RIYADH: Saudi Arabia is not just an oil-producing country, but also an unquestionable name in the entire energy sector, as the Kingdom hosts the 44th conference of the International Association for Energy Economics for the first time in the Middle East and North Africa region in Riyadh, according to a top expert.
In an exclusive interview with Arab News on the sidelines of the conference, Daniel Yergin, vice chairman of S&P Global said that Saudi Arabia will continue to play a crucial role in both traditional energy sectors and renewables.
“This conference is very important for the region and for Saudi Arabia. It underscores the fact that Saudi Arabia is not just a country for oil, but it is a country for energy, and Saudi Arabia’s role in energy transition as it continues to supply the oil the world needs,” said Yergin.
He added: “Saudi Arabia is going to continue to be at the forefront as an oil producer. But also what you see in Saudi Arabia is much more use of renewables, particularly, solar for generating electricity."
The S&P Global executive said that the big question before the global industry is the role of hydrogen, adding that if there is a global market for hydrogen, "Saudi Arabia will play an important role in that.”
The IAEE conference comes at a time when Saudi Arabia is adopting several measures including the launch of the Voluntary Carbon Market to achieve the net-zero target by 2060.
According to Yergin, the energy transition will not happen quickly, as the majority of the world countries are still dependent on hydrocarbon.
“You just have to look at the numbers. Over 80 percent of world energy today is hydrocarbons. Energy transition, you are going to change it overnight. It will change. We have a developing world with 80 percent of the people that has far less energy, and they need energy for development,” added Yergin.
He further noted that energy transition should be looked at from a global perspective rather than looking only through the lens of Europe and North America.
“It (energy transition) takes time for it to happen. And there is a tendency to focus on the developed world and to underestimate the energy needs of the developing world where 80 percent of the people live, and their per capita income may be just five or 10 percent of the income in the developed world,” Yergin said.
The S&P Global vice chairman noted that the mining sector will also have a crucial role to play in the energy transition, as the demand for minerals will witness a dramatic rise in the future.
He added that the 44th IAEE Riyadh conference is highlighting the significance of minerals, which has not been part of the discussion in the event’s previous editions.
“For instance, an electric car takes two and a half times more copper than a conventional car. That has to be mined, and it takes 16 to 25 years to open a new mine. I think, there is still an imbalance on how people are assessing the objective for energy transition, and materials needed for it,” he pointed out.
According to Yergin, the economic growth in China and the way in which the Asian giant comes out of the Covid-related lockdown will have direct impacts in determining the price of oil.
He further noted that the ongoing conflict in Ukraine has changed the global energy map, especially after the EU introduced a price cap on Russian oil.
“It is unprecedented what is happening because Europe said no to Russian energy, and Europe has been the main market for Russian energy. You also have price caps on Russian oil. And this is not merely an economic experiment. This is a geopolitical development that is happening,” said Yergin.
Talking about S&P Global’s economic forecast for 2023, Yergin said that this year will witness global economic growth of 1.9 percent. He added that there is a possibility of a mild recession in the US and Europe.
“In 2024, we see global growth going back to around 3 percent. So, 2023 is going to be a transitional year for the global economy. It is compounded by the uncertainties of the Ukraine war. If that escalates, then it will introduce new risks,” Yergin added.
In relation to the Big Three concept mentioned in his book The New Map: Energy, Climate, and the Clash of Nations, Yergin said that the world does not have a global oil market post the war in Ukraine.
“The big three are the US, Saudi Arabia and Russia. And you could look at them together as a group, but now, you have to look at them separately because of what is happening with the Ukraine war. And what we really have now is a divided oil market. We do not have a global oil market, because of the embargo on Russian oil to Europe, which was the main market for Russian oil,” said Yergin.