The Sultanate of Oman's National Strategy for an Orderly Transition to Net Zero

1. Oman’s emissions baseline 12 In 2020, the Sultanate of Oman released its second Nationally Determined Contributions (NDCs) to reduce greenhouse gas (GHG) emissions by 7% by 2030 against a baseline of ~125Mt CO2e (2030 business-as-usual emissions). As part of its recent net zero 2050 announcement, the Sultanate commissioned a team to collect and verify emissions data through Oman’s Carbon Management Lab to validate the country’s emissions baseline. Oman’s 2021 carbon emissions have been assessed at 90 Mt CO2e (Exhibit 1). Five sectors account for 95% of these emissions: industry, oil and gas, power, transport and buildings. Industry produces the lion’s share at 32%, followed by oil and gas at 25%. Exhibit 1: Oman’s net carbon emissions Mt CO2e, 20211 Mt CO2e, 2021 Cross-sectoral emissions Sector not modeled bottom-up 1 Cross-sectoral emissions Sector not modeled bottom-up Total emissions: Total ~90 emissions: Mt CO2e ~90 Mt CO2e 5.4 (6%) 5.4 (6%) 28.4 (32%) 28.4 (32%) 22.9 (26%) 22.9 (26%) 17.1 (19%) 17.1 (19%) 15.9 (18%) 15.9 (18%) 2&3 Wheelers 2&3 Wheelers F-gases Buses Buses F-gases Light Light Iron & steel Iron & steel Commercial Commercial Vehicles Vehicles Aluminum Aluminum Upstream production Upstream production Cement Cement Passenger Passenger Solid cars Solid cars waste Urea & ammoniaUrea & ammonia waste Power Power Methanol Methanol Live- Live- stock stock Petrochemical industry Petrochemical industry Flaring Flaring Petroleum Industry Petroleum refining Industry refining Oil & Gas Oil & Gas Power Power Transport Buildings Waste Agri LULUCF Transport Buildings Waste Agri LULUCF Waste Waste Fugitives/ventingFugitives/venting water High-temperature heat Trucks water Trucks High-temperature heat Other Other Low/medium- Low/medium- industry industry LNG LNG temperature heat temperature heat Other Other Industry Industry Oil & Gas Oil & Gas Power Power Transport Transport Waste Agri Waste Agri Oman currently has a strong reliance on gas, mainly for industry, upstream operations, and Buildings LULUCF Buildings LULUCF power. The warm climate is driving cooling demand for buildings 1. 1. for With adjustments With adjustments for short-term short-term Covid-impact Covid-impact The maritime Source: Oman’s and aviation Carbon Source: Oman’s Carbon Management Lab industry Management Lab are not considered here, since it’s outside of the remit of the Paris agreement 13 By 2050, Oman’s emissions are set to rise 16% to 104 Mt CO2e unless it takes action to reduce the amount of emissions it produces. The Sultanate is therefore evaluating energy transition pathways that could help it curb these numbers and reach its net zero goal. Oman has identified five objectives for its transition pathway. First, it should help the country achieve environmental sustainability by reaching net zero and minimizing the cumulative carbon budget by 2050. It should minimize energy system costs for Omani citizens and businesses while optimizing economic impact impact including fiscal outlook and gross domestic product (GDP). It should factor in the social impact of the transition in terms of creating jobs. And it should maximize security of supply to ensure that demand centers are connected to the grid and that the system provides a stable supply of electricity. Multiple pathways are open to Oman in its journey to reach net zero. They fall under three broad archetypes: delayed , orderly and accelerated transition (Exhibit 2). A delayed transition transition would sustain Oman’s existing export industries and introduce decarbonization levers as late as possible. This pathway would prioritize two of the five guiding principles: energy system costs and economic impact. However, it could have a negative effect on the economy in the long term as it risks creating ‘stranded assets’, e.g., legacy energy assets such as gas power generation plants that may become uncompetitive as the global energy system evolves. It could also mean that Oman loses out by failing to stake an early claim in new green businesses that offer valuable future revenue streams, e.g., hydrogen. At the opposite end, an accelerated transition would decarbonize sectors early and fast to minimize the total carbon budget and match the commitments of other front-runner countries (55% carbon emission reduction by 2030 5) – thus prioritizing environmental sustainability. This path could be more expensive in the near term, as it would likely require the uptake of technologies before they are economically viable and would incur forced abatement costs induced by pivoting away from existing assets before their natural replacement cycle. An orderly transition represents the middle ground. It would focus first on decarbonization levers with the lowest abatement costs, and then on segments that are harder to abate. This would be a more gradual transition that would pace adoption rates of green technologies (e.g., purchase of electric vehicles) to that of peer countries and would time major system changes to coincide with natural asset replacement cycles (e.g., replace low-and medium temperature furnaces with electric boilers at the end of their lives). Individual sectors would decarbonize at different paces, but this pathway would help Oman achieve all five of its transition objectives. The remainder of this report explores the opportunities and impact for Oman presented by an orderly transition. 5 The European Union has committed to reduce its greenhouse gas emissions by 55% by 2030 through the Fit for 55 package 14 Exhibit 2: Three archetypes for Oman’s energy transition In comparison to the Business-as-Usual scenario Delayed transition Orderly transition Accelerated transition Pathway description Focus on sustaining the existing Focus on decarbonization levers Early and fast decarbonization export industries, implementing with the lowest abatement costs across sectors aligned with the the most cost-attractive (priority levers), followed by European targets, minimizing initiatives only when latest segments that are hard-to-abate the required carbon budget required to reach Net Zero (optimizing for economic gain, and matching the commitment and staying within sustainable of other front-runners (i.e., 55% fiscal and cost limits) reduction by 2030) Abatement Pathway, CO2e 2021 30 40 2050 2021 30 40 2050 2021 30 40 2050 Carbon budget, Mt CO2 ~2,100 ~1,760 ~1,500 Leading objectives Considerations Delayed transition is often Optimizing for (long-term) Uptake of technologies before disruptive and can in the long- economic gain and these are economically viable, term result in asset stranding, environmental impact adopting larger technology and whilst leading to higher security of supply risks, as well Enabling gradual transition and cumulative emissions as forced retirement costs adoption rates to allow for match- Unsustainable price flare-ups ing natural switching points and Economically suboptimal for consumers as legacy repurposing of gas consumption because of asset stranding and products become scarce or from power and industries forced retirement costs to reach uncompetitive, whilst focus on short-term abatement targets existing revenue streams can limit the uptake of future green DETAILED PATHWAY value pools Source: Oman’s Carbon Management Lab 15

