Can Oil-Producing Nations Move To Renewables? Grading 7 Petrol States
The possibility of transitioning to a greener energy future varies among economies that are fossil fuel-dependent , which represent nearly one-third of the world's population and one-fifth of global greenhouse gas emissions. For some, the question is purely financial; for others, political factors are slowing the shift.
In Norway, a left-wing landslide election win last week is calling into question the future of the country's oil production. Two weeks earlier, Iraq's finance minister made an unprecedented call to fellow OPEC countries to move away from fossil-fuel dependency.
The two recent headlines are emblematic of the challenges facing major oil-producing nations around the world. Last year's crash in oil prices coincided with unprecedented public demands for a commitment to a cleaner energy future, while the pandemic exposed the fragility of economies heavily dependent on a single commodity.
And yet, the ability to adapt to a greener energy future varies drastically among fossil fuel-dependent countries, which represent nearly one-third of the world's population and one-fifth of global greenhouse gas emissions. For some, the question is purely financial; for others, political factors are slowing the shift.
"We are basically undoing over a century of interdependence between these nations and the global economy," says Deborah Gordon, leader of oil and gas solutions at global energy and climate think tank RMI. "Unwinding this tightly integrated, global market needs to be surgical."
The position an individual oil-producing country faces is somewhere between weaning a child off of her mother's milk or checking your speed as you race into a brick wall. "[It] represents an existential threat for many of these countries," according to Thijs Van de Graaf, professor of International Politics at Ghent University in Belgium. "Some of the poorest oil-dependent countries are in complete turmoil. Look at Libya, Venezuela, Nigeria or Iraq. This pattern may spread to other petrostates."Here's a quick tour of some the world's top oil producers, and an on-the-fly grade to gauge how each is facing the energy transition:
NORWAY: An Oil-Driven Election May (Or May Not) Break The Cycle
Jonas Gahr Støre | Arbeiderpartiet — Photo: Flickr
Norway's Labour Party won a landslide victory over the Conservatives last Tuesday in an election heavily focused on the climate crisis and the future of the country's oil industry. The United Nations' ominous August 9 climate report prompted both the country's Red Party, The Greens and The Socialist Left Party to call for an end to gas and oil exploration, while environmental organizations made the same demand in a joint statement, reports Oslo-based daily Dagsavisen.
However, the anti-oil Greens — the only party to have delivered an ultimatum of no-cooperation to the government should exploration continue — failed to win enough seats to become a potential kingmaker. Labour leader Jonas Gahr Støre, generally seen as a pro-oil figure, campaigned on the promise of a more fair and equitable Norway following eight years of conservative free-market rule, and has dismissed the idea to put curbs on oil production.
While climate policy is likely to be tightened, the focus of the new government will be job growth and continued resource diversification. The oil sector accounts for 14% of GDP today, but Norway is also offering generous subsidies for electric cars and investing heavily into clean energy sources. In April, the country's 1.2 trillion euro sovereign wealth fund – the largest in the world – made its first investment in renewable energy infrastructure when acquiring a 50% stake in the Borssele offshore wind farm in the Netherlands for 1.375 billion euro.
➡️ Grade: B
SAUDI ARABIA: Big Plans From MBS Go Only So Far
Oil refinery in Saudi Arabia — Photo: pixabay
Earlier this year, Crown Prince Mohammed bin Salman announced the launch of the Green Saudi and Green Middle East initiatives that will apply a number of ambitious programs to reduce the region's carbon emissions by 60%, and plant 50 billion trees in the world's biggest afforestation project to date.
Arab News cites the crown prince: "As a leading global oil producer, we are fully aware of our responsibility in advancing the fight against the climate crisis, and that just as we played a leading role in stabilizing energy markets during the oil and gas era, we will work to lead the coming green era."
Still, the sincerity of Saudi Arabia's climate commitment was called into question last month as the country sought to whitewash the language in the UN's landmark climate-change report — attempting to replace references to "carbon emissions" with "greenhouse gas emissions."
➡️ Grade: C+
IRAQ: Groundbreaking Words From An OPEC Founder
U.S. soldiers securing an oil pipeline in Iraq in 2006 — Photo: af.mil
In a Sep. 1 article published in London-based The Guardian daily, Iraqi Finance Minister Ali Allawi co-wrote an unprecedented call to fellow oil producers to move away from fossil fuel dependency and into renewable energy. Allawi, who is also one of the founding members of the global oil cartel OPEC, said ahead of a key OPEC meeting that the climate crisis will require a move away from oil, and the impact of global warming will have particularly devastating effects on the Middle East and North Africa.
However, Iraq — which has 145 billion barrels of proven crude reserves — still reels from decades of conflict and political instability, and remains heavily dependent on oil exports. The government's plan is to almost double the current oil output by 2027, while also diversifying its portfolio. Still, it is notable that in 2021 Iraq has announced several agreements with international oil and gas players for the development of renewable projects.
