Philippa Kaur

THE UNITED ARAB EMIRATES sits on a rich fossil bounty. ADNOC, the national oil company, is one of the world’s top hydrocarbon producers. Two months ago the uae hosted some 140,000 delegates at the planet’s largest oil-and-gas jamboree. Against the backdrop of the worst energy crisis in decades, you might have expected much gloating about how the Persian Gulf’s carbon-spewing exports helped avert a bigger shock. That made the keynote address by Sultan Al Jaber, the UAE’s minister of industry, all the more remarkable. Mr Al Jaber repeatedly highlighted the importance of greening this brownest of industries. “ADNOC is making today’s energy cleaner while investing in the clean energies of tomorrow,” he intoned. In the past the grandees of the Gulf’s energy industry limited themselves to defending fossil fuels. Now many, like Mr Al Jaber, profess a commitment to decarbonisation. Saudi Arabia and Kuwait have announced targets of net-zero emissions of greenhouse gases by 2060. The UAE and Oman say they will get there by 2050. Qatar has no net-zero target, but says it will cut emissions by a quarter by 2030 relative to a scenario that assumes business as usual. All the Gulf countries have signed the Global Methane Pledge, which commits them to reduce emissions of that potent greenhouse gas. The UAE will even host the annual UN climate summit in 2023. Some suspect this is greenwash: all soothing noises and toothless targets after years of denying climate science and obstructing efforts to tackle global warming. On this view, the Gulf’s governments are too reliant on the revenues generated by the national energy firms—which account for a big share of state budgets—to be serious about decarbonisation. Yet an examination of the leading companies’ investment plans reveals a genuine—and in some cases rather large—bet on green technologies. This is worth scrutinising, because the firms behind the effort matter beyond their region. National energy companies in other parts of the world look to the Gulf behemoths, and especially to ADNOC and Saudi Aramco, the Arab kingdom’s oil colossus, as examples to emulate. Where two of the world’s biggest energy firms go technologically and strategically, their state-run peers elsewhere often follow.The Gulf oil champions’ approach rests on two pillars. The first is deep brown: it involves doubling down on oil and gas. Bolstered by high crude prices, the region’s energy firms are investing heavily to expand output. Aramco’s capital expenditure in 2022 will come to $40bn-50bn. It is promising even bigger sums in the next few years, as it aims to lift its oil-production capacity from roughly 12m barrels per day (b/d) to 13m by 2027. ADNOC will spend $150bn on capital projects by 2027 with the goal of boosting capacity from roughly 4m to 5m b/d. Qatar Energy will plough $80bn between 2021 and 2025 into expanding production of liquefied natural gas (LNG) by two-thirds by 2027. For most energy firms, doubling down on fossil fuels during the transition to a carbon-constrained world would be financial folly. Every national oil company in the world “wants to be the last one standing”, observes Patrick Heller of the Natural Resource Governance Institute, an American NGO. Naturally, “not all of them can be.” The Gulf giants, with their vast, low-cost reserves, are the likeliest to prevail. As such, their huge investments in new production could pay off, Mr Heller thinks, “even if global demand declines dramatically in the years to come”.Oilmen betting on oil is nothing new. But the Gulf giants’ latest wagers suggest they no longer have their heads in the sand about the future of oil demand. They are keenly aware that their best customers in the developed world are going to crack down on carbon emissions, argues Mariam Al-Shamma of S&P Global, a research firm. Policies like the EU’s carbon border tax, the details of which EU member states approved on December 18th, are a sign of things to come. “To be the last producer standing, you need more than just the lowest cost,” she says. To help ensure their longevity, the Gulf’s oil champions also intend to be the cleanest producers of fossil fuels. They enjoy a natural advantage. Their hydrocarbon reserves are among the least carbon-intensive to extract (see chart). The Emiratis and the Saudis have also made an effort to reduce this carbon intensity further with high operational efficiency and low gas flaring, notes Olga Savenkova of Rystad Energy, a research firm. ADNOC is spending $3.6bn on subsea power cables and other kit to replace natural gas burned at its offshore facilities with clean energy from shore. This is both green and, potentially, good business: Ms Al-Shamma reckons that grades of crude made with fewer emissions will fetch a premium in future, a trend already seen in the LNG market.The second pillar of the Gulf’s strategy is more intriguing. It involves investing part of today’s fossil windfall in the clean-energy technologies of tomorrow. The region’s governments are making some of the world’s biggest bets on carbon capture and storage, renewables and hydrogen. “A wave of low-carbon projects is building in the Middle East,” marvels one analyst.