Kingdom built on oil foresees fossil fuel phase-out this century
Financial Times, 21 May 2015
Saudi Arabia, the world’s largest crude exporter, could phase out the use of fossil fuels by the middle of this century, Ali al-Naimi, the kingdom’s oil minister, said on Thursday. The statement represents a stunning admission by a nation whose wealth, power and outsize influence in the world are predicated on its vast reserves of crude oil.
Mr Naimi, whose comments on oil supply routinely move markets, told a conference in Paris on business and climate change: “In Saudi Arabia, we recognise that eventually, one of these days, we are not going to need fossil fuels. I don’t know when, in 2040, 2050 or thereafter.”
For that reason, he said, the kingdom planned to become a “global power in solar and wind energy” and could start exporting electricity instead of fossil fuels in coming years.
Many in the energy industry would find his target of a 2040 phase-out too ambitious. Saudi Arabia is the largest consumer of petroleum in the Middle East, and more than 25 per cent of its total crude production — more than 10m barrels a day — is used domestically.
A 2012 Citigroup report said that if Saudi oil demand continued to grow at current rates, the country could be a net oil importer by 2030.
But while acknowledging that Saudi Arabia would one day stop using oil, gas and coal, Mr Naimi said calls to leave the bulk of the world’s known fossil fuels in the ground to avoid risky levels of climate change needed to be put “in the back of our heads for a while”.
“Can you afford that today?” he asked other conference speakers, including British economist, Nick Stern, author of a 2006 UK government report on the economics of climate change. “It may be a great objective but it is going to take a long time.”
With more than 1bn people globally still lacking access to electricity, there would be strong demand for fossil fuels for years to come, he said, adding that more work was needed to find ways to burn oil, coal and gas without releasing warming carbon dioxide.
Saudi Arabia, like other Gulf states that burn a lot of oil domestically, has long said it plans to use more renewable power.
Officials in the kingdom declared three years ago they had plans to build so many solar plants they would be able to export solar electricity. But the recent fall in oil prices has increased doubts about the fate of such schemes.
Mr Naimi said he did not think lower crude prices would make solar power uneconomic. “I believe solar will be even more economic than fossil fuels,” he said.
The minister’s comments come as Paris prepares to host UN talks in December where nearly 200 countries are due to agree a global climate pact.
Ahead of that meeting, the leaders of Germany and France have called for an end to carbon emissions this century.
World leaders have already agreed in previous UN talks to curb emissions enough to avoid global temperatures warming more than two degrees Celsius compared with pre-industrial times.
But Mr Stern said the action countries had pledged in the lead-up to the Paris meeting so far would not be enough to put the world on a path to meeting the two degree target. It was therefore crucial for any agreement signed in Paris to include measures that required countries to ramp up their climate actions in future, he said.
Chairs and chief executives from nearly 60 large companies represented at the Paris business meeting this week backed a statement urging governments to produce a robust, predictable climate agreement at the end of the year.
Christiana Figueres, the UN’s top climate official, said the number and size of the companies attending the Paris meeting represented a “turning point” in the global warming debate.
However, some of the energy company executives at the event, including Glencore chairman Tony Hayward, echoed Mr Naimi’s caution about the long-term need for fossil fuels in many countries.