2. An orderly transition 16 In considering a pathway to net zero emissions, two categories of lever were identified: priority decarbonization levers (those with the lowest cost of abatement) and system choices (levers that entail trade-offs to address hard-to-abate emissions). Under an orderly transition, priority decarbonization options levers would optimize for all five of Oman’s transition objectives. They are expected to drive half (52 Mt) of the abatement Oman seeks to achieve by 2050 across all sectors, driven largely by the industry, power and transport sectors (Exhibit 3). Exhibit 3: Priority levers across the five key sectors Abatement compared to baseline emission trajectory, Waste, agriculture and LULUCF Mt CO2e Business-as-Usual outlook 110 100 90 80 70 60 50 40 Multiple 30 pathways possible 20 An Orderly 10 Transition pathway 2021 25 30 35 40 45 2050 Key priority levers (not exhaustive) Industry Electrify low/medium-temperature heat across industries, feedstock changes in steel, cement, PetChem, and selective grid connections Oil & Gas Electrify low/medium-temperature heat and implement efficiency improvements, LDAR1 for fugitives, and repurpose/export flared gas Transport Wide transition to EVs2 and H2-fuel cells for long-distance trucks and buses, behavioral changes reducing car usage, biofuels blending for lower emissions from ICE3 vehicles Buildings Improve insulation standards for new builds, improve energy (incl. in power) efficiency of air conditioning units, and other electrical equipment Power Deploy renewable power generation at large scale, mainly driven by solar PV and onshore wind

1. Leak Detection and Repair 2. Electric Vehicles 3. Internal Combustion Engine Source: Oman’s Carbon Management Lab 17 For example, priority levers for the industry sector could include electrification of low-to-medium temperature heat processes, changing the feedstock in cement production (e.g., substituting clinker) and making selective grid connections. The power sector could deploy solar and wind power generation at scale. The transport sector could transition to electric light vehicles and hydrogen fuel cells for long-distance trucks and buses, whilst supporting behavioral changes to reduce (individual) car usage. Exhibit 4: Systems choices for harder-to-abate emissions Abatement Abatement compared compared to to baseline baseline emission emission trajectory, trajectory, Mt CO e Mt CO22e Business-as-Usual Business-as-Usual outlook outlook 110 110 100 100 90 90 Priority Priority 80 80 levers levers 70 70 60 60 50 50 40 40 30 30 20 An 20 An Orderly Orderly 10 Transition Transition pathway pathway 10 2021 2021 25 25 30 30 35 35 40 40 45 45 2050 2050 5 5 key key areas areas with with system system choices choices Positioning in Orderly Transition scenario Positioning in Orderly Transition scenario Industry How Further electrification Industry How toto decarbonize decarbonize the the Further electrification hard-to-abate hard-to-abate sectors? sectors? CC(U)S Hydrogen CC(U)S Hydrogen Oil Oil & & Gas How Gas How to to decarbonize decarbonize the the Further sector? Further CC(U)S sector? electrification CC(U)S electrification Buildings How How toto optimally optimally cool District Cooling Buildings cool District Cooling existing existing buildings? buildings? Rapid demand Active retrofits Rapid demand Active retrofits response management and insulation response management and insulation Power How RES + gas + CC(U)S Power How to to deliver deliver baseload? baseload? RES + gas + CC(U)S RES + Nuclear RES11+ LDES22 RES + Nuclear RES + LDES “Last Technology-based Nature-based “Last mile” mile” How How to to close close the the Technology-based solutions Nature-based solutions to to Net Net Zero Zero final gap? solutions solutions final gap? 1. Renewables (mainly solar PV and onshore wind)