➡️ Grade: B-
UNITED STATES: Biden's Campaign Vows And Infrastructure Reality
While U.S. President Joe Biden made bold promises on the campaign trail to ban oil and gas permits on federally owned land, his administration announced the opening in August of millions of acres for oil and gas exploration following a federal court order requiring the government to resume lease auctions.
The forced end of Biden's federal leasing moratorium is a setback for his Administration's apparent good-faith plans to fight climate change: some 80 million acres of water in the Gulf of Mexico may be tapped for exploration along with potentially hundreds of thousands more onshore. Earthjustice, a non-profit public interest organization, has filed a lawsuit on behalf of four environmental groups in Washington D.C. federal court challenging the move.
Only weeks prior, Biden was criticized by climate activists when calling on OPEC and its oil-producing allies to boost production in an effort to combat climbing gasoline prices. The unexpected request came just one day after the U.S. Senate approved a massive $1.2 trillion infrastructure bill loaded up with incentives, mandates and subsidies to stimulate the buildout of electric vehicles and renewable energy projects.
➡️ Grade: B
NIGERIA: Africa's Biggest Petrol Producer Lags Behind
Gates of an oil refinery in Port Harcourt, Nigeria — Photo: Wikimedia Commons
For Africa's top petroleum producer, even before talking about the current urgency to prepare for the energy transition, the country has wrestled for decades with what Michael L. Ross dubbed: "The Oil Curse;" Like other oil-producing countries, the aggregated wealth Nigeria has created has been accompanied by the stunting of both political and economic progress by being so dependent on oil revenues.
As Caleb Adebayo noted last month in the Vanguard newspaper, Nigeria is trailing other petrol states in diversifying, only now focused on natural gas, and still unable to provide reliable energy to vast parts of its own territories. In the move towards renewables, especially in light of the vast potential for solar in the sub-Saharan nation:
"We must not make that mistake with the next stage of the transition to renewable energy. Indeed, there has been some increased commitment from government over the last few months in renewables, but the unenergized population still looms large. We cannot wait for gas to saturate the market before we heavily invest in and strengthen the framework for renewables. We need to boost gas and renewable energy all at once, side by side; encourage hybrids and make the painful separation from oil with an aim to boost clean energy access for all- rural, semi-urban, urban."
➡️ Grade: C-
CHINA: Import-Reliant Producer Bets On Energy Transition
On Sep. 24, for the first time in its history, China will sell some of the oil it keeps in its strategic reserves in a bid to decrease ballooning prices. The move signals just how dire a situation rising prices is for the country: China is still heavily reliant on oil — and most than that: foreign oil. The world's largest oil importer and second-largest consumer after the U.S.: as of 2020, fossil fuels accounted for more than 84% of China's energy mix.
In fact, China has embarked on a mission to make renewables the backbone of its economy and break its addiction to foreign oil. In March 2021, according to China Dialogue, the country's ruling Communist Party vowed to "build a power system with new energy at the center", with sources like hydropower, renewables and nuclear making up more than half of its energy matrix. It pledged to decarbonize its economy, committing to reach peak carbon emissions in 2030 and carbon neutrality in 2060.
The problem is just how much work remains to be done. China has spent decades investing in oil and coal infrastructure (coal alone, a heavily polluting source already left behind by some Western countries, still accounts for about half of China's power generation capacity), and some estimate that the country now needs to invest some $21.3 trillion to reach net zero in 2060. Fossil fuels will certainly lose their leading role to cleaner forms of energy, but the transition is poised to be costly.
➡️ Grade: B+
VENEZUELA: Failed State And Missed Opportunities
Oil extracting in Venezuela — Photo: Flickr
Another blatant example of the Oil Curse. After years of mismanagement and the more recent U.S. sanctions, Venezuela's oil sector is in collapse. While the South American country has one of the world's largest oil reserves and — until the last two years — was a main supplier to North American. refineries, the disputed president Nicolas Maduro's attempts at creating economic growth have failed.
With oil accounting for some 99% of the value of Venezuela's exports, opposition leaders have identified the oil industry as the country's best chance for funding the massive infrastructure projects needed to repair the economy — should they manage to remove Maduro from power. But this strategy would also coincide with the global attempts at burning less fossil fuel. Earlier this year, Norway's Equinor and France's TotalEnergies agreed to sell their stakes in Venezuela's Petrocedeno project, citing carbon intensity as the principal reason for the move.
Some hope was rekindled in early September, as representatives of President Nicolas Maduro and opposition leader Juan Guaido met in Mexico City to search for a path out of the country's political crisis. The meeting, mediated by Norway, resulted in the signing of two "partial agreements" on matters of social protection as well as Venezuela's stance on a disputed border area controlled by Guyana. Talks will resume September 24, with the key issues of elections and sanctions still to be resolved, reports Voz de América. Cutting oil production is notably not on the agenda.
➡️ Grade: D-
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