The Omani energy sector, which has long been synonymous with oil and gas production, is set to take on a leading role in addressing the energy transition, with positive domestic, regional and international implications. According to the IEA, Oman has set out an ambitious strategy to derive 30% of electricity from renewable sources and to be producing 1mt of hydrogen by 2030. In following this ambitious strategy, Oman is embarking on a transformative journey given that it continues to rely on oil and gas for around 30% of its GDP. Its goal is to emerge as a leader in the global energy transition, diversifying the country’s exports while reducing its own reliance on fossil fuels and lowering its own emissions.

In a global economy shaken by the aftermath of the pandemic and a surge in inflation on the back of Russia’s invasion of Ukraine, the energy trilemma looms large for policymakers trying to address rising energy costs, energy security and climate change. Navigating this complicated economic landscape has posed a complex challenge for industry and policymakers around the world. The Omani government has recognised that the country is well positioned to pivot from a reliance on oil and gas to two other plentiful resources in this region: solar energy and wind energy.

Abundance of clean energy potential

Oman’s abundant renewable energy resources provide an exciting opportunity. The intensity of solar radiation is among the highest in the world, with on average 360 days of sunshine per year.

Oman’s abundant renewable energy resources provide an exciting opportunity

This, coupled with vast amounts of available land, offers an excellent opportunity for large-scale solar exploitation. Oman also has significant wind energy potential along its southern coast, upon the coastal highlands facing the Arabian Sea and in the mountains in the north of Salalah. In these locations, the average wind speeds consistently exceed 8 metres per second, similar to the wind conditions at successful established European projects. Oman has the potential to position itself as an attractive destination for foreign direct investment into the renewables market.

The Sultanate of Oman proudly stands as a nation known for its political stability and promising economic growth prospects. Similar to other Gulf region countries, Oman has undergone a comprehensive overhaul of its commercial laws, regulations and policies, with the goal of establishing a more open and flexible environment to foster economic growth and attract foreign investment.

Targets and drivers

Currently, oil and gas constitute roughly 60% of Oman’s export revenues, while domestic natural gas powers over 95% of the nation’s electricity production.

To facilitate a successful transition, in what is clearly a fossil fuel dominated economy, Oman has set ambitious goals for its renewable energy sector. In 2022, in line with the Paris Agreement, Oman set a key target of reaching net-zero emissions by 2050, increasing the renewables share of the energy mix to 20% by 2030 and 39% by 2040.

Hydrogen is set to play a vital role in meeting these targets. Aiming to become a major player in the global hydrogen market, Oman plans to produce more than 1mt of renewable hydrogen annually by 2030, with targets escalating to 3.75mt by 2040 and a staggering 8.5mt by 2050.

These long-term objectives would not only meet Oman’s domestic energy needs but also surpass the current total hydrogen demand in Europe.

Although natural gas has long been a key part of Oman’s economic growth, resources are slowly dwindling

This planned transition will transform Oman’s energy mix and is a testament to the country’s commitment to sustainable energy development and its determination to be a prominent figure in the global renewable energy space.

In addition to the need to meet decarbonisation targets and reduce greenhouse gas emissions, the strategy also recognises the positive economic solutions that the transition will offer.

Although natural gas has long been a key part of Oman’s economic growth, resources are slowly dwindling. So, while in the short and medium term gas reserves are expected to be enough to fulfil current levels of consumption, in the long term growing population and industrial aspirations could put a strain on domestic resources, increasing the importance of utilising renewable energy sources. As well as this, the uncertainty over future fossil fuel export revenues in favour of clean alternative energies adds to the necessity for producer economies like Oman to get ahead of the curve in their transition efforts.

There is already a pipeline of renewable projects under development set to boost electricity generation to meet the decarbonisation targets, such as the Dhofar Wind Project. This will be the first large-scale wind farm in the GCC, comprising 50MW. The wind farm’s aim is to reduce domestic reliance on gas for electricity generation, which can be redirected towards more valuable industrial uses and preserve natural gas resources. In solar, the Ibri-2 Independent Power Producer will be Oman’s largest utility-scale solar PV independent power project and will generate 500MW of renewable power.

Independents supporting strategy

Euphrates Energy, a recently established independent, is leveraging the favourable operating environment to capitalise on opportunities arising from prevailing industry trends while actively supporting Oman’s energy objectives. Its strategic approach involves the acquisition of interests in mature oil and gas assets, contributing to energy security, all the while channelling its resources and expertise towards the financing of solar power projects in Oman. This dual-focused strategy underscores Euphrates Energy’s alignment with the global and Omani transition goal to develop cleaner and more sustainable energy sources. As an early mover in this space, Euphrates Energy mirrors Oman’s ambition to establish itself as a pivotal provider of energy security solutions in the short term and for the future.

Majid Qamardeen is a director at Euphrates Energy.

This article was published as part of PE Outlook 2024, which is available for subscribers here. Non-subscribers can purchase a copy of the digital edition here.

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Author: Majid Qamardeen