The Case for Cooperation on the Energy Transition in the Gulf
This article is part of a series exploring regional energy cooperation in the Gulf and is published in cooperation with Istituto Affari Internazionali.
Regional security and economic development among the Gulf states—Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—can improve if cooperation is fostered in the energy, minerals, and water industries, by encouraging joint exploitation of resources, establishing neutral regional zones, and creating energy sources that are interconnected. The positive diplomatic environment of 2023, particularly after the rapprochement between Iran and Saudi Arabia after seven years, holds the key to unlocking a new era of cooperation in the region across the resource mix.
Fostering Renewable Energy Cooperation
The region’s geographic location means it receives some of the highest annual amounts of solar energy in the world—more than 2,100 kilowatt-hours (kWh)—and a wind speed that can reach about 10 meters per second (m/s). These natural clean energy resources could be exploited regionally and also exported beyond the region, benefitting the economy both directly and indirectly and encompassing many sectors of industry, including energy, manufacturing, and information technology.
The Gulf Cooperation Council Interconnection Authority (GCCIA) envisions establishing a robust interconnected power grid. This would leverage the region’s abundant solar and wind resources and further position the are to become a hub for producing and exporting clean energy. As of early 2024, part of the region is already interconnected through this grid—from Oman in the south through the UAE, Saudi Arabia, Qatar, and Bahrain, and then to Kuwait in the north. In addition, Iraq recently signed an agreement with the GCCIA to join the grid. GCCIA has an ambitious plan to extend to Eurasia and East Africa. Iran is also part of this planned grid, as is Turkey. Such interconnection would give domestic power grids more reliability and stability in the face of increasing challenges, such as unexpected electric load rise, as well as blackouts due to natural disasters or equipment failures.
Envisioning a Gas Network
Expanding the gas sector across the Gulf is a potential solution to some of these problems. Doing so would pave the way for a joint gas pipeline network that could facilitate hydrogen transmission—which is key to achieving net zero carbon emissions. Several Gulf countries have either not fully developed their gas production sectors or have insufficient resources. Iraq, Kuwait, and the UAE are net gas importers, and in 2022 imported 50%, 40%, and 20% of their gas demand respectively (see chart below). For example, Iraq imports most of its gas from Iran, and the UAE sources much of its gas from Qatar through the Dolphin pipeline.
Kuwait is the only Gulf country to source a large percentage of its imported gas (46%) from non-Gulf regions, such as Africa, Europe, and North and South America. This sourcing of around 4 billion cubic meters of natural gas annually from faraway countries is deemed to be a lost economic opportunity for Gulf countries, including Iran and Qatar.
Expansion of the gas sector in the Gulf would play a key role in the region’s energy transition. Having a joint pipeline network capable of carrying hydrogen products could also pave the way for the region to become a world hub in the production and export of carbon-neutral (blue and green) hydrogen.
Gulf Minerals Powering the Future
The Gulf region’s mineral wealth, essential for energy transition, has come to the forefront. Recent discoveries of lithium, cobalt, nickel, copper, and other minerals mark a turning point in the global race to secure mineral supply chains. These minerals are essential components of renewable energy technologies and energy storage systems.
Recently, Iran announced the discovery of a huge lithium deposit—an estimated 8.5 million metric tonnes—on its territory. This makes the country the fifth lithium reserve resource holder after Bolivia, Argentina, Chile, and the United States. Moreover, Iran also revealed the discovery of additional vital minerals, among them manganese, nickel, and cobalt.
Saudi Arabia also recently announced the discovery of mineral reserves with an estimated market value of US $64 billion. Among the discovered minerals related to energy transition are copper, iron, and nickel. Oman, too, has announced an ongoing project to update its national geographical and geological minerals database with more discoveries of copper and iron reserves.
The envisioned regional collaboration would include joint investments in developing the infrastructure needed in the region for extraction, preliminary mineral processing, and export logistics. Joint efforts to invest in the management of mineral resources could position the Gulf as a key influencer in the global transition to clean energy. This could be pursued by establishing joint venture companies where investors include the Gulf states’ public and private sectors.
Working together, the Gulf states could pool resources, share costs, and achieve economies of scale. By doing so, the region would be able to collectively manage and mitigate risks associated with volatile commodity prices, environmental challenges, and geopolitical uncertainties. As a result, such collaborative ventures would contribute to political stability in the region. The Gulf countries would have broader access to markets and assert their role as key players in the energy transition agenda.
It is worth noting that Iran’s current economic sanctions may discourage other states from establishing joint ventures. However, these restrictions do not prevent discussion of joint strategies for making the most of the Gulf’s mineral reserves and developing regional value chains.
Developing Shared Fields
The collective strength of Gulf countries lies in their vast natural resources, accounting for approximately 48% and 40%, respectively, of the world’s proven oil and natural gas reserves. Shared oil and gas fields, as illustrated in the table below, are poised for active development, offering potential solutions to regional energy challenges.
In early 2022, Kuwait signed a memorandum of understanding with Saudi Arabia to develop the joint offshore Arash/Durra gas field in the partitioned neutral zone. However, Iran has objected to the agreement and demanded its share. Most likely the Arash/Durra field will not be exploited in the short term until an agreement is reached on the demarcation of maritime borders between Iran, Kuwait, and Saudi Arabia. However, joint exploitation of Arash/Durra could be achieved without compromising the territorial sovereignty of the three countries; Iran is already jointly exploiting oil and gas fields with neighboring Gulf states, including the South Pars/North Dome gas field with Qatar and the Esfandyar/Lulu oil field with Saudi Arabia. These joint models can provide lessons and open the door for pragmatic and logical negotiations to enable cooperation in exploiting other joint fields, including Arash/Durra.
Establishing a Regional Water Network
A region is labelled as water-scarce when the availability of natural renewable water (waterfalls, rivers, freshwater lakes, and aquifers) is below 1,000 cubic meters per person per year. This definition implies that all Gulf countries except Iran are under the natural water poverty line. Consequently, these countries depend on energy-intensive seawater desalination to meet their potable water demand. The power stations in these countries are mostly cogeneration systems that produce electricity and heat.
Addressing water scarcity is paramount for Gulf countries, especially those heavily reliant on desalination. Despite challenges including geopolitical tensions, a strategic imperative is to establish a regional water interconnection network. With this in mind, GCC leaders decided to carry out a water interconnection study in the year 2000. The proposed network would supply fresh water to all GCC states from desalination plants that would be built on the shores of certain states. Three desalination plants were proposed—to be built in Sohar, Oman; Al-Sila in the UAE; and Al-Khafji in Saudi Arabia. Unfortunately, there has been no tangible action on the project since 2013.
There is an urgent need for increased cooperation in the areas of seawater desalination, water treatment, water resource management, and water transmission across the Gulf region if its future is to be more sustainable. The latter of these in particular is a key survival strategy, and such a water network would make the region resilient to natural and changing environmental conditions challenges. The feasibility of a regional water grid should not therefore purely be based on financial profits—it also needs to consider the grave water scarcity challenges the region is poised to face in the years ahead.
Moving Towards Sustainable Horizons
While it may take time to achieve regional cooperation in energy, water, and environmental sustainability, diplomatic rapprochement between Iran and Saudi Arabia could pave the way for positive outcomes. Policies should focus on establishing interconnected regional infrastructures, including gas and water networks, and implementing a joint financing system to support balanced development across the Gulf region. It is essential to overcome political differences and address challenges through dialogue for these policies to succeed.
As we chart the course toward sustainable horizons in the Gulf, the call for cooperation echoes loudly. Embracing shared objectives, drawing on collective strengths, and navigating challenges with a collaborative spirit will propel the region towards a future defined by sustainability, resilience, and mutual prosperity.
Photo: Shams Power
