RIYADH, SAUDI ARABIA—This capital, known historically as a drab desert city, today reverberates with construction, concerts, art shows, film screenings, sporting events and buzzy restaurants.
Thanks to continued oil wealth and efforts by the government to both diversify its economy and loosen once-strict societal rules, many young Saudis suddenly see a future in their own country with opportunities and a new economic dynamism.
Rayan Al-Ghalayini, who grew up in the kingdom, didn’t ever expect to run a business back home when he graduated from the University of British Columbia in Vancouver, Canada back in 2014. Now he owns a fast-growing health and fitness business that’s expanding from Jeddah to Riyadh.
The 33-year-old entrepreneur is opening new gyms in the capital and designing wellness programs for companies to offer to their growing Saudi work forces, all in a country where yoga lessons were illegal just a few years ago.
Al-Ghalayini’s experience, like that of many other young people, represent the striking juxtaposition Persian Gulf states embody — one that is inextricably linked with oil and gas.
The petrostates in the Persian Gulf region are in the spotlight at the United Nations global climate summit opening tomorrow in Dubai, United Arab Emirates. The glare can be harsh, but it also reveals their increasingly complicated relationship with fossil fuels.
The UAE, with the seventh largest oil reserves in the world, has already stirred controversy by appointing the head of its national oil company as president of the event, known as COP28, and inviting the fossil fuel industry prominently into deliberations.
Regional heavyweight Saudi Arabia and the tiny emirate of Qatar — the world’s largest exporters of oil and gas respectively — are also expected to wield outsized influence at the gathering.
The trio of sheikdoms depend on more than just producing and exporting fossil fuels. They are also prolific consumers of oil and gas themselves, making their economies among the world’s most carbon-intensive, along with fellow Gulf monarchies Kuwait, Bahrain and Oman.
All have seen runaway growth in energy use as they’ve become rich selling fossil fuels and ruling families have placated their populations with copiously subsidized electricity and petrol. Cut-rate energy for consumers and businesses has encouraged extravagant use, including roads crowded with giant SUVs, indoor ski slopes, air-conditioned outdoor cafes and the extensive use of energy-intensive water desalination.
Qatar, a city state of 2.7 million people, emits more greenhouse gases per capita than any other country. The UAE, population about 10 million, ranks fifth and Saudi Arabia, population 36 million, ranks 14th.
These countries now face a tricky challenge when it comes to fossil fuels. They’re increasingly desperate to rein in their own consumption, while they aim to produce even more to sell overseas. They plan to use the profits to diversify their economies beyond oil and gas — the key to their prosperity in any post-fossil fuel era.
The UAE and Saudi Arabia together aim to add at least 2.5 to 3 million barrels per day to their oil production capacity by 2027, equal to about 2% of the global oil market. Both are also planning new natural gas production, with Saudi starting to draw from a huge new field beginning in 2025. Qatar recently signed contracts to supply liquified natural gas to China and other countries until at least 2050. The Organization of the Petroleum Exporting Countries (OPEC) — which is dominated by Saudi Arabia and includes the UAE but not Qatar — recently forecasted global oil demand would rise to 116 million barrels per day, from about 101 million today, by 2045.
The UAE may even have intended to use its COP28 presidency to promote oil and gas deals, according to media reports about leaked internal talking points for meetings with foreign officials. And the government of Saudi Arabia has an initiative aimed at boosting oil demand in developing countries.
“Fossil fuels are here to stay,” declared Prince Abdulaziz bin Salman Al Saud, Saudi Arabia’s energy minister and a son of King Salman bin Abdulaziz Al Saud, at a recent conference last month in Riyadh.
Gulf states’ fossil fuel ambitions fit uneasily with a climate conference where one of the main questions up for debate is whether the world should phase down or ultimately eliminate the use of fossil fuels.
Yet that doesn’t mean these states oppose clean energy.
Gulf countries, in fact, are making massive clean energy investments. The UAE operates the world’s largest single-site solar farm and started up three nuclear reactors since 2020. Saudi Arabia is building the world’s largest renewable energy hydrogen facility and aims to produce half its electricity with renewables by 2030.
“They have fantastic solar and wind resources to deliver a significant amount of the electricity they consume,” said Paddy Padmanathan, former chief executive of the Saudi Arabian renewable energy developer ACWA Power and co-founder of a Milan-based developer Zhero. “Today, there’s no other way they can deliver that [electricity] cheaper than renewable energy.”
Gulf countries are also reducing generous energy subsidies — long seen by citizens as a birth-right — in a bid to stem runaway growth in energy consumption.
Adding renewables and restraining energy use at home are both critical for Gulf countries to avoid cannibalizing their own oil and gas exports as their collective populations are expected to grow from 59 million today to 84 million by 2100, including large foreign work forces.
If global oil and gas markets eventually do go into decline — something Sultan Al Jaber, COP28 president and head of the UAE national oil and gas company, has called “inevitable” — these states believe they can expand market share with their low-cost oil and gas produced with a lower carbon footprint than competitors.
Gulf states also need to broaden their economies beyond fossil fuels, which they are racing to do. The UAE has led the region in these efforts, with its foreign trade on products other than oil hitting a record high in the first half of this year. Saudi Arabia, a far larger economy, has jump-started diversification under Crown Prince Mohammed bin Salman Al Saud, often referred to by his initials MBS.
The kingdom launched its Vision 2030 with great fanfare after the 38-year-old prince began his rise to successor to the throne in 2016. The plan got off to a rocky start after the 2018 assassination of Saudi journalist and dissident Jamal Khashoggi in the country’s embassy in Türkiye. The murder caused a global sensation, with United States intelligence services concluding it was likely ordered by the crown prince. MBS has denied ordering the killing.
Since then, Saudi Arabia has struggled to attract foreign investment, leaving the kingdom to rely on its oil revenues to fund many of the diversification projects, from a new airline to its first-ever electric car assembly plant to a 105 mile long, luxury residential corridor across the desert.
While many foreign investors hesitated, the crown prince stimulated growth by firing up a swath of Saudi Arabia’s youth — almost two thirds of its population is under age 30 — by loosening religious restrictions across the board, allowing women to drive for the first time and promoting public entertainment for all.
“It’s been an incredible shift I didn’t think I would ever see in my lifetime,” the young entrepreneur Al-Ghalayini said recently after leading a workout for men and women together at a new Banyan Tree resort in the eco-tourism development area of Al Ula, representing the sportswear company Lululemon as a brand ‘ambassador.’ “The government has really opened doors for us.”