and deploying carbon capture and storage, not only for the attainment of domestic decarbonisation goals, but to help drive down technology costs, demonstrate new technologies, and progress CCS for faster adoption globally.
Like other major hydrocarbon-producing regions, the Gulf can deploy its resources to start returning carbon to the Earth. This blog summarises the current status of CCS in Saudi Arabia and the UAE and lays out some key steps they can take to maximise the decarbonisation opportunity for these technologies.
|GDP||3.2% annual growth in 2021.2|
|CO2 emissions||672 Mt (1.8% of global): 50% from power, 24% from industry.3|
|Climate policy||Goal of net zero emissions by 2060.|
|Estimated CO2 storage potential||5.2 Gt in depleted gas reservoirs, 40-318 Gt in the Rub’al-Khali basin.4|
|Operating CCS projects||From 2015, the Uthmaniyah enhanced oil recovery project has stored up to 0.8 Mt/year of CO2 removed from natural gas.5|
|CCS policies and plans||Targets 9 Mt/year of CCS from 2027 at the Jubail hub, expanding to 44 Mt/year by 2035. Also plans for an Eastern hub focused more on CCU. New gas power plants must have CCS.6|
|United Arab Emirates|
|GDP||3.9% annual growth in 2021.2|
|CO2 emissions||204 Mt (0.55% of global): 40% from power, 43% from industry.3|
|Climate policy||Strategic initiative to achieve net zero emissions by 2050.|
|Estimated CO2 storage potential||5.9 Gt in depleted gas reservoirs, 16.7 Gt in ‘undiscovered capacity’.4,7|
|Operating CCS projects||Since 2016, the Al Reyadah project captures up to 0.8 Mt/year of CO2 from a direct reduced iron plant and uses it for enhanced oil recovery.5|
|CCS policies and plans||ADNOC targets 10 Mt/year of CO2 capture and storage by 2030. Initial targets are gas processing facilities, with the Habshan facility taking a final investment decision in 2023. Pilot injection in a carbonate saline aquifer is planned using CO2 from fertiliser production.|
What are the regional sources and sinks of carbon dioxide?
Figure 2 shows the distribution of point source emissions in the two countries, highlighting the concentrations of power sector and oil and gas sector emissions along the Persian Gulf, as well as in other urban clusters such as Riyadh and Jeddah. Cement plant emissions are much more dispersed.
For comparison, Figure 3 shows that sedimentary basins with geological storage potential are also mainly located around the Persian Gulf, as well as in Saudi Arabia’s Northern and Southern deserts. The greatest potential storage capacity is associated with the Rub’al Khali sedimentary basin, which covers the south of Saudi Arabia and all of the UAE. There is more uncertain potential for saline storage around the Red Sea and via mineralisation in specific rock formations found in both countries.
What steps can the UAE and Saudi Arabia take to deploy CCS?
- Create a strategy for carbon management deployment
Political will is a requisite ingredient to advance climate technologies and build the political, business, and regulatory system that can facilitate bringing to solutions to scale. A first step for creating a new industry for managing and storing flows of CO2 should be the creation of a dedicated political strategy which can provide clarity to stakeholders and promote investment. Strategies should set out overarching goals and set in motion the steps required to achieve them:
- Set deployment targets: in terms of tonnes abated and sectors to be decarbonised
- Determine the roles of different actors in the private and public sector
- Establish dedicated funds for supporting demonstration projects in key sectors and an investable framework for wider deployment
- Identify areas for cooperation within the region
- Develop regulatory frameworks for CO2 capture, transport and storage
Assuring the safe and permanent geological storage of CO2 requires the implementation of a new regulatory framework that sets out principles including the appropriate characterisation, development, and monitoring of storage sites, as well as post-closure requirements and allocation of liabilities. New regulations and standards may also be required for the safe and efficient operation of CO2 capture plants and transport networks. Such frameworks will provide confidence and clarity to project developers, investors, and local communities, and can enable internationally recognised accounting for lower-carbon exports. Existing oil and gas regulations can form the basis for a storage framework, combined with input from international experience and existing standards.
- Establish large-scale, open-access storage
Development of storage sites can take several years, so should be progressed ahead of industrial demand. Policy should require NOCs to undertake resource mapping and screening of CO2 storage sites and promote greater access to subsurface data, enabling the coordinated development of promising, high-capacity basins with ready access to emissions. Following the model demonstrated by Norway’s Northern Lights project, storage hubs should be developed with surplus capacity open to future CO2 sources, with the ability to expand in a phased manner. The primary focus should be on developing dedicated, permanent CO2 storage rather than temporary use-case pathways or EOR.
- Identify and promote the growth of low-carbon clusters
Several industries with a strong presence in the region, such as gas processing, ammonia and petrochemicals, represent lower-cost abatement opportunities for CO2 capture, due to the presence of more concentrated CO2 streams. These sources can help seed early transport and storage infrastructure that can expand to tackle harder sources, such as cement and power plants. Governments can work with regional industries to appropriately plan and size shared transport infrastructure to meet growing demand.
