Inside Top Oil Exporter Saudi Arabia’s Plan to Go Green
AThe inside of the research centre was dimmed by the morning sunshine. There, in front of a large monitor, an engineer clicked on a slide to begin the day’s presentation for his visitor: “Towards carbon emissions net zero,” it read.
It was not an environment organization, nor a conference on climate change, like the slide indicated. TIME had been allowed inside the normally secretive R&D hub of Saudi Aramco, a fossil-fuel behemoth that dwarfs giants like ExxonMobil and Chevron. Even as the world’s largest oil exporter busily pumps crude and pours it into the hulls of seafaring tankers, it is loudly proclaiming its ambitions to reach net-zero carbon emissions within its borders by 2060.
For Saudis—two-thirds of whom are younger than 35—climate change is not a far-off issue. Summer heat regularly tops 120°F. Climate scientists last year said they believed the Middle East’s temperatures could become “potentially life-threatening for humans” in the years ahead. “These countries are already facing a crisis,” says Ali al-Saffar, an analyst on the region at the International Energy Agency in Paris. “They have skin in the game.”
Although the Saudis can be blamed for climate change, environmentalists believe that Saudi Aramco is responsible for more than 4 percent of global greenhouse gas emissions since 1965. Here on the edge of the Arabian Desert, Saudi Arabia has tapped an unfathomable quantity of oil—about 267 billion barrels of proven oil reserves, or about 15% of the world’s total—since the 1930s, when California wildcatters struck a gusher and turned a tribal kingdom into a global oil power.
More than 80 years on, Saudi Arabia’s domination in the oil world has scarcely diminished. It pumps nearly 11 million barrels of oil a day—about 1 in every 10 in the world—and sells more than 7 million of those on international markets, earning vast riches for the ruling royals and their state-owned company Aramco, whose profits rocketed to about $110 billion last year.
And yet, after years of lucrative production, a global crisis now hangs over the Saudis’ prized position. Almost all countries have committed to cutting their use of fossil fuels, by far the biggest source of the planet’s greenhouse gases. It could lead to the biggest shift in energy use since the beginning of the automobile age more than 100 years ago. For Saudi Arabia, the question is whether it can remain a super-power in the oil world and at the same time join the global climate fight—or whether its ability to diversify its economy away from an overwhelming dependence on oil will come too late, fall short, or otherwise prove itself to be, as some charge, lip service to its critics.
The Saudi Green Initiative Forum in Riyadh was addressed by Crown Prince Mohammed Bin Salman on October 23, 2021
Fayez Nureldine—AFP/Getty Images
If Saudi Arabia’s gamble pays off, it could emerge from the global energy transition as the world’s indispensable fossil-fuel power—while ironically boasting of a clean-energy, eco-friendly country at home. “They like to have their cake and eat it,” says Jim Krane, energy geopolitics expert at Rice University in Houston. “The Saudis’ ambition is to be the last man standing in the global oil market. They want the last drop of oil drilled to come from a Saudi field.”
This country is able to afford its extravagant plans with plenty of money. Aramco has an estimated market value of $2.3 trillion and is currently the second-most valuable company (behind Apple). Aramco’s earnings nearly doubled due to sharp increases in gas prices. Because of its vast oil wealth, the country of only 35 million has enough power to dictate quotas in OPEC (an international cartel consisting of 13 oil-producing nations). This could have a significant impact on stock markets around the globe.
That unique position could last for decades, especially since the country’s de facto leader, Crown Prince Mohammed bin Salman, or MBS, is just 37 years old, and could rule for generations.
“The demand for oil will continue growing,” Saudi Energy Minister Prince Abdulaziz bin Salman—the far older half-brother of MBS—tells TIME over tea in his office in Riyadh. “At what level, I don’t know,” he says. “Anyone who tells you that they have a good grasp of when and where and how much is certainly living in a fantasyland.”
Last February, MBS transferred $80 billion from the oil company to the country’s sovereign wealth fund, the Public Investment Fund, or PIF, which he chairs. The fund’s assets have risen sharply since the pandemic hit, to about $620 billion, since it bought into the lockdown dip to invest billions in Netflix, Carnival Cruises, Marriott hotels, California’s EV automaker Lucid Motors, and other stocks, when they were pummeled by global lockdowns.
Those assets could help fund Saudi Arabia’s own energy transition. Just how that unfolds—how carbon emissions are “handled,” as Abdulaziz puts it—is what occupies numerous top government engineers across the country. The efforts have drawn some interest from Western investors, whose unease with the kingdom’s human-rights abuses has collided with business exigencies.
On the edge of Riyadh one crisp winter morning, in Saudi Arabia’s King Abdullah Petroleum Studies and Research Center, known by its acronym KAPSARC, about 15 specialists gathered to outline the strategy for TIME. Abdulaziz calls the researchers “my young cadets, none over 30.” Many of them are women, and many are U.S.-educated.
Among the plans is a network of EV charging stations, and a project to upgrade offices and homes with low-energy electricity systems—about 33 solar and wind projects are in construction. They say that funding all of this is possible if the royals approve it. “We have a mandate from the King to make all buildings retrofitted for energy efficiency,” says Mudhyan al-Mudhyan, of the National Energy Services Company. “We have our own capital to finance all our projects, so we don’t need to go to banks or any lending institutions.”
It is NEOM that’s the largest experiment in progress. This futuristic city, estimated to cost $500 billion, will be built in the northwestern region of the country. In theory, it will become the testing ground for concepts like air taxis and so-called green hydrogen, created by using renewable energy, and which MBS has boasted will generate most of NEOM’s electricity. NEOM has a $5 billion green-fuel plant. “It is a clear path towards moving from the lab to the research center, to fully deployed technology,” says Sadad al-Husseini, a geologist who previously headed Aramco’s exploration and production department and who now heads Husseini Energy Co., a forecasting and analysis consultancy in Aramco’s hometown of Dhahran. Aramco’s research includes trying to capture and reuse the carbon spewed into the atmosphere from Saudi oil fields. It’s a tactic Saudi Arabia is relying on heavily to meet its emissions targets. Although the effectiveness of this method is uncertain, Saudi Arabia began to capture carbon from the desert and transport it 52 miles to a facility to turn it into petrochemicals.
Engineers are also researching a way to transport “blue” hydrogen—derived from natural gas—to far-off Europe and Asia. Saudi Arabia has delivered Japan’s first shipment of blue hydrogen in 2020. Germany and Saudi Arabia have also agreed to jointly develop green hydrogen. Aramco has also been working to develop a synthetic fuel made from a combination of carbon and hydrogen. It claims that this will help reduce pollution by up to 88%. It plans to market it by 2025, according to the company.
The fact that Saudi Arabia has only one oil company, and that it’s owned by the state, enables it to spend freely on research. “You won’t find Exxon or Chevron or any of these companies focusing research on things like this,” Husseini says. “If you say, ‘Do a research project that won’t pay out for 20 years,’ they would say, ‘That’s not our job.’”
The engineers see new opportunities for exports, especially of hydrogen, with a large amount of money available. “We can develop world-class engineering companies to design hydro-carbon resources or plants in the kingdom, and also do that service for anyone else who’s interested,” says Yehia Khoja, an electrical engineer trained at Stanford University, who is an adviser to the Energy Ministry. According to him, Saudi Arabia would reduce its fossil fuel consumption by approximately 1 million barrels per day in a “green” Saudi Arabia. At current oil prices, it could sell the oil and make nearly $100 million per day. “It is how we justify the economics of this project,” Khoja says. He calls the country’s plan “holistic and inclusive of all solutions. It is our way of trailblazing a path towards a solution, rather than just being content in being part of a solution,” he says.
Scientists reject this argument and accuse Saudi Arabia of greenwashing. It has declared its commitment to carbon cuts while simultaneously aiming to grow oil production to 13,000,000 barrels per day. Aramco’s carbon reduction does not include so-called Scope 3 emissions generated by oil consumption, which scientists believe account for most fossil-fuel greenhouse gases. “Aramco’s approach to achieving emissions reductions lacks credibility,” Carbon Tracker Initiative, a financial think tank based in London and New York City, said in a July report. It is not only a problem for the earth. Saudi Arabia, a country that loves oil, could see its revenues drop as the world switches to renewable energy. “Saudi Aramco is exacerbating, not mitigating, its exposure to transition risk,” the report says.
Until recently, it would have been unimaginable that Saudi Arabia could be seen as a trailblazer in any global investments, let alone climate mitigation—and indeed, many doubt it ever will be. Foreign investment plunged after the October 2018 murder of Jamal Khashoggi, a Saudi journalist living in Washington, who was killed and dismembered by Saudi operatives in the country’s consulate in Istanbul, his remains never recovered.
Last year, the CIA concluded that MBS had surely approved the capture or murder of Khashoggi, given his “absolute control” over Saudi security services. Amid the global outrage over the grisly assassination, CEOs and Western officials boycotted that year’s Future Investment Initiative, MBS’s flagship Davos-like gathering in Riyadh.
And yet, three years after Khashoggi’s death, foreign investors were back in Saudi Arabia in force, packing MBS’s Saudi Green Initiative conference last October, and drawn to the plethora of potential deals in one of the biggest energy plans anywhere. As war raged in Ukraine, Saudi officials invited top Wall Street investors to a New York City road show in early April, to pitch their new city NEOM—a key element of the country’s green plans.
For both investors and politicians, there’s a growing acceptance that the prince’s tenure is likely to outlast almost every world leader—one reason President Biden finally visited Riyadh in July, even giving him a cozy fist bump. “The idea you’re going to get rid of MBS and replace him with the Canadian Parliament is naive in the extreme,” says David Rundell, a former longtime U.S. diplomat in Riyadh and author of a book on the crown prince. “The alternative is al-Qaeda.”
There is palpable relief on the ground that Khashoggi’s death has had little lasting business impact. “I think you could say we have moved on,” says Husseini, the longtime Aramco executive. “People may have postured and said, ‘Oh, I will never go there,’” he says. “But there are fundamentals in the world. You have to maintain the economy moving.”
This is evident from the Saudi Stock Exchange, also known as Tadawul and which is controlled by the sovereign wealth fund. Khalid al-Hussan (its CEO) estimates that around 14% stocks are held in non-Saudi hands. These shares can be purchased through approximately 2,600 institutional investors who trade on the stock exchange. The Tadawul became partially public in December last year. It was then bombarded by requests for shares from foreigners, with subscriptions exceeding 10 times the value of the offered amount, Hussan said. “I have met with more than 100 international investors,” he tells me on the day the applications closed.
Saudis will continue to attract investors but they need more companies committed to climate change mitigation. “We see this pressure in the U.S. and Europe more and more in the future,” Hussan says. Environmental issues, he says, “will drive their investment decisions.”
An underground pipe from the Hawiyah NGL Recover Plant captures carbon and allows for its reuse
Maya Siddiqui—Bloomberg/Getty images
Inside Aramco’s R&D complex in Dhahran, there is a strong belief that despite the climate crisis, it will not only remain a huge oil giant but increase in size. Aramco’s engineers argue that the energy transition should focus on how to drill oil more cleanly, rather than cutting the amount of oil pumped.
The company’s researchers say they are already working with automakers (which they declined to name) to switch to hydrogen-powered engines; a Nissan sedan fitted with a green-hydrogen engine sits parked outside the front door as an example. A short drive away is the company’s new center for artificial intelligence, dubbed the 4IR (fourth industrial revolution) building. Aramco’s mangrove plantations are displayed near the huge Ras Tanura refining facility on the Arabian Gulf. This vegetation functions as a natural carbon-capture system, extracting the emissions from the air and then absorbing them in its swampy soil.
But the heart of the 4IR building is a large circular control room resembling NASA’s ground control in Houston. Engineers monitor oil flow across hundreds of fields with the help of 60 drones, and 5 billion data points from a fleet robot. A screen wraps around the walls, showing a blizzard of graphs and figures—information engineers say they can use to analyze how to keep producing oil while cutting emissions. “It is all about efficiency and sustainability,” one says, guiding me through the center.
To environmentalists, Aramco’s efforts seem like the last gasp of an oil giant attempting to keep the global climate campaign at bay. “Aramco has no plans to reduce oil and gas production by 2030,” says ClientEarth, an international environmental legal organization. The government, it says, “has a long history of fighting efforts to tackle climate change.”
Energy analysts say the Saudis—who since the 1930s have drilled oil more cheaply than anyone else—are well positioned to find solutions to the climate crisis, and put them into effect. “They have built a lot of know-how and a lot of capacity. They have the pipeline infrastructure, the ports infrastructure,” says Saffar of the International Energy Agency. The country now needs to end its overwhelming dependence on oil revenues and transition to more clean energy—a tough two-headed challenge, Saffar says. “If you could make them work in the same direction, you would be really onto something,” he says. The question is whether Saudi Arabia’s rulers have the will to do so, even at the risk of their outsize profits. —Reporting by Solcyre Bourga, Leslie Dickstein and Anisha Koki/New York
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