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Home / Business / When the sun goes down on oil, the sun will rise on solar energy – EURACTIV.com

When the sun goes down on oil, the sun will rise on solar energy – EURACTIV.com



When shares in Saudi Aramco are finally disclosed, it will undoubtedly be an industry of what promises to be the largest listed offering ever. More significantly, the move will also signal Saudi Arabia's recognition that fossil fuel sunset is just over the horizon, writes Jonathan Gornall.

Jonathan Gornall is a British journalist, formerly with The Times, who has lived and worked in the Middle East and is now based in the United Kingdom.

There was a clear lack of crucial financial details, so it was not the world's most conventional investor relationship. But when the world's largest oil producer this month offered an astonishing glimpse behind the silence veil that normally hides its business, it may also have lifted the curtain in the last act of the fossil fuel era.

It is three years since Saudi Aramco first announced that it planned to go public. Since then, the plan has been on and off again several times, but now it seems to be back on. If Saudi Energy Minister Khalid Al Falih has hinted that Aramco shares will be put on the market at some point during the next year and a half, it promises to be the largest initial stock offering ever seen.

This company, owned directly by the Saudi government, is gigantic. In 201

8, it made a net profit of $ 111.1 billion, making it almost twice the size of Apple, the world's most profitable listed company, and dwarfing the profitability of each of the other major oil companies. On August 12, the company revealed that revenue for the first half of 2019 had fallen 12% to $ 47 billion, a drop blamed on a dip in the price of crude oil, but Aramco remains easily the world's most profitable company.

So why does Saudi Arabia want to offer outsiders part of the action?

The most credible explanation is that 86 years after Saudi Arabia signed the licensing agreement with a US oil company that led to the establishment of the Arabia Oil Company and 39 years since the government increased its stake in Aramco to 100%, it realizes that fossil sunset Fuel is just over the horizon.

On one level, this is terrific news for a planet facing irreversible damage from the impact of fossil fuel consumption. Saudi Arabia is the largest crude oil producer in the world, and analysts believe they plan to spend billions, if not trillions, of dollars a stock exchange will provide in part to fund ambitious plans to divest the country dependent on oil and to develop a significant sector for renewable energy.

But a planned IPO indicates that all Saudi oil is unlikely to stay on the ground. The amount of oil Saudi Arabia has always been uncertain. But in January, in an effort to improve transparency before giving shares, Aramco released details of the first independent review of the country's oil reserves. It confirmed that with 263.1 billion untapped barrels at the end of 2017, Saudi Arabia has the world's largest raw material reserves. Similarly, the company's first and massively oversubscribed international bond issue three months later, which raised $ 12 billion, to test appetite and pave the way for a stock exchange listing.

Goal Achieved. Global investors are looking forward to going, and when stocks are finally going to sell, there will no doubt be an unbridled feed frenzy.

Of course, none of these potential investors are unaware of the increasing environmental pressure on oil and at the same time growth in interest and investment in renewable energy sources, which together limit Aramco's long-term prospects. But they also know that there is still a short-term fortune to be made from oil and gas, and that they will be ruthless in their determination to squeeze every possible percentage of the profits from every drop before the curtain finally falls on the fossil fuel era. [19659004] Notwithstanding all this, this is a key element in the global transition from fossil fuels to alternative energy sources. It signals Saudi Arabia's recognition that oil is about to die, and that it is better to reap a huge dividend from the sale of that asset now, instead of seeing its earnings steadily declining to the stock is worthless. It is also likely to stimulate similar strategic thinking among Saudi Arabia's oil-producing neighbors, which may well accelerate their efforts to simultaneously maximize profits and reduce oil dependency in favor of going out to develop significant renewable energy sectors.

It is no coincidence that Saudi Arabia has just invited a number of massive solar projects as it begins to increase its commitment to renewable energy goals outlined under the country's Vision 2030 plan. Although it is dropping in price, solar infrastructure is still expensive and large investments are required – investments that can easily be financed by a stock exchange listing.

It would be an exaggeration to suggest that Saudi Arabia is turning its back on oil too soon; the profits from that bounty will continue to flow into the country's coffins for many years to come. But the fact that it reduces the exposure to rely on the commodity in such a public way and willingly shares the remaining short-term benefits with outside investors indicates that the Kingdom recognizes that the end of an era is looming.

Just as important, this historical development suggests another, optimistic scenario. For the sunny region as a whole, the global transition to renewable energy and especially to solar power is not only inevitable, but something to be welcomed with open arms as the next big bonanza.

The protectionist tariff barriers that have prevented widespread use of renewable energy around the world will inevitably fall under the weight of their own ultimately indefensible illogicality, while the costs of solar and other renewable energies are steadily declining as technologies improve. For example, a paper in the journal Nature this month revealed that 344 cities in China are already generating unsubsidized solar energy at or below the price of conventionally generated energy.

So the response from the Gulf-rich oil states must be imaginative. Maximum efforts must now be directed towards developing cutting-edge technologies that are necessary to ensure that solar energy can not only be efficiently utilized at home, but can also be stored, distributed and exported as efficiently as oil has been.

a massive, scary business, which requires huge investments and paradigm-changing technological breakthroughs, but it will be more than worth it. Once blessed with oil, the Gulf states are blessed with sunshine, a natural and infinitely renewable asset that can be communicated forever with the right investment in ingenuity – and save the earth in the coup.


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