Energy security issues and the surge in energy prices during 2022 have shown that the path to a successful energy transition is neither smooth nor simple. Achieving a global supply of energy that is affordable, secure andmore sustainable is essential, but it won’t be easy.
Success in tackling this energy “trilemma” will ultimately rest on the world’s ability to cultivate and harness new technologies, both to lower the carbon footprint of existing energy systems and develop new ones. Aramco’s $1.5 billion Sustainability Fund, announced in October 2022, will play a role in helping solve this “trilemma” by supporting progress on both fronts.
Learning From Experience
Make no mistake, the oil and gas industry is expected to be critical to the energy transition. Its expertise and skills – too often ignored in conventional thinking – draw on decades of experience in areas such as managing large, complex projects and working in remote, harsh conditions.
While capital is just one of many drivers that will shape the transition, the sheer volume of investment required should also not be overlooked. The global economy is built on conventional energy and its transformation will cost sums so large that they can scarcely be conceived. But momentum is building and Bloomberg New Energy Finance’s Energy Transition Investment Trends report showed global energy transition investment in 2022 reached $1.11 trillion, illustrating the scale of the efforts being made. The oil and gas industry’s contribution to this effort should not be underestimated.
The industry also has the capital and the technical knowhow to pioneer solutions and develop the huge infrastructure required. But for net zero to be achieved, no single company, country or industry – however well-resourced or ambitious – can solve the climate challenge on its own. A successful energy transition will only be achieved through collective efforts, from partnerships and collaborations to sharing knowledge, skills and resources.
One example of these efforts is Aramco Ventures – the venture capital arm of Aramco – which plans to invest $200 million annually in early-stage sustainability ventures. Our view is that hydrocarbons will remain a significant component of the world’s energy supply for decades to come – which is why reducing their emissions is so important. Hence the Sustainability Fund focuses on areas such as carbon capture and storage, digital innovations, greenhouse gas emission reduction solutions, and energy efficiency improvements.
By also targeting investments in lower-carbon fuels, such as hydrogen, ammonia and synthetic fuels, we hope to advance potential solutions for hard-to-decarbonize sectors, including industry and heavy-duty transport, and make these alternatives available to our global customers.
Aramco Ventures’ Sustainability Fund, and its emphasis on new technology development, has the potential to support Aramco’s own emissions-reduction efforts and encourage development of new lower-carbon enterprises. It has been investing in firms pioneering new technologies over the past decade, including $255 million in the sustainability space alone.
Portfolio companies include EnerVenue, a California-based company developing metal-hydrogen batteries to help address the intermittency of renewables. Finding ways to store renewable energy is crucial to wider adoption, and EnerVenue’s product offers the potential for lower lifetime storage costs than conventional batteries, is more efficient and highly reliable. Another of our companies, Carbon Clean, uses proprietary solvents to remove CO2 from flue gas, biogas and landfill gas streams at lower cost, increasing opportunities for carbon capture.
Patience pays
While addressing the effects of climate challenge is urgent, many of the technology solutions required are still in their infancy. Deploying a technology successfully is key, and developing it requires what we can be called “patient capital”. So in addition to providing hard cash, the industry should also provide a platform to test and perfect technologies all the way from pilot state to operations at scale.
Patience, and a strategy of being actively involved in portfolio companies from seed to growth, is a hallmark of Aramco Venture’s approach. Twelve of our 80 investments to date have achieved billion-dollar valuations, a strong measure of our success. We plan to take a similar approach for our Sustainability Fund.
One criterion for investment is that target companies provide potential solutions to a pressing challenge identified within Aramco’s own activities. Our belief is that combining the ingenuity and agility of a start-up with the expertise and resources of a well-established company can have a real, lasting impact.
Mahdi Aladel Chief Executive Officer, Aramco Ventures