- Create enduring incentives for CCS
New incentives and regulatory drivers are required to unlock investment in the sector. Grants or loans can help kickstart first-of-a-kind projects, but will need to be followed by incentives designed to support wider roll out. These should endure over a project lifetime and be bankable and easily repeatable. Various fundamental approaches are emerging globally, including:
- Performance standards for sectors (e.g., Saudi Arabia’s requirement for new gas power plants, or a carbon intensity standard on industrial products)
- Fixed subsidies per tonne stored (e.g., the 45Q tax credit in the USA)
- Carbon pricing, supported by more targeted subsidies such as carbon contracts for difference (e.g., policies in the Netherlands and the UK)
Expansion of sectoral performance standards may represent a route that can be rapidly implemented in the region. In the medium term, demand for various low-carbon goods can help support CCS in industry by establishing a price premium for these products. Domestic demand can be created by stipulating the use of low-carbon materials in public infrastructure projects. There will be a fast-growing international market for such low-carbon products and the region can position itself as a credible exporter of low-carbon steel, cement, and fertiliser, as well as fuels with minimised embedded emissions.
- Establish a principle of producer leadership
Oil and gas production are the engines of the region’s economies, with Saudi Aramco achieving a record $161 bn profit in 2022.10 Given the NOCs central role in the development of CO2 transport and storage value chains, a promising approach to accelerating deployment ahead of demand could be to place direct obligations on the sector. This could take the form a financial levy on production (ringfenced for storage development), a requirement to develop a target storage capacity11, or a form of ‘carbon takeback obligation’ in which production is matched to a growing proportion of CO2 stored.12 CATF analysis indicates that the cost of full abatement of the emissions associated with the production and processing of oil and natural gas across both countries would be in the order of $15 bn per year, including some $6 bn per year for the cost of CCS to abate the emissions from gas processing, liquefied natural gas production, and oil refining. For oil the upstream emissions abatement would add less than $2 to the market prize of a barrel.13
- Deploy industrial carbon dioxide removal for domestic and international use
Net zero emissions goals imply a necessary role for the removal of CO2 from atmosphere to balance any emissions which are more costly to abate by other means. The geological storage of biogenic or atmospheric CO2 can provide measurable and permanent removals and will therefore be in increasing demand both domestically and internationally. Extensive storage capacity and clean energy resources make the region well placed to demonstrate and scale up direct air capture in particular, provided emissions reductions are appropriately prioritised. Rules for international transfer of emissions and removals are being established under Article 6 of the Paris Agreement, potentially providing a mechanism for international investment in CO2 storage in the region.14
- Help progress CCS technologies for global benefit
While many CO2 capture, transport and storage technologies have been established for various commercial uses, there is still an urgent need to demonstrate and de-risk CO2 capture for new industrial applications and at larger scales. Experience and improvements also continue to be gained with dedicated CO2 storage in saline reservoirs. Saudi Arabia and the UAE are well positioned to help accelerate global efforts to drive these technologies down the learning curve, and make strategic investments in promising new CO2 capture technologies, particularly where aimed at key applications such as cement, steel, power and refining. This approach could extend to helping to finance projects in countries in the Global South.
- Build towards an international market for CO2
The huge storage potential of Saudi Arabia and the UAE offers an opportunity to act as a CO2 storage hub for the wider region, receiving imports via pipeline or ship. Interconnection via pipeline between the two countries would be a first step towards a resilient cross-border infrastructure for CO2, in which emitters have multiple storage options available. Analysis by Afry and Gaffney Cline estimates that this ‘storage as a service’ business model could represent up to $1.2 billion of gross added value to the Gulf region in 2050.4
Saudi Arabia and the United Arab Emirates have significant domestic emissions associated with their carbon-intensive power sectors, major petrochemical industries, and production of other raw materials. Both countries have taken early steps in CCS project demonstration, but must now ensure these technologies are rapidly scaled up to make a meaningful contribution towards their climate goals. This will require a clear political strategy, which draws on international experience but remains flexible to a rapidly evolving industrial and technological landscape. Adopting a climate-focused approach to CCS can signal real ambition to the world.
2 BP (2022) Statistical review of world energy.
3 IEA (2022) Energy statistics data browser; Our World in Data (2022) CO2 country profiles.
4 OGCI (2022) CCUS deployment challenges and opportunities for the GCC.
7 OGCI, GCCSI, Storegga (2022) CO2 storage resource catalogue cycle 3 report.
8 CaptureMap by Endrava (accessed 2023).
9 GCCSI (2022) 2022 status report.
11 European Commission (2023) A proposal for a Net Zero Industry Act.
12 Stuart Jenkins et al. (2021), ‘Upstream Decarbonization through a Carbon Takeback Obligation: An Affordable Backstop Climate Policy’, Joule 5, no. 11 (2777–96).
13 CATF analysis, on the basis of an estimated 220 MtCO2/year from oil and gas production and processing emissions across both countries, estimates of the costs to apply CCS to NG processing, LNG production, and oil refining, and assuming an average $60/t for the abatement of O&G production operations through electrification and other means.
14 IEAGHG (2023) Integrating CCS in international cooperation and carbon markets under Article 6 of the Paris Agreement.