“Saudi Arabia holds major advantages in decarbonisation,” says Jim Krane of Rice University in Texas. He points to vast tracts of empty, sunny land with a geology tailor-made for storing carbon emitted in adjacent industrial areas. Aramco plans to develop capacity to capture, store and utilise 11m tonnes of carbon dioxide a year and install 12 gigawatts (GW) of wind and solar power by 2035. Overall, Saudi Arabia aims to build 54GW of renewable capacity by 2032. Not to be outdone, the UAE is eyeing 100GW of renewable-energy capacity by 2030, at home and abroad, up from investments in 15GW-worth in 2021. That would make Masdar, a state-controlled clean-energy outfit in which ADNOC has a stake, the world’s second-biggest developer of clean energy. It recently bought a British firm developing energy-storage technology. The Gulf’s biggest green bets concern hydrogen. If made using renewables as opposed to natural gas, hydrogen is a clean fuel. Investments in the needed infrastructure are proliferating the world over, from Gujarat to Texas. In 2021 the UAE inaugurated its region’s first such “green hydrogen” plant. ACWA Power, a Saudi utility, has almost completed financing for a $5bn green-hydrogen project. Oman, whose oil reserves are smaller and costlier to exploit than those of its bigger neighbours, is talking of a $30bn investment in what could be the world’s largest hydrogen plant. It has launched a state-owned hydrogen entity to offer green-hydrogen projects concessions in its special economic zones.The Saudis and Emiratis are also looking abroad. Masdar is investing in a $10bn hydrogen venture in Egypt; developing 4GW of green-hydrogen and renewables projects in Azerbaijan; and has invested in a firm developing green hydrogen in northern England. ACWA Power is eyeing multibillion-dollar green-hydrogen projects in Egypt, South Africa and Thailand. By 2030 both the UAE and Saudi Arabia want to control a quarter or more of the global export market for clean hydrogen.Ben Cahill of the Centre for Strategic and International Studies, a think-tank, sees the two countries moving aggressively on hydrogen and ammonia (which can serve as a less fiddly medium to transport the gas). They want to acquire first-mover advantage by securing deals with buyers from Asia and Europe. Qatar is spending over $1bn on a plant to make “blue ammonia” from natural gas. It is scheduled to open in 2026. If the hydrogen economy takes off, estimates Roland Berger, a consultancy, it could produce between $120bn and $200bn in annual revenues for Gulf countries by 2050. That is far less than they now make from oil and gas; Aramco alone had sales of over $300bn in the first half of 2022. But it is serious money—and, given the real risk of an end to the oil bonanza, suggests the Gulf’s green efforts ought to be taken seriously. ■ More

Not long ago, big tech was splurging on flashy office space to woo talent. Money sloshed around and a hiring boom was under way. Even as the pandemic forced programmers and software engineers to work remotely, tech giants splashed out on lavish workplaces. Google has been beavering away on a sprawling complex in London with a 25-metre swimming pool and a rooftop running track, due to open in 2024, while shelling out $1bn on another building in the city. Amazon said it would add a dog-day-care facility and hiking trail at its new complex in Arlington, Virginia. In the two years to March, other tech companies across America and Canada added enough office space to fill the Empire State Building more than 20 times over. As recession looms and businesses tighten their belts, surplus office space presents an easy target. This is especially true in tech, which is sacking workers en masse. Technology firms around the world have announced 150,000 job cuts so far this year, according to Layoffs.fyi, a jobs-data website. On December 13th Amazon delayed the start-dates for graduates who were meant to begin work in May to the end of 2023. Bad news for tech workers is also bad news for tech landlords.Meta (which is laying off 13% of its workforce) has abandoned plans to expand in New York. So has Amazon, which has also paused construction on six new buildings in Tennessee and Washington state. Snap, which has sacked a fifth of its workers, has permanently shut its office in San Francisco. Twitter has reportedly stopped paying rent. Netflix, Lyft and Salesforce, among other downsizers, are trying to sublet unneeded property. It all adds up to a lot of empty desks. Since early 2020 office space available to sublet across America’s top 30 tech markets has more than doubled (see chart) to a record 142m square feet (13m square metres).This puts an end to a decade-long office expansion. Since 2010 tech firms have acquired more space than any other industry, accounting for 17.5% of leasing activity in America. In 2021 a fifth of all leased office space was taken up by tech companies. Big tech signed more than a third of the largest leases by floor space last year. And landlords have more to worry about more than nervy tech darlings pulling back. The spillover from a shrinking tech sector will hit the broader economy, More

