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Gulf countries remain the cornerstone of global energy, making up about 34 percent of the world’s oil exports and 26 percent of its gas exports. This influence is due to the abundant fossil fuel resources they possess, with ºÚÁÏÉçÇø and the UAE among the world’s leading producers of oil and natural gas. At the same time, electricity demand across the Gulf Cooperation Council states is rising sharply.

In response, the GCC countries are working to reduce their domestic reliance on fossil fuels, especially in power generation, by accelerating electrification and renewable energy adoption. However, the production and export of fossil fuels continue to be central drivers of their economies. This dual approach reflects a common trend in the region: securing the energy future while balancing growth, sustainability and economic resilience.

ºÚÁÏÉçÇø is today the world’s largest oil exporter, with its annual exports valued at about $210 billion. Meanwhile, demand for natural gas is rising quickly, up by about 2.7 percent in 2024.

Confronted with extreme heat, recurring environmental challenges and reduced crude oil output due to OPEC+ production cuts, GCC nations recognize the urgency of building energy resilience. Energy security and decarbonization have become central pillars of their economic planning.

While all GCC states articulate ambitious goals, the true measure lies in the speed of their execution, especially as the global economy accelerates toward electrification in an era defined by data and technological growth. Therefore, the region’s energy future depends, first, on its ability to scale renewable energy production and, second, on its capacity to develop networks that provide the flexibility and reliability required to meet surging electricity demand amid profound economic transformations.

The GCC countries are working to reduce their domestic reliance on fossil fuels, especially in power generation

Zaid M. Belbagi

Electricity demand has been rising steadily in the Gulf region. With populations expanding and incomes growing, regional consumption is projected to climb by a further 50 percent by 2035. This trend is reinforced by rapid urbanization and the impact of the climate, as extreme heat drives peak demand across many countries, particularly through the widespread use of cooling systems, data centers and water desalination programs.

Investments in the electricity sector are also increasing, reaching $44 billion in 2024 and being projected to far exceed $66 billion by 2035. While most countries have long since phased oil out of power generation, the GCC states remain compelled to burn significant volumes to meet critical needs such as desalination.

ºÚÁÏÉçÇø illustrates this dilemma: each summer, crude use rises for desalination and cooling, despite ongoing tariff reforms and robust energy-efficiency goals. This reveals a double cost: every barrel diverted to power plants is one less available for export, while simultaneously increasing the Kingdom’s domestic carbon footprint.

In this context, and with full awareness of global fossil fuel consumption trends and their impact, OPEC+ delegates met in Vienna last week to discuss new avenues and a revised methodology for assessing sustainable capacities, with the aim of setting more credible 2027 baselines.

This redefinition represents a decisive lever for shaping the revenue trajectory of Gulf producers and, less directly, for determining the budgets available to finance the modernization of power systems and the large-scale replacement of fuel oil with gas and renewables. While such measures should directly improve the energy balances of Gulf countries, nearly 40 percent of electricity sector investments will still need to be allocated to modernizing transmission networks and expanding regional interconnections. Indeed, the regional grid connecting the Middle East remains the Achilles’ heel of the broader electrification strategy.

Mutualization is crucial to the resilience of Gulf countries’ economies as they confront the coming energy challenges

Zaid M. Belbagi

One concrete example of this increasing turn toward electrification is the agreement concluded last week by the GCC Interconnection Authority and Sohar International Bank. This $500 million interim financing deal will support the implementation of a direct electricity interconnection project linking the authority’s grid with that of Oman. Such mutualization is crucial to the strengthening of the resilience of Gulf countries’ economies as they confront the energy challenges of the coming decade.

Securing the region’s future energy will also require greater reliance on renewables such as solar and wind, thereby reducing dependence on fossil fuel-based power generation, especially for domestic consumption. Gulf countries have already embedded these objectives in their national agendas. ºÚÁÏÉçÇø aims to generate 50 percent of its electricity from renewable energy by 2030 and the UAE has set a target of 44 percent clean energy in its mix by 2050. Oman, for its part, is pursuing a goal of 20 percent renewables in power generation by 2030.

The Middle East and North Africa region has experienced the third-strongest growth in electricity consumption this century after China and India. The central challenge ahead lies in reconciling the abundant fuel resources of the GCC nations with the need for economic diversification through sustainable projects and electrification. These countries continue to rely on oil and gas as key revenue sources, while at the same time investing in renewable electricity, diversifying their economies and reducing domestic fossil fuel consumption, both to free up larger volumes for export and to curb emissions.

• Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the Gulf Cooperation Council. X: @Moulay_Zaid