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Observer
27-05-2025
- Business
- Observer
Private sector must absorb premiums to accelerate energy transition
MUSCAT: The global energy transition will not succeed without private-sector willingness to absorb cost premiums, build scalable models and push investment despite current regulatory uncertainties, according to Salih Merghani, Executive Vice President for Energy at Olayan Saudi Holding Company. Speaking at the Oman Petroleum & Energy Show (OPES) held in Muscat recently, Merghani said that unlike previous shifts in industrial history, today's energy transition demands that companies move away from 'dense, cheap and reliable' fossil fuels to energy sources that are intermittent, complex and often more expensive. 'This is unlike anything we've attempted before. We're transitioning not because the alternatives are more efficient, but because of an environmental imperative. That makes the economics more challenging — and more urgent,' he said. Merghani noted that although Saudi Arabia and the region offer competitively priced energy, the lack of a comprehensive regulatory framework for decarbonisation is slowing momentum. As a result, private investors must take the lead in developing new mechanisms for green investment. 'In our case, we asked ourselves: why move now? The answer was scalability. The scale exists, the market is forming and our capital has to find a home where it contributes to the long-term shift,' he said. He cited examples of private investment by Olayan into carbon capture and storage (CCS) technologies and industrial retrofits aimed at reducing emissions in sectors like steel, cement and heavy industry. 'We looked at steel production, for example. Instead of building a new 'green steel' facility from scratch, we worked on retrofitting existing operations to lower their emissions profile significantly,' he explained. However, he stressed that many low-carbon technologies will not scale without 'offtake guarantees' and financial structures that share the risk across the value chain. 'We realised that if we wanted to accelerate deployment, someone had to accept the premium — whether in the form of higher offtake prices, long-term contracts, or industrial policy support,' he said. Merghani also highlighted the role of voluntary carbon markets (VCMs), noting that investments under Saudi Arabia's VCM initiative have focused on creating credible carbon credits and building awareness within the private sector. 'We don't yet have taxes or binding emissions caps, but the idea is to integrate carbon into business decision-making through the market. The VCM gives us a way to do that,' he said. On technology maturity, he pointed out that while solar energy has now reached global scale, other solutions — particularly CCS and sustainable aviation fuels (SAF) — still face barriers. 'We've made strong progress in solar, but CCS and SAF require different economic models. For SAF, the aviation sector may be the last to transition and retrofits must become financially viable at today's cost structures,' he said. Merghani called for greater collaboration between industrial players, regulators and financiers to unlock the full potential of emerging technologies. 'Financing institutions must be part of the solution. We can't build a project pipeline if the banks and regulators aren't aligned with the pace of transition,' he noted. He concluded by stressing that while the private sector is ready to lead, market signals and policy coordination must follow if the region is to move from pilot projects to full-scale decarbonisation. 'The technology is here, the investment appetite is real — but if we want this to happen fast, it has to be a shared effort. This transition won't happen under normal conditions. We need to rewire the whole ecosystem,' he said.
Observer
14-05-2025
- Business
- Observer
Energy shift must reflect local realities: Experts warn
MUSCAT: Global energy experts convening at the Oman Petroleum & Energy Show (OPES) have urged governments and industry leaders to adopt more realistic, inclusive, and economically grounded strategies to drive the clean energy transition. During a high-level session titled 'Innovation in New Energies to Enable the Transition', speakers highlighted the urgent need for regulatory clarity, social engagement, and investment frameworks that reflect on-the-ground realities in the Middle East and beyond. Organised by the Society of Petroleum Engineers (SPE), the panel brought together senior voices from Oman's Ministry of Energy and Minerals, OQ, SLB, Olayan Saudi Holding Company, and Petronas. Dr Firas al Abduwani, Director General of Renewable Energy and Hydrogen at the Ministry of Energy and Minerals, opened the discussion by emphasising that the real challenge lies not in technology, but in crafting effective policy. 'Everyone talks about the need for more renewables, but few appreciate the complexity of policymaking. It's not just about ambition—it's about designing policies that reflect economic and social realities,' he said. He explained that Oman's natural gas, partly subsidised and socially priced, plays a vital role in electricity generation, desalination, and industrial production. Transitioning from this foundation requires careful sequencing and institutional alignment. Dr Talal al Aulaqi, Vice President of Energy Excellence at OQ Alternative Energy, warned that while policies are accelerating, social behaviour has yet to catch up. 'Every summer, we see power demand spike. That tells us people still expect reliability from fossil systems,' he said. 'We must ensure the transition is inclusive and that citizens have a role in shaping it.' He called for demand-side engagement tools, such as distributed solar, energy efficiency incentives, and education campaigns to bridge the gap between national strategy and public expectations. Salih Merghani, Executive Vice President for Energy at Olayan Saudi Holding Company, said the clean energy transition cannot advance without clear, long-term market signals. 'We've seen successful pilot projects in carbon capture and green industrial solutions, but they won't scale without demand certainty and regulatory support,' he said. He noted that the absence of carbon pricing in many regional markets is limiting the ability of private capital to move decisively into low-carbon investments. Guillaume Verhaeghe, Director of New Energy MENA at SLB, called for leveraging decades of oil and gas expertise to fast-track carbon capture, utilisation and storage (CCUS). 'The region has the technical capability. Now we need permitting reforms, financial incentives, and cross-sector partnerships to deliver CCUS at scale,' he said. He added that reusing existing infrastructure for new energy applications could reduce transition costs and create regional leadership in climate technologies. Emry Hisham Yusoff, Senior General Manager of Carbon Management at Petronas, said Southeast Asia is moving cautiously—balancing environmental goals with economic development. 'Yes, we're expanding CCUS and renewables, but gas remains crucial for energy access,' he said. 'To scale climate solutions, we need public-private coordination and government-backed incentives.' He highlighted the role of frameworks like the US Inflation Reduction Act as models for de-risking early investment in carbon management. Across the panel, speakers emphasised that energy transition is not merely about new technologies—it is a systemic transformation that requires public acceptance, economic restructuring, and policy coordination. As Oman moves forward under Vision 2040, the session reinforced the Sultanate of Oman's position as a regional innovator in green hydrogen and low-carbon energy—but also underscored that successful transitions must be gradual, inclusive, and grounded in national context.