It was called the tweetstorm that saved Christmas. In October 2021 scores of freighters idled at anchor off the west coast of America unable to deliver imports to docks already choc-a-bloc with containers. To find out what was wrong Ryan Petersen, founder of Flexport, a logistics firm, took a boat tour of America’s biggest port complex. He concluded that the adjacent ports of Los Angeles and Long Beach were at a standstill largely because of a shortage of space, which meant empty containers could not be removed from the dock. “OVERWHELM THE BOTTLENECK!” he tweeted. The thread went viral. Politicians were stung into action. Long Beach relaxed restrictions on how high containers could be stacked. Goods moved again. Santa Claus heaved a sigh of relief. Listen to this story. Enjoy more audio and podcasts on More

This is the digital age, and the advice to executives is clear. Managers need to have a digital mindset; the organisations they run must embrace digital transformation. If you don’t know what ChatGPT is, think of Dan Brown when you hear the word “code” or dislike the idea of working with a cobot, enjoy your retirement. So what present should you be getting the executive in your life this festive season? Answer: anything made of paper. Even if the recipient of your gift never uses it, it can still serve as a useful reminder of where the digital world’s limitations lie. Listen to this story. Enjoy more audio and podcasts on More

When theKaufhaus des Westens (KaDeWe), a temple of consumption in West Berlin, celebrated its 115th birthday last month with a glitzy champagne party for 2,000, the mood was sparkling. A row of brightly lit Christmas trees greeted partygoers when they entered the ground floor of the grand old lady of Berlin’s department stores, where Chanel, Dior, Gucci, Tiffany’s and other luxury brands vie for their attention. As guests danced through the night, the war in Ukraine, sky-high inflation and other worries seemed far away. Listen to this story. Enjoy more audio and podcasts on More

With no end to the tech downturn in sight, the industry’s titans are eyeing new markets. The bigger, the better: in the past year the combined revenue of Alphabet, Amazon, Apple, Microsoft and Meta reached $1.5trn, so further growth that moves the needle can only come from a giant business. One candidate is finance. What is more, that industry generates petabytes of data, the crunching of which is a core competency of tech firms. And it is dominated by stuffy, old institutions. For a tech CEO, it looks ripe for disruption. Listen to this story. Enjoy more audio and podcasts on More

Every indian business dreads waking up to a bill from the state. So too the Taj Mahal Palace. The Mumbai Port Trust, owner of the land upon which the landmark hotel sits, is demanding $92m in retrospective rent for the years 2012-22. The Taj, which is owned by Tata Group, a conglomerate, has called the demand “exorbitant and untenable” in a petition to the Bombay High Court. The claim’s size and the Taj’s prominence make the claim unique. But many tenants get similar treatment. As a result, Mumbai’s old business district, once home to many global firms, has slid into disrepair. Listen to this story. Enjoy more audio and podcasts on More

Nuclear power seems, in some ways, tailor-made for this day and age. It emits next to no carbon. It provides reliable baseload electricity when sun isn’t drenching solar panels or wind isn’t wafting through turbine blades. And it does not leave its operators hostage to fossil fuels from dictators like Vladimir Putin, who has throttled the supply of Russian natural gas to Europe in response to Western sanctions over his invasion of Ukraine. With memories of the Fukushima meltdown in Japan 11 years ago fading, countries from Britain to India are considering fission as a critical part of their future energy mix. Even in nuclear-sceptical Germany, which decided to mothball its nuclear reactors in that disaster’s wake, the government felt compelled in October to extend the lifetime of the three remaining ones until April 2023.If there is one country that should already be enjoying all the benefits of this abundant carbon- and autocrat-free power, it is France. Its fleet of 56 reactors account for around 70% of national electricity-generating capacity, the highest share in the world and more than three times the figure in America. That allows the French to emit just 4.5 tonnes of carbon-dioxide per person in a typical year, much less than gas-addled Germans (7.9 tonnes) or car-crazy Americans (14.7 tonnes). As for Mr Putin’s energy blackmail, on European minds again as a mercifully mild autumn suddenly gives way to a frigid winter this week, you might expect it to be met with a Gallic shrug.France should, in other words, be basking in the warm glow of controlled fission reactions. Instead, after a decade of mismanagement and political mixed signals, its nuclear industry is desperately trying not to implode. A third of France’s ageing fleet is out of action owing to maintenance and other technical problems. Experts warn of possible power outages during extreme cold spells later this winter. To keep up with demand, France has to import pricey electricity, from Germany of all places. The fleet’s state-controlled operator, EDF, is being fully renationalised to save it from bankruptcy. The company’s newly appointed boss, Luc Rémont, talks of a “serious crisis”. A lot is riding on its resolution. Europe is counting on the French nuclear industry to stop being a drag on the continent’s beleaguered energy system this winter. Emmanuel Macron, France’s president, is counting on it for a national nuclear renaissance. More broadly, its success may determine whether the world’s newer nuclear converts see the French experience as an object lesson—or a cautionary tale. To understand the French nuclear business’s current predicament it is worth going back to its roots in the oil shock of 1973. At the time, most French power plants ran on petroleum. As the fuel became scarce, French politicians concluded that in order to be truly sovereign, the country needed an energy source it could control. Nuclear power seemed just the ticket. France already knew something about the technology, having built an atom bomb and nuclear submarines. It also boasted a cohesive corps of engineers, most of whom attended the same university, the École Polytechnique. And the country’s centralised political system allowed the powerful executive branch to ram through the ambitious programme without much consultation with either the French public or their elected representatives.This rapid ramp-up had big advantages. Critically, it enabled France to enjoy what industry types call the “fleet effect”. Building a reactor is hugely complex and requires a lot of learning by doing. So long as you keep doing, the expertise grows, making each new project easier. Between 1974 and the late 1980s EDF brought reactors online at a rhythm of up to six a year, with construction crews moving swiftly from one plant to another. Atom’s heart smotheredHowever, the French approach has created a number of lingering problems. On the technical side, squeezing a lot of construction into a few years means that reactors undergo their big decennial refit (le grand carénage) around the same time. And since they are built to the same standard, problems found in one regularly trigger repairs in others. As a result, French reactors’ “load factor”, a measure of whether a plant is running at full capacity, hovers at 60% or so, compared with more than 90% in America. In 2021, 5,810 reactor-days were lost to outages, of which almost 30% were unplanned, according to the “World Nuclear Industry Status Report”, an industry publication. The latest refits keep revealing ugly surprises: a year ago EDF discovered cracks, due to corrosion, in the emergency core-cooling systems of some reactors, leading the company to shut down 16 of them. Three have been turned back on; the other 13 remain idle. Meanwhile, with little accountability and oversight the industry quickly became a state within a state, characterised by groupthink and, in the words of one former insider, “a serious lack of self-doubt”. This led to some terrible business decisions. In the early 2000s Framatome, the company that built reactors for EDF, developed ambitions of its own. Under new management—and a new name, Areva—it signed a contract with Finland to build a new type of plant, called the European pressurised-water reactor (EPR), which it had developed jointly with Siemens, a German conglomerate. Not to be outdone, EDF decided to build its own EPR at home in Flamanville, and sell others to China and Britain. Both Areva and EDF started construction before they knew what exactly they would build and how much it would cost. As often happens when the French and Germans co-operate, the EPR was a hugely complex beast, not least because it had to satisfy both countries’ nuclear inspectors. The upshot is that neither reactor has yet produced much electricity. Both are way over budget. The Finnish project, at Olkiluoto, bankrupted Areva, whose reactors business EDF took over in 2017. The cost of Flamanville has gone from an original price tag of €3.3bn (then $4.8bn) to €19bn (including financing) and counting.Finally, bypassing the legislature, which may have speeded things up at first, has made French nuclear policy more vulnerable to political winds. In 2012 François Hollande, the Socialist president, convinced the Greens to back his successful presidential campaign in exchange for a promise to close the country’s two oldest reactors in Fessenheim, near the German border, and limit nuclear power in the country’s electricity mix to 50% by 2025, which implied the closure of up to 20 reactors. Mr Hollande kept the first promise but not the second. Still, the prospect of wider decommissioning helped put the fleet effect into reverse. Just as nuclear success begets more success, nuclear failure feeds on itself, as lost expertise gets harder to replenish. Mr Macron now wants to turn the vicious circle virtuous once again. In February, even before Mr Putin attacked Ukraine, the French president announced that the country will start building new reactors again: at least six and up to 14 if things go well. “We have to pick up the thread of the great adventure of civil nuclear energy,” he declared. Barring last-minute legal hiccups, the French state will have full control of EDF within a fortnight, recreating unité d’action, as the French would say. “The state is now fully back in charge,” explains Emmanuel Autier of BearingPoint, a consultancy.The next, harder task is for the president’s hand-picked EDF boss, Mr Rémont, to get as many of the shut reactors back online as he can. EDF has pledged to have most of them up and running by January, which seems ambitious. The new CEO must also deal with the bill for the outages, and for the government’s cap on tariff rises imposed to stave off anger over high energy prices. This, plus the requirement to sell some power at a discount to rival suppliers, could cost EDF €42bn this year in gross operating losses, reckons Moody’s, a ratings agency. With net debt already at €90bn, up from around €70bn a year ago, Mr Rémont will have to convince the French state to provide the firm with additional capital to cover the upcoming big refit, which could cost €50bn-60bn, and Mr Macron’s new reactors, which would add up to about the same, all told. And he has to persuade the eu’s competition enforcers to accept the state aid and refrain from insisting that EDF split itself up by selling its profitable global renewable business.More difficult still may be building the new reactors. EDF engineers have been working on a new design, called EPR2, which is an attempt to learn from previous mistakes and simplify the first version. Gone are many parts needed to comply with German rules. Components will be standardised. Instead of 13,309 different faucets and valves, for instance, the EPR2 will sport only 1,205, according to the current plan. And it is supposed to be built in pairs, with only 18 months between the start of construction of the first and the second reactor. To ensure everything goes smoothly, EDF has added a head of “industrial quality” to its executive board. In this role Alain Tranzer, a former carmaking executive, has launched “Excell plan” to fortify the ecosystem of nuclear-related companies, digitise the surprisingly analogue industry and introduce better project management. As part of the plan, in October EDF and its partners opened a school for welders, teaching students how to bind a reactor’s 370km or so of pipes so tightly that no superheated, often contaminated water can escape; at the moment such professionals are so scarce in France that EDF has had to fly them in at a high cost from America and Canada. Mr Tranzer’s plan also calls for the creation of a University for Nuclear Trades, which opened its lecture halls in April. Not everyone is convinced of the new strategy. “They are making the same mistake again by starting before detailed engineering is completed,” says Mycle Schneider, co-ordinator of the report on the state of the nuclear industry. EDF may have already invested more than 1m engineer-hours in the EPR2, but another 19m may be needed to fine-tune the design. Even government experts have doubts about whether EDF will be able to deliver six EPR2s on time and on budget. In a leaked internal memo from late 2021 they warn that the first pair may not be ready before 2043, not 2035 as promised, and could cost €21bn in today’s money, rather than €17bn-18.5bn. The Cour des Comptes, France’s auditing office, has calculated that in 2019 a megawatt-hour (MWh) of nuclear power cost nearly €65 (taking into account construction costs). The EPR2 may be able to produce it more cheaply, but certainly not at the rate of €15 and €46 that Spaniards and Germans, respectively, already sometimes pay per solar MWh.And recreating the broader tailwinds that helped France launch the fleet effect in the 1970s and 1980s will not be easy. Despite the new welding school and nuclear university, France is no longer the industrial power it once was, limiting the pool of candidates. It may be difficult to recruit the skilled workers needed, beyond the 220,000 that already work in the sector. And although the reputation of nuclear power is improving—two-thirds of French think that it has a future, up from less than half in 2016—local protests are likely near proposed plants. “We have to be very humble about our capacity to build new reactors,” cautions Nicolas Goldberg of Colombus Consulting, a firm of advisers. For the French, a nation not known for humility, that may be the hardest test of all. ■ More