On Wednesday, Saudi Aramco announced the creation of a $1.5 billion fund to support an inclusive global energy transition, while Saudi officials warned that the transition away from hydrocarbons could take decades, necessitating continued investment in conventional resources.

Saudi Arabia, the world’s largest oil exporter, and other OPEC members have warned of underinvestment in fossil fuels, particularly as spare production capacity is limited and demand remains relatively strong despite economic headwinds.

“The current transition plan is flawed honestly. It is not really delivering. What we need is an optimal, realistic transition plan,” Aramco CEO Amin Nasser told a business forum, where he announced the new fund managed by Aramco Ventures.

“We need to realise that today alternatives are not ready to shoulder a heavy load of the growing energy demand and therefore we need to work in parallel until alternatives are ready.”

The Aramco sustainability fund would invest globally, with an initial focus on carbon capture and storage, greenhouse gas emissions, hydrogen, ammonia, and synthetic fuels.

Saudi Arabia and other Gulf Arab states have sought to improve their environmental credentials. Riyadh stated last year that the kingdom’s goal is to achieve net zero emissions of greenhouse gases, which are primarily produced by the combustion of fossil fuels, by 2060.

Saudi Finance Minister Mohammed al-Jadaan told the FII gathering that thinking about the global energy transition has “now become more realistic that actually transition will take… potentially 30 years,” and that conventional resources would continue to be important to ensure supply security.

While the global economy faces a “very difficult six months,” the outlook for Gulf oil producers is “very good” and will remain so for the next six years, according to Jadaan.

“In the region… we are investing as much in conventional energy but also investing in climate change initiatives,” he added.

The Future Investment Initiative (FII) forum, which began on Tuesday, held a carbon credit auction in which 15 Saudi and regional entities participated. According to a statement, Aramco and two other Saudi companies were the top buyers. Jadaan stated that global cooperation was required to achieve stability, and that Gulf states would assist countries in the region dealing with a difficult economic outlook.

The Public Investment Fund (PIF) of Saudi Arabia has established five regional investment companies in Jordan, Bahrain, Sudan, Iraq, and Oman, the fund announced on Wednesday, following a similar move for an investment subsidiary in Egypt.

According to the statement, the six companies plan to invest up to $24 billion in infrastructure, real estate, mining, healthcare, agriculture, manufacturing, and technology.

Sheikh Salman bin Khalifa Al-Khalifa, Finance Minister of Bahrain, stated that Gulf countries needed to improve their production and export capabilities because the majority of their non-oil GDP was currently based on consumption and imports.

(Adapted from BusinessInsider.in)