How will you make a difference this Holy Month?July 2, 2015 3:00
Why Masdar is about more than realty
Plans for the construction of Abu Dhabi’s ambitious eco city have been scaled back. But that doesn’t diminish the wider purpose of the initiative: To preserve the UAE’s energy-producer status after the oil runs out.
March 25, 2010 6:20 by Emily Meredith
For as much as western governments talk about needing to move away from oil to achieve ‘energy security,’ the Middle East’s governments are worried about energy both from the standpoint of producers who derive most of their wealth from hydrocarbons and from that of countries with increasing demands for energy.
“I’d be surprised if political leadership in the Gulf didn’t regard developments in the alternative energy realm as important to them if only as potential to impact a critical business in the Middle East,” said Dan Nelson, a retired oil energy executive, who is now a partner with the advisory firm International Strategic Insights.
“It’s a business decision to be assessed on an opportunity by opportunity basis,” said Nelson. In the UAE, those decisions are political. “The business decision will be assessed by analytical people whose analysis will be impacted by the host government incentives.”
Jones said the degree to which a country’s businesses are supported by its government and the depth of its hydrocarbon resources also contributes to the decision to explore alternative energies. “I would say the weight of the factor varies from country to country.”
“In the Western countries, the geopolitical factor is low,” Jones said, noting that investment in alternative energy is usually driven by the private sector. “But the geology factor is also high because they’ve been producing for a very long time. In some of the rich oil countries geology is less of a constraint but I would think geopolitics is more of a constraint.”
The geopolitical concerns are particularly strong in the Middle East, where a potentially nuclear Iran quarrels with a nuclear-equipped Israel. But the UAE’s decision to enter into alternative energy is also driven by the potential size of the market for non-carbon energy sources.
Even after the world’s leaders failed to produce an agreement at Copenhagen last year, there is still high demand for alternatives to conventional energy and the UAE is setting itself up to continue to be an energy producer regardless of the world’s dependence on oil.
Jones said that a recent IEA study showed oil production falls an average of seven percent after it peaks, meaning that countries have years of production left, but will enter a notable period of decline.
“The overall impact will be a smaller number of producers both in OPEC and outside of OPEC,” Jones said. “When you have fewer sources of something the chances of disruption increase.”