As Central Asian states seek to diversify their economic partnerships, the UAE and Saudi Arabia double down on green investments in the region to bolster their energy transitions.
Masdar, the United Arab Emirates’ renewables developer, and its Saudi peer, ACWA Power, are leading the two OPEC members’ clean energy projects in energy-rich Central Asia, a new frontier for petrostates looking to advance their net-zero agendas in the wake of the United Nations Climate Change Conference, COP28, in Dubai.
Gulf-Central Asia Climate Cooperation
The UAE and Saudi Arabia already have strong ties with two Central Asian countries, Azerbaijan and Kazakhstan, both of which are members of OPEC+, the coalition of oil producers that was formed in 2016 and collectively pumps about 40% of the world’s crude. However, the UAE has taken its green energy cooperation with one Central Asian country a notch further by announcing a “troika” of COP presidencies with COP29 host Azerbaijan and COP30 host Brazil. The Emirati-led troika, which was launched in February, aims to jointly support efforts to limit global warming to 1.5 degrees Celsius, with Sultan Ahmed Al Jaber, president of COP28, saying it will help “ensure we have the collaboration and continuity required to keep the North Star of 1.5°C in sight – from Baku to Belém and beyond.”
Since 2016, Jaber has been the CEO of the Abu Dhabi National Oil Company, the UAE’s biggest energy producer, which has set targets to hit net-zero Scope 1 and Scope 2 emissions (emissions related to a company’s operations) by 2045 and is one of Masdar’s three shareholders. Jaber helped set up Masdar in 2006 and has been the chairman since 2014. Masdar’s two other shareholders are Mubadala Investment Co., an Abu Dhabi sovereign wealth fund, and energy company TAQA, which is majority-owned by ADQ, another Abu Dhabi sovereign wealth fund. For the UAE, Masdar’s expanding footprint of clean power projects in regions such as Central Asia will help beef up its claims of advancing a net-zero agenda.
With plans to boost its current renewables capacity of over 20 gigawatts to 100 GW by 2030, Masdar is banking on the UAE’s political prowess paying dividends in Central Asia, where countries are courting foreign investments and bolstering ties with allies to slowly move out of Russia’s shadow. Masdar’s projects will support the UAE’s goal of net-zero emissions by 2050, which was announced in October 2021 and quickly followed by Saudi Arabia’s announcement of a 2060 net-zero target, 10 years after Saudi Aramco’s goal.
Saudi Arabia is bankrolling ACWA Power’s clean energy projects via the 44% stake in the company held by the Public Investment Fund, Saudi Arabia’s sovereign wealth fund.
In Azerbaijan, Saudi Arabia’s and the UAE’s interest in Central Asia’s green energy sector has led to cooperation akin to oil policy coordination within OPEC+. In November 2023, Masdar and ACWA Power signed a memorandum of understanding with Azerbaijan’s state-owned oil and gas company SOCAR to develop 500 megawatts of renewable projects.
Masdar had a head start in Central Asia by entering Uzbekistan in 2021 with a 100 MW solar power project and it has since expanded to over 3.75 GW of renewables projects. During COP28, Masdar and France-based EDF signed an agreement with Kyrgyzstan to explore the development of as much as 3.6 GW of renewables and hydropower projects, which would mark Masdar’s first entry into the hydropower space. Masdar also signed an agreement during COP28 to develop a 1 GW wind project in Kazakhstan, the company’s first project in Central Asia’s biggest economy.
Fossil Fuel Diversification
The UAE also has a leg up in Central Asia when it comes to oil and gas investments. ADNOC plans to buy a 30% stake in Azerbaijan’s Absheron gas field in the Caspian Sea to become partners with SOCAR and TotalEnergies, marking the UAE company’s first major international gas investment. “The partnership will enable ADNOC to build a major footprint in a region with prolific natural resources and significant growth potential, facilitating a route into attractive international growth markets for gas in Europe and Central Asia,” ADNOC stated August 4, 2023. “As the world transitions to a low-carbon energy system, natural gas will play a crucial role as a key transition fuel, with this investment further cementing ADNOC’s leading position as a reliable supplier of lower-carbon energy,” it added.
Dragon Oil, a unit of Dubai’s government-owned energy firm ENOC, is another Emirati company expanding its presence in Central Asia. In 2022, Dragon Oil renewed a 10-year production sharing agreement with Turkmenistan’s state-owned Turkmen Oil that will start in 2025 and pledged to invest $8 billion to boost oil production capacity beyond the current 60,000 barrels per day.
AD Ports, majority owned by ADQ, now operates five oil tankers in the Caspian Sea to carry Kazakh crude as part of its joint venture with KazMorTransFlot, Kazakhstan’s state-owned transportation company. “Operating along the strategic route across the Caspian Sea, the vessels will serve as shuttle tankers, undertaking consecutive voyages to move Kazakhstan’s oil to Azerbaijan,” AD Ports stated in a November 2023 announcement on the Abu Dhabi Securities Exchange, where its shares are traded. “This service contributes significantly to the diversification of the transportation routes for oil for onward delivery to the world through the Mediterranean or Black Sea, improving Kazakhstan’s global trade footprint,” the company stated.
Kazakhstan pumps about 1.5 million b/d, making it the second-biggest non-OPEC oil producer in OPEC+ after Russia. However, Kazakhstan is trying to find alternative ways to export its crude to international markets by circumventing the Caspian Pipeline Consortium route connecting it to Russia’s Black Sea terminal near the Port of Novorossiysk, from where about 80% of Kazakh oil exports are shipped. Although Kazakhstan cannot completely abandon exporting its oil via the Black Sea terminal, it is trying to gradually reduce its reliance on Russia’s energy infrastructure through partnerships such as the joint venture with AD Ports.
When announcing its expanded partnership with Kazakhstan in 2023, AD Ports stated, “Because of its strategic geographical location and significant proven reserves of natural gas and crude oil, Central Asia has emerged … as a direct source of energy, a major transport corridor on the emerging Caspian Sea, Black Sea and Mediterranean Sea axis, and a key player in global energy security.”
Saudi Arabia’s energy agreements in Central Asia, however, pale in comparison to the UAE’s. In 2023, Saudi Arabia signed separate agreements with Azerbaijan and Kazakhstan to cooperate in energy fields including oil, gas, petrochemicals, electricity, and renewables. But Saudi Arabia is keen to take part in Kazakhstan’s plans to develop its rich resources and energy sector, from rare earth minerals to clean hydrogen projects, according to a January 9 report by the King Abdullah Petroleum Studies and Research Center.
“Since 2022, Kazakhstan has been increasingly willing to develop alternative partnerships and routes, decreasing its dependence on Russia,” the report noted. “In the oil and gas industry, Saudi Arabia could diversify its supply strategy by investing in Kazakhstan, which has easier access to the European energy market.” The report added, “This would extend carbon management and hydrogen production – investing in delivering methane-hydrogen blends from Kazakhstan to Europe through existing infrastructure may complement Saudi Arabia building a dedicated hydrogen pipeline across the Mediterranean Sea.”
As the West keeps pressure on countries, including those in Central Asia, to move out of Russia’s political and economic orbit, the UAE and Saudi Arabia are likely to be joined by more states investing in the region’s energy sector, particularly resource-hungry China, which will be more than willing to step into a region rich in oil, gas, sun, wind, water, and minerals.