Energy companies back Cop28 deal calling for transition from fossil fuels

Some energy companies have backed the Cop28 deal that calls for a transition away from fossil fuels by 2050.

The global stocktake was unanimously approved by 198 countries at the UN climate summit in Dubai on Wednesday, marking a historic moment in the fight against climate change.

France’s TotalEnergies said it welcomed the agreement, adding that it supported the goals of tripling renewable energy and doubling energy efficiency by the end of the decade.

“These objectives are at the heart of TotalEnergies' roadmap for 2030,” the company said in a statement to The National.

Developed and developing countries have agreed on the complexity of the energy transition challenges ... that’s a great result

Eni,
Italian energy company

The company also said that natural gas, considered a transitional fuel due to its lower emissions compared with other fossil fuels, could be useful in the move to net zero by 2050.

Carbon dioxide emissions from burning fossil fuels are expected to hit a record high this year amid higher emissions driven by India and China, according to the Global Carbon Budget report.

Earlier this year, TotalEnergies' board reaffirmed its support for the company’s multi-energy strategy, focusing on oil and gas assets with low emissions and diversification into renewables.

In October, QatarEnergy and TotalEnergies signed two sale and purchase agreements for the supply of up to 3.5 million tonnes of liquefied natural gas a year to France.

The company said it supported a “just, orderly and equitable” transition away from fossil fuels, adding that it is crucial for emerging countries aiming for economic and social development.

But TotalEnergies was not the only company welcoming Wednesday's news, with Italy's Eni in agreement.

"For the first time, the final agreement expresses the need to balance emission targets, energy security, access to energy and competitive development," a spokesperson told The National. "Both developed and developing countries have agreed on the complexity of the energy transition challenges ... that’s a great result."

Sharjah-based Crescent Petroleum said the agreement recognised the importance of the energy trilemma, which includes “achieving affordability and availability as well as sustainability".

It also acknowledged that the transition must be “just and orderly and equitable”, keeping the growing energy needs of the developing world in mind, the company’s chief executive, Majid Jafar, told The National.

The International Energy Agency expects global demand for oil and gas to peak by 2030 with an increasing adoption of renewable energy technology and electric vehicles.

The current annual investment in the oil and gas sector of $800 billion is double what is required by 2030 in the 1.5°C scenario, the agency has said.

Javier Cavada, the chief executive and president of Mitsubishi Power Emea, drew a comparison between the transition from fossil fuels to alternative energy sources and the shift from horses to the automotive industry in the 20th century.

“We have a fossil fuel society … I wouldn't say we have an industry,” Mr Cavada told The National.

Mitsubishi Power, a subsidiary of Japan's Mitsubishi Heavy Industries, provides energy solutions.

Despite the rapid adoption of electric cars and renewable energy, fossil fuels still meet more than 80 per cent of the world's energy requirements.

The Cop28 agreement was struck against the backdrop of two geopolitical conflicts and an economic slowdown, that have raised concerns over energy supply.

Russia’s invasion of Ukraine last year pushed natural gas prices to record highs, forcing traders in developing economies such as India and China to boost their imports of coal.

Despite that, global coal-fired power generation is on track to peak in 2023 as new sources of renewable and low-carbon energy expand rapidly, according to Rystad Energy.

The Norway-based consultancy expects coal consumption to start declining next year as solar and wind grow in popularity.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Energy companies back Cop28 deal calling for transition from fossil fuels

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