A New Climate City In A Big Oil State – Saudi Arabia – Is It Future Or Fantasy.

Reading about this futuristic vision may provide a temporary respite from the calamities of war.

Oil and gas states are thinking about low-carbon climate hubs – local groupings of innovations and industry start-ups that can focus on reaching a critical mass to become sustainable and self-sufficient.

The oil giant BP is building a hydrogen hub in Teesside, an industrial center in the north of UK. It will produce hydrogen from methane and get rid of the bi-product carbon dioxide by injecting it deep underground. Heavy industry will use the hydrogen as fuel to lower their greenhouse gas (GHG) emissions. But they also envision adding hydrogen to the natural gas supply pipeline.

New South Wales, in Australia, is building two new renewable energy hubs, based on wind and solar and big-batteries. Investments for the first one of 3GW have been so successful that a second zone of capacity 8 GW is in planning.

But a new kind of hub – a climate city or eco-city – set in a harsh isolated desert seems a bit speculative.

A new climate city.

Saudi Arabia is the second largest oil producer in the world, with the US number 1, and Russia number 3. Combined these three countries produce 43% of the world’s oil.

But it’s still a bit of a surprise that Saudi Arabia has launched a vision for a new climate city in a desolate stretch of desert between the Red Sea and the country of Jordan. Crown Prince Mohammed Bin Salman (MBS) is the drive behind this, as part of his vision to green Saudi Arabia.

The city called Neom is part of Saudi Arabia’s Vision 2030. On-land features of the $500 billion Neom project will include:

·       An area that is larger than Israel (see map).

·       A green city that is built in a straight line for 100 miles, with no cars, but with a hyper-speed rail.

·       An autonomous government whose laws will be chartered by investors.

·       A narrow city, called the Line, will be 110 miles long and built in stages one block at a time.

·       Each block will be designed to be sustainable and self-sufficient. Schools and grocery stores will be easily accessible by walking or cycling.

·       A huge expanse of solar panels will provide endless energy, as the city is to be totally powered by renewable energies.

Another part of the project will be an offshore port city called Oxagon that floats on the Red Sea. This industrial hub plans to take in tenants by 2022.

Further up the coast will be a coral reef restoration project, planned to be built by 2025 – just three years away.

Status quo. 

Neom is a grand vision, but only one block has been built so far. A satellite image reveals rows of homes, a swimming pool, a football field, and a golf course.

The plan is to be self-sufficient in food by utilizing greenhouses and vertical planting. Since Saudi Arabia imports 80% of its food, this will be a challenge in the middle of a severe desert.

Another serious obstacle is fresh water. The solution is for water to come from desalination plants, which Saudi Arabia is familiar with because half of the country’s water comes from such plants.

In the US and Australia, desal is on the cusp of commercial profitability when powered by fossil fuels. But the process is dogged by the biproducts of salt and a few other dubious chemicals that are usually disposed back into the sea.

In Neom, the desal operations are planned to be be fueled by renewable energy such as solar, even though this has never been tried. Ideally, the salt will become raw material for industry.

Attitudes toward climate change.

The Saudis have quietly dipped their toe into the climate revolution in a few areas:

·       Liquid hydrogen from Saudi Arabia and UAE is being exported to Japan.

·       Egypt has plans to invest in hydrogen and battery storage of electricity, and with Saudi Arabia has plans for a grid-scale 1 GW (giga-watt) battery that is bigger than the best ones in current operation (300 MW or mega-watt).

·       Egypt and Saudi Arabia have commissioned wind farms of 400 MW and 1.7 GW.

·       Saudi Arabia are planning to plant 50 billion new trees in the region.

But in other ways, such as at COP26, the Saudis have spoken up to defend the economic necessity of oil and gas for many decades. This is understandable since oil and gas is the country’s primary industry. And in the Middle East, fossil energy is so cheap that there is no incentive to begin a transition to renewable energies. 

This illustrates the dilemma the oil and gas industry finds itself in with climate change. But one perspective on the Middle East offers some valuable insights on the dilemma.

The Crown Prince at COP26 announced that Saudi Arabia would be net-zero by 2060. The Middle East is pessimistic about net-zero by 2050. Beyond 2050, they insist the world will definitely need lots of oil and gas, and they are also betting the world will be more resilient to climate change by then.

There will be electric vehicles (EVs) all over the place, but the world will still need asphaltene to pave the roads they drive on. There are other down-to-earth considerations too. Air-conditioning is critical for Saudi Arabia but it won’t be easy to transition this to renewables.

Business propositions.

The International Energy Agency (IEA) says fossil energy needs to be reduced by 4% every year to get global GHG emissions under control. But if energy is owned and run by a national government, as it often is in the Middle East, it will take a lot of time and effort because private companies can’t go it alone, and government inertia slows everything down.

It’s estimated that investment payback time for a company undertaking a transition to renewables will be 7-10 years. This is too long for most companies that operate for profit. Fossil fuels companies would have to shift from a “short-term” profits goal to a “long-term” profits goal if they decide to embrace renewables.

On a global basis, a business model is needed to transition an energy infrastructure to achieve net-zero, which may entail a cost of $140 trillion. Who from the oil and gas sector and country governments will provide the money, and how will it be spent?

A business model has to include a balance between investment recovery and climate action. There is no model for this — fragmented efforts, yes, but no unified approach.

Rich countries have more money to lead the way and develop climate solutions. But a mechanism is also needed for rich countries to assist poor countries during the transition. It used to be that oil and gas was cheaper than renewables for developing countries, some of which are in energy poverty. But this position has been challenged within Australia where new-build renewables are cheaper than new coal or gas power plants. This simplifies the challenge greatly.

As a takeaway, Neom is a grand vision for a sustainable climate city in a desolate landscape, and an adjacent seaport. But it has only just started, and several aspects, especially the source of water, will be keenly watched as the city grows.

Saudi Arabia has the money to pull this off, and progress at Neom will help decide whether this is a token climate enterprise, or a real deal alternative to reduce the country’s dependence on oil and gas.