Despite several concerted efforts towards economic diversification, the Middle East as a region is still heavily reliant on the oil industry. In order to make any steps to achieve diversification really count, I believe it is crucial to invest in renewable energy and create more sustainable jobs - thereby safeguarding the future.
History teaches us that fossil fuel resources are set to be depleted, sooner rather than later. Since the discovery of oil 125 years ago, the human race has collectively extracted around one trillion barrels of this resource, with one trillion more barrels making up confirmed reserves, and a third trillion waiting to be mined in the coming years.
Detractors to the diversification theory argue that oil will never be depleted, and that oil reserves replenish themselves automatically since crude oil is formed inside the earth as a result of an ongoing process that cannot be halted.
There are countless theories and opposing positions on this crucial subject. Two decades ago, scientists predicted the depletion of oil in the mid-21st century. Also, oil no longer exclusively refers to crude oil – today we have variations including shale oil, oil sands, and even heavy oil that exists in certain parts of the world.
This conundrum extends to oil in the GCC countries. Some studies predict that we will be left without oil in three decades, still others say it will take 140 years, while new theories predict the complete depletion of this resource that has been the erstwhile mainstay in this region.
For Oman itself, experts estimate that the gradual decline in oil production commenced at the turn of the 21st century. Several reports have surfaced lately on depleted oil fields in Oman, prompting the Omani government to announce the 2016-2020 five-year plan. Designed and implemented to avoid any economic challenges in light of oil’s declining fortunes in the recent decade, the plan seeks to reduce the country’s reliance on oil and diversify its economy with a focus on sectors of competitive advantage, such as tourism, industry, trade, agriculture, and financial services.
Regardless of how accurate these reports are, experts concede that the strategic importance of oil in the global economy is gradually receding. The appearance of newer, less expensive and more environment friendly alternatives is helping to fast track oil’s inevitable decline.
The new drive to invest in renewable energy is not merely a luxury. Rather, it is an urgent need even for the largest OPEC countries or those with confirmed surplus oil reserves. A recent study by Strategy& (Middle East), a management consulting and business strategy services company, predicted that annual global investments in renewable energy will rise by US$130 billion to reach US$370 billion by 2020. It also noted that the total GCC-wide investments in this sector will reach US$16 billion annually by 2020, while total accumulated investments register $40 billion – provided the right decisions and policies are adopted.
Authorities in Oman are well on track to implementing the plans outlined in Vision 2020 to produce 10 per cent of the country’s electricity requirements through renewable energy sources by 2020.
In February 2018, the Miraah Solar Project was inaugurated in the Marmul Area in Dhofar to the south of Oman. One of the world’s largest solar power endeavors, this project aims to generate around 1,021 megawatts of thermal energy to be used to generate steam that separates heavy from light oil, thereby making oil extraction from the Amal oil field easier.
Through its use of solar energy, the project once complete will save 5.6 trillion British thermal units (BTUs) of natural gas annually, which is enough to power more than 209,000 homes in the country, and reduce carbon dioxide emissions by over 300,000 tons per year. The project that started two years ago, includes 36 greenhouses, and spans a total area of just 3 square kilometers.
Meanwhile, construction works at the Dhofar Wind Power Project, the first large-scale wind farm in the GCC region, are proceeding as planned. The 50-megawatt wind farm will be connected to the Dhofar grid. With some 13 wind turbines set to be installed and the capacity to generate 160 gigawatt-hours/ year of clean energy, the project will electrify an estimated 16,000 homes and offset 110,000 tons of carbon dioxide emissions a year.
Oman has a notable advantage in leveraging renewable energy resources because of its geographical location. Enjoying year-round sunshine, the country receives solar irradiance of approximately 5,500 to 6,000 watts per hour per square meter a day during the month of July. Even in winter in January, for instance, this capacity continues to reach 2,500 to 3,000 watts per hour per square meter a day, offering advantages on par with the highest national solar energy density levels.
My purpose in highlighting the above projects is to underline that investing in renewable energy is important not only because it provides a more sustainable alternative to fossil fuel, or because it helps the Omani economy avoid the negative impacts of oil price fluctuations that we have witnessed in recent years. Equally significantly, renewable energy is a precious resource that we must continue to utilize effectively. Offering considerable prospects for national companies, it helps attract foreign direct investments from large global corporations that deem renewable energy as the most viable investment for the future.
Renewable energy has the power to ensure drastic positive transformations for Oman’s economy. Development models in nations rich in natural resources often effectively combine economic growth that targets an increase in the total production of commodities and services, and economic development in the broader sense that focuses on quantifiable economic growth levels as well as social, human and cultural dimensions. This implies a focus on investing in human beings in parallel with developing, managing and investing in resources and their revenues.
Such all-round transformation mandates a parallel investment in preparing qualified Omani cadres that can oversee the renewable energy ecosystem and its economic effects. It is worth emphasizing here that investing in human capacities and skills will become a defining aspect of leading economies of the future.
* The author is the Executive Chairman of Investcorp, Chairman of Bank Sohar and an International Advisor to the Brookings Instituition. All the views and opinions expressed in the article are solely those of the author and do not reflect those of Times of Oman