Navigating the Energy Transition: How Gulf NOCs Can Weigh in on the Climate Crisis

Executive Summary

This report explores the strategies utilized by International Oil Companies (IOCs) and Arab Gulf National Oil Companies (NOCs) to address the contemporary global energy transition. Mounting internal and external pressure to shift energy production away from hydrocarbons has fundamentally affected the business model of IOCs and NOCs alike. However, Gulf nations face a particularly acute imperative to rethink paradigms of energy production due to the fact that regional economies and political structures are undergirded by the production of hydrocarbons. As the energy transition is already underway, evaluation of existing approaches and provision of actionable recommendations for IOCs and Gulf NOCs is vital.

Through analysis of strategic best practices, three central approaches to addressing the coming energy transition are elucidated:

• IOC and NOC work to significantly reduce carbon intensity.

These strategies largely include net-zero carbon emissions targets, methane emissions monitoring, and the use of carbon storage technology to limit carbon emissions. Many IOCs have increased investment in lower-carbon technologies and set ambitious standards for carbon emissions. Comparatively, Gulf NOCs lag behind, rhetorically recognizing the significance of carbon reduction but lacking transparent, detailed, and substantiated plans.

• IOCs and NOCs are increasingly emphasizing gas and power.

Many IOCs have focused heavily on developing natural gas and liquified natural gas (LNG) portfolios, aspiring to apply their well-developed vertically integrated production models outside of oil. In the Gulf, for instance, Qatar-gas is striving to develop and market its capacity as an LNG provider, and Abu Dhabi National Oil Company (ADNOC) is integrating natural gas development into its expansion plans. Similarly, the rising importance of power is reflected by the ventures pursued by IOCs and the domestic initiatives of NOCs.

• NOCs are focusing on key technological innovation in carbon capture and clean hydrogen technologies.

Gulf NOCs have taken a forward-leaning approach to carbon capture, utilization, and storage (CCUS) technologies, in comparison to the tentative approach of IOCs. However, the region has largely strayed away from focusing on clean hydrogen production, despite potentially holding a strong comparative advantage. Ample space remains for Gulf nations to build key international partnerships in clean hydrogen technology and to become foundational in its growth.

The findings from this research enable a comprehensive understanding of the efficacy and implications of the strategies utilized by IOCs and NOCs to address the global shift away from hydrocarbons. Despite significant initiatives undertaken by IOCs and NOCs thus far, the continued discernment of opportunities for competitive advantage are vital. Companies must explore a combination of approaches and work to demonstrate progressive action. As the global energy transition is underway, creativity and transparency are vital, especially for the Gulf nations that fundamentally depend on hydrocarbon production.

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