Can the nascent green energy push ever outpace big oil?

• Aramco CEO says the energy industry should “abandon the fantasy of phasing out fossil fuels.”.
• At the moment, green energy solutions are too expensive for commercial viability.
• For Africa, while leaders welcome green energy investments, they continue to sign ambitious investments to explore oil & gas.

Green energy transition is facing challenges as global leaders in oil production, Saudi Arabia says current initiatives have failed and calls for more investment in oil. “New energy sources can complement fossil fuels but not replace them, he said. Investment in all sources of energy was needed to meet global energy demand,” quoted the CEO of Saudi Arabia oil giant Aramco.

The CEO of the world’s largest oil company goes on to point out; “the current strategy of prematurely switching to immature alternatives has been so self-destructive.”

According to him, “new sources cannot even meet the growth in demand.” In a previous conference he bluntly called on policymakers to “abandon the fantasy of phasing out fossil fuels.”

Across the world in the US, President Donald Trump’s administration shares this view as it moves to maximize oil and gas production. This is a complete turn around from his predecessor, Joe Biden, who sought to accelerate the green energy transition and move away from fossil fuel.

In Africa, however, sentiments are at cross roads; while rhetoric calls for investment in green energy transition, new ambitious investments in oil exploration suggest otherwise.

Speaking in London at an African Development Bank-hosted session titled “Managing Carbon Risks and Raising Climate Ambition – New Policy Approaches for Countries with Fossil Fuels,” Sian Bradley, a Research Associate at Chatham House, outlined the risks and complexities for African countries that are currently extracting oil and gas.

In his view, “About half of all low-income economies are either producing fossil fuels or exploring right now; this is a significant issue,” he said.

Even though he admitted that, “the ability to extract oil and gas has traditionally improved countries’ positioning for finance, their credit ratings and their ability to graduate from aid.”

However, while noting that oil production means developing Africa’s wealth, he maintained that, “there’s a much wider reassessment of value going on in the global economy with the reallocation of capital to more sustainable energy sources.”

He cautioned African oil producers and countries that are currently exploring fossils that the global green energy transition will potentially make oil production less profitable and even obsolete.

In his opinion; “delivery of net-zero carbon emissions will have significant impacts for fossil fuel exports and the competitiveness of fossil fuel-based power, with economy-wide implications.”

“Direct impacts range from volatile and declining fossil fuel revenues over time, to potential reductions in the productive lifespan of fossil fuel assets,” he said, a view that Aramco CEO opposes.

Speaking at the CERAWeek conference in Houston, Texas, U.S. this week, the Aramco CEO Amin Nasser told executives from the world’s biggest energy companies that green energy solutions can compliment oil as alternative fuel, but not replace it.

That be as it may, he called on policymakers and energy executives to rethink energy transition plans and to “stop doubling down on elements of the transition that have failed.” Indeed, he called for “the need for investment in fossil fuels to meet global demand.”

Similarly, media report says in Europe, “policymakers have slowed the rollout of clean energy policies and delayed targets as energy costs soared following Russia’s invasion of Ukraine in 2022, shifting their focus to energy security.”

Seconding the views of the oil giant CEO, the report points out that; “European oil majors have pulled back from plans to build-out greener technologies because they have proved unprofitable. It is time to stop reinforcing failure,” Nasser said.

He gave green hydrogen as an example of a green energy fuel that is been promoted and has been the focus of energy transition policies, “but is still too expensive for widespread commercial use.”

“In fact, there is more chance of Elvis speaking next than the current plan working,” he commented, a similitude that sung very close to home for his US audience at the conference.

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Africa green energy vs oil production

With this back and forth on green energy transition and the purported phasing out of oil, it is no wonder that African leaders have become very cautious. On the one hand welcoming green energy transition investment and on the other, signing oil exploration deals.

Consider the views of Chebet Maikut, the Commissioner for Climate Change in Uganda at the AfDB session in London: “Oil and gas is a resource that everyone welcomes to support our socioeconomic transformation.”

He said Uganda has in excess of three million barrels and it is conducting further exploration. “The Government has now prioritized oil and gas as a key sector to speed economic growth in the country,” he explained.

Staying cautious, he added; “But we want to learn from the mistakes of others and do this in a sustainable way. In our Nationally Determined Contributions we’ve committed to reduce emissions by 22 per cent by 2030 and part of this is to increase the supply of renewable energy.”

Speaking at the same event, Rose Mwebaza, Chief, Natural Resources Management Officer at the African Development Bank, cited Nigeria, Africa’s largest oil producer, as a country that is balancing it’s oil output and related carbon emissions with policy action for the green energy transition or rather carbon emission reduction.

“Nigeria’s oil and gas is one of the top 10 greenhouse gas (GHG) emitters in the world mainly through gas flaring,” she admitted.

In the same train of thought, she said; “Nigeria has a clear strategy and framework to reduce GHG emissions, particularly in flaring.” She also commended Nigeria for having “identified several low carbon development projects and has made progress to implement some of them through mitigation financial instruments such as the Green Bond.”

This approach, continued oil production alongside green energy action and reduction of carbon emissions seems to be the global stance now.

However, none has put it more bluntly than the Aramco CEO. While calling for increased investment in oil production, he said Aramco invested more than $50 billion last year in conventional and renewable energy projects.

“The company has a target to invest in up to 12 gigawatts of solar and wind energy by 2030,” he added, but made it clear that these investments in green energy and carbon reduction are in no way meant to replace oil production.

On the contrary, the Aramco CEO did not mince his words when he called on the industry to “abandon the fantasy of phasing out fossil fuels.”

Read also: The future of Africa’s energy sector: Balancing fossil fuels and renewables