Saudi Aramco and China to bridge the climate gap
https://arab.news/9cxnq
In the campaign to combat climate change, the biggest challenge is China. As the world’s most populous country and its biggest manufacturer, China’s indigenous energy resources are dominated by coal, the least environmentally friendly of the hydrocarbons.
This all adds up to make China the world’s biggest polluter. If you reduce greenhouse gas emissions there, you take a big step toward meeting the Paris Agreement goals by 2050 and making the world a cleaner place.
This is the essential background to a recent speech by Amin Nasser, CEO of Saudi Aramco, to the China Development Forum, which set out how the interests of the Kingdom and China dovetail neatly on combating climate change. As Nasser said, the two countries are a “natural fit” in the energy world.
The headline takeaway from the speech was Aramco’s offer to be a “bridge” between China’s current reliance on comparatively dirty fossil fuels and its stated ambition to move to a carbon neutral economy by 2060. Since the China strategy also involves doubling its economy in size by 2035, there is a big potential energy market there — for the right kind of fuel.
But, it might be argued, Aramco is an oil exporter, the biggest in the world, and crude oil is not one of the fuels usually associated with energy transition. How can shipping more crude help China to clean up its act, even if Saudi crude is among the lowest carbon intensity in the world?
That simplistic argument misrepresents both the nature of the hydrocarbon industry and Aramco’s strategy for the 21st century.
Increasingly, oil is being used not just as a liquid you pump into a car, ship or plane and burn, but is also being turned into the molecular building blocks of industrial processes and manufacturing, from petrochemicals and plastics through to advanced materials that can replace carbon-intensive products like steel, other metals and concrete, which China uses in abundance.
Oil, of course, will remain at the heart of the China-Saudi relationship for decades to come
Frank Kane
Aramco — much bigger in the petrochemicals space thanks to the acquisition of SABIC — is already in partnership with Beijing’s Tsinghua University to develop technologies that can convert crude oil directly into petrochemicals.
There are other areas in which China and Saudi Arabia already collaborate on energy transition technology, such as the research underway on fuels and engine efficiency in partnership with Chinese research institutes and car manufacturers. Future fuels such as hydrogen and other cleaner alternatives to fossil fuels will inevitably be another sector for partnership.
But perhaps the most immediate area where Chinese and Saudi energy priorities overlap is in liquified natural gas (LNG).
The Kingdom is committed to developing its vast gas reserves for both cleaner domestic use and, ultimately, export around the world. It mastered the techniques of gas gathering decades ago when it halted the environmentally damaging and wasteful practice of “flaring” that is still common in many places.
China, with climate change goals in mind, sees LNG as its preferred fuel to bridge the energy gap while it phases out coal. It has earmarked LNG as the main fuel to generate post-COVID economic recovery, and it is estimated that it will import more LNG this year, even with the ravages of the pandemic lockdowns, than at any time in its history. China is forecast to overtake Japan as the world’s biggest LNG importer in a couple of years.
It already buys gas in LNG form from the Middle East, as well as from the US and Australia and — via pipeline — from Russia and central Asia. But China seems a natural partner for Aramco’s long-term gas-exporting ambitions.
Oil, of course, will remain at the heart of the China-Saudi relationship for decades to come. When the world’s biggest producer and its biggest consumer get together in a long-term strategic relationship and with focus on climate change goals, it can only be good for the planet.
• Frank Kane is an award-winning business journalist based in Dubai.
Twitter: @frankkanedubai
