The Masdar initiative, aka Abu Dhaby renewable energy bet
You would never expect that one of the major hydrocarbon-producing (oil!) nation in the word starts a clean and sustainable energy project.
Well, it is true. It has happened, and it is extremely smart. Abu Dhabi launched the “Masdar Initiative” in 2006, defined as a “global cooperative platform for open engagement in the search for solutions to some of mankind’s most pressing issues: energy security, climate change and truly sustainable human development.”
The declared goal is to make of Abu Dhabi a world leader in new energy technologies research and development. This is not limited to just energy production, but also touches carbon management and water utilization.
Abu Dhabi has oil reserves of about 92bn barrels, and a production of circa 2.5mn a day. This makes for a reserve life of about 100 years at current production and consumption. Both production and consumption will clearly grow because of the growing appetite of emerging markets.
Yet I don’t think that fear of running out of oil is what drives this decision. Even with a very pessimistic view, you can expect Abu Dhabi to have oil reserves for several tenths of years. What I think drives this decision is the realization that expensive energy is boosting research for alternative forms of energy, and climate issues are making oil “less friendly” to say the least.
With oil at 120$ a barrel, almost every form of energy production becomes profitable. It costs less than a dollar to produce a barrel of oil in Saudi Arabia, about 6$ in US, and about 35-40$ from the Canadian tar sands (which are estimated holding about 180bn of barrels in reserves).
While Abu Dhabi has reserves for 100 years, the whole world has apparently enough oil for just over 30 years, and this is what really matters (to the whole world). The closer you get to that deadline, the more expensive oil will be, and the more profitable will be investing in new energy technologies. The more you invest in them, the less expensive they will become, and the cheaper alternative energy will be. And it will also be greener, thanks to the growing attention to the environment. Cleaner, greener and renewable. This is happening now and at an ever growing pace. The risk (or certainty maybe?) is that oil will be displaced as the main source of “cheap” energy well before the world runs out of reserves.
Now, it doesn’t really matter that you have 100 years of oil reserves if the focus has shifted to other form of energy. This is what Abu Dhabi has understood and is smartly fighting against: loss of importance.
Abu Dhabi has understood that the focus will shift away from oil towards other form sof energy over time, and has decided to put the huge capitals it is accumulating at work in the smartest way possible: researching on those technologies that will eventually displace its source of wealth.
The long term goal of a project like Masdar in an oil-producing country is building the conditions to remain the centre of gravity for energy production even beyond the limit imposed by its natural resources. And by doing this, the project is speeding up the very same process that will eventually displace the older energy production technology whose proceedings are right now being used to displace itself!
It’s a very smart play, and if well carried over we will all benefit from it. I think other countries in the area might follow suit, to make sure they will be able to play on a levelled field in 20 years time.
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