Low investment in fossil fuels detrimental to energy transition, UAE minister says

Oil prices are currently trading at multiyear highs as economies reopen

UAE Energy and Infrastructure Minister Suhail Al Mazrouei said the country plans to derive half of its energy mix from renewables by 2050. Chris Whiteoak / The National

A lack of investment in securing future energy supplies could extend the cycle of higher oil prices that have hit multiyear highs, UAE Minister of Energy and Infrastructure Suhail Al Mazrouei has said.

"If we are not investing enough, I am afraid we could see highs like we have seen in coal and in gas due to lack of investments," said Mr Al Mazrouei.

He credited the Opec+ bloc of oil exporters, of which the UAE is a part, with helping to stabilise oil prices.

"[The] Opec+ alliance has worked together as countries to ensure that we are not getting the huge increase in prices that could slow down economic growth as we are moving to the recovery after the pandemic," he said at the Africa Oil Week event, which kicked off in Dubai on Monday.

Oil prices are currently trading at multiyear highs as economies open up and industrial activities resume as part of an ongoing post-pandemic recovery. The prices of natural gas, which are linked to crude, have also doubled over the past year, amid a shortage of supply.

Brent, the international crude benchmark, was up 0.82 per cent to trade at $82.05 a barrel at 4.54pm UAE time. West Texas Intermediate, which tracks US crude grades, was up 0.96 per cent at $82.05 a barrel.

The Henry Hub price for natural gas was up 0.51 per cent at $5.544 per million British thermal units.

On Thursday, Opec+, which is led by Saudi Arabia and Russia, approved the addition of 400,000 barrels per day of oil supply to the market in November.

The group, which enacted historic production cuts amid the Covid-induced demand crunch last year, plans to bring back 2 million bpd of supply to the market by the end of the year.

Opec+ is playing a crucial role in ensuring security of supply as the world transitions to net zero, said Mr Al Mazrouei.

"This group of committed countries has worked together to ensure that investments are coming to the sector and that supply is there when the world needs it," he said.

"This goes hand in hand with our commitment to the transition and our commitment to do more projects in renewable energy. We need to not stop these investments or slow them down."

Mr Al Mazrouei also issued a warning that the race to net zero could result in steep increases in the prices of essential fuel commodities if a balanced investment approach is not taken.

"If we are serious about the transition – and this is very important – if we don't do that, we will have hikes in the prices and those hikes will prevent the world and the countries from subsidising renewable projects."

The UAE, Opec's third-largest producer, was the first Arab country to commit to reaching carbon neutrality by 2050. The country plans to derive 50 per cent of its energy mix from renewables by the middle of the century.

"We are planning to reduce the carbon intensity in oil operations to make it one of the cleanest barrels in the world," Mr Al Mazrouei said.