1. Renewables (mainly solar PV and onshore wind) 2. Including pumped hydro

2. Including pumped hydro Source: Oman’s Carbon Management Lab Source: Oman’s Carbon Management Lab 18 Harder-to-abate emissions would require more difficult system choices with trade-offs (Exhibit 4). For example, oil and gas players would have to choose between addressing remaining emissions through electrification (e.g., of combined heat processes and LNG plants) or via carbon capture and storage. An orderly transition would activate both priority levers and system choices to lower emissions 6% by 2030, 54% by 2040 and 92% by 2050 compared to the 2021 baseline (Exhibit 5). This would leave a “last mile” gap of ~8% (7Mt) to achieve net zero by 2050. Oman could cover this gap through breakthrough decarbonization technologies and engineered or natural negative emissions (e.g., DAC of carbon with storage in depleted reservoirs or by planting mangrove trees to absorb atmospheric carbon), and changing behaviors, e.g., substituting carbon-intense products or materials). The Second NDC aspires to reduce GHG emissions 7% by 2030 against a baseline of ~125 Mt CO2e business-as-usual emissions. Under an orderly transition, emissions abatement by 2030 would be ~6% (relative to the 90 Mt CO2e 2021 baseline determined during Oman’s Carbon Management Lab), however, ~20% relative to Oman’s 2030 business-as-usual scenario. The total carbon budget for the pathway would be 1,760Mt CO2e to 2050. Exhibit 5: Projected decarbonization efforts to 2050 Pace of GHG emission reduction per sector, 2021-2050, Mt CO2e1 110 Decarbonization 100 Business- vs. 2021, percent as-Usual 90 outlook Sector 2030 2040 2050 80 2 70 Industry 13 -43 -86 60 Oil & Gas -7 -84 -94 50 40 Transport -3 -34 -100 30 3 3 3 20 Buildings 5 14 10 Seven key areas with system choices 10 Power -3 -57 -99 0 2021 30 40 2050 Other4 Vs 2021 -6% 1 -54% -92% Vs BaU -21% -62% -93%

1. Emission reduction compared to 2021 level; resulting 2030 projection of ~85 MT CO2e compared to the original target of ~116 MT CO2e based on a 7% reduction and a baseline of 125 MT CO2e

2. Emissions increase due to production capacity expansion in cement and iron & steel

3. Indirect emissions; emissions accounted for in the power sector

4. Out of scope (waste, LULUCF, agriculture) Source: Oman’s Carbon Management Lab 19 Industry Decarbonization levers in each sector would support the pathway as described below. Baseline and growth  Petroleum refining, petrochemical industry and cement account for ~50% of emissions in 2021 32%  ~8 BCM p.a. of natural gas available to be repurposed in 2050 of Oman’s 28.4 Mt  Growth in the business as usual case in 2050 (26%) is CO2e mainly driven by planned expansions in 2025 emissions in 2021 Levers Petroleum refining Aluminum Urea & ammonia Emissions reduction by lever Petrochemical industry Iron & steel Other industry to 2050, Mt CO2e Cement Methanol F-gases +26% -89% 35.7 11.7 28.4 7.3 6.8 6.4 3.4 1.2 2.2 4.0 Baseline Change in BAU Process Hydrogen CC(U)S Grid Process Montreal Last-mile 2021 activity level 2050 electrification connection efficiency Protocol emissions 2050 Pathway and technological enablers Broader implications Anticipated emission reduction, Mt CO2e ~6-7 Mtpa 10-15% 40 CO2e CC(U)S capacity increased cost for changing +13% required by 2050 to hydrogen-based steel, -43% -86% could potentially be offset by 20 ~70 TWh a “green premium” in the short term of renewable electricity required by 2050 for ~8 BCM p.a. electrified assets of natural gas available to 0 be repurposed in 2050 2021 30 40 2050 Activity level by segment Change in technology route for production – scaled and indexed to 2021 emissions 135 21% Electrification 27% Electrification & CC(U)S 90 CC(U)S 16% 45 Hydrogen 29% Technology development 7% Conventional 0 0% 2021 25 30 35 40 45 2050 20 Industry Industry produces 28.4 Mt of CO2e – 32% of Oman’s total emissions – and this number is projected to grow to 35.7 Mt by 2050 under a business-as- usual scenario driven largely by petroleum refining, petrochemicals, cement, aluminum, iron and steel. This sector is the biggest carbon emitter but low- cost levers have the potential to abate ~41%, mainly by electrifying refining and low-to-medium temperature heat processes (14%), connecting selected sectors to the grid (9%), and increasing hydrogen-based steel production (8%). System choices entailing trade-offs would be required for the ~48% of emissions that are harder-to-abate. Three main technologies could be con- sidered: electrify costly processes in the petrochemical, aluminum and cement industries as technology