The UAE has outdone Saudi Arabia in diversifying from oil
Saudi Arabia’s struggle to diversify
Saudi Arabia has been trying to diversify its energy sources in the last years, especially under the leadership of Mohammed Bin Salman, with several ambitious projects aimed at diversifying from Saudi Arabia’s economic and geopolitical reliance on oil.
In 2018, When Saudi Aramco was on the verge of a deal to buy a stake in an Indian oil refinery, its boss quickly boarded a company jet in Paris and flew to New Delhi, and signed the agreement himself, highlighting its importance to the Saudi rulers. It secured the plans for investing $44 billion into India’s West Coast oil refinery.
Furthermore, last summer, OPEC members Saudi Arabia and Kuwait have discussed resuming oil production in jointly operated fields in the Saudi–Kuwaiti Neutral Zone, Kuwaiti state news agency KUNA said yesterday. The Saudi–Kuwaiti Neutral Zone, or Divided Zone, is an area of 5,770 square km between the two countries’ borders that was left undefined when the border was established in 1922. Saudi and Kuwait had both stopped the output from the oilfields 4 years ago.
Therefore, progress is going slower than expected, as Prince Mohammed’s stated goal of being able to “live without oil” by 2020 looks set to be missed. Jim Krane, an energy fellow at Rice University’s Baker Institute said: “Saudi Arabia’s oil addiction is as strong as ever…economically, of course, the Saudi economy runs on oil. Oil still dominates GDP, exports and government revenues.” This slow progress means that the Saudi economy will be largely influenced by oil prices for longer than initially planned.
The UAE looks to gas
The UAE has invested large sums in finding new energy sources to be able to use, specifically natural gas, and this was proven successful, as large gas fields are being discovered in the UAE’s lands.
A reservoir containing an estimated 80 trillion cubic feet of shallow gas, and spanning around 5,000 square kilometres, was discovered on Monday, UAE authorities reported. The reserve, located between Abu Dhabi and Dubai, is the fourth largest in the world, and the first major natural gas discovery in 15 years, since Galkynysh field was found in Turkmenistan in 2005. The Jebel Ali project is the first-time state-owned Abu Dhabi National Oil Co (Adnoc) has sought new fuel reserves in Dubai, making the discovery after drilling more than ten wells. Last Sunday, Adnoc signed an agreement to develop the supply jointly with the Dubai Supply Authority (Dusup), which plans to use a variety of standard and unconventional drilling techniques to pump out the fuel.
This discovery will support the country’s aim to be totally self-sufficient in the generation of electricity and also provide additional power capacity to boost broader economic diversification efforts.
Exploration and development at an 80 trillion cubic feet gas reservoir in the Jebel Ali area will be carried out by state-owned Abu Dhabi National Oil Company and the Dubai Supply Authority, meaning the nation’s 2 largest cities working together. The signing of a joint venture agreement on Monday was witnessed by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, and Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.
This signifies the strong intent and action by the UAE towards diversifying its energy sources, and the discovery of the new gas reserves has shown this united will.
The UAE’s efficient diversification
Gas is not the only source of the UAE’s economic diversification efforts, as the nation has planned this out for a long time, and used many routes to do so.
A key driver of diversification is innovation, as it opens up many possibilities. Launched by the Ministry of Economy and the Department of Economic Development in Abu Dhabi, the innovation initiative is aimed at supporting startups and innovators who develop solutions that address challenges facing various sectors. This year’s edition saw over 4,000 applications submitted from over 90 countries, with the 30 finalists awarded at a ceremony on Tuesday at New York University Abu Dhabi. “As the UAE moves ahead on the path of economic diversification to establish a competitive economy based on knowledge; we believe the potential of promoting an environment of innovation, technology, scientific research and intellectual property,” said Al Mansouri.
Rashid Abdulkarim Al Blooshi, the undersecretary of the Department of Economic Development Abu Dhabi, said the UAE’s capital was fast becoming a global hub for innovators. “The awareness today [has increased], Abu Dhabi has become one of the places where innovators are looking at. “On one hand there are the rules, regulations and the attractiveness of these ideas to come to us here, and then the ecosystem that we talk about are available,” he added.
Signs of innovation are already present across the nation, as The Emirati Khalifa University last week announced that it had installed a first-of-its-kind solar concentrator in the smart city of Masdar, boasting that the facility had the concentration ratio of a thousand suns and could generate temperatures of over 1,000 degrees Celsius.
The United Arab Emirates does not plan to go down in history as only an oil producer and nothing else. It intends to maintain its position as a developed economy, through innovation and expansion of energy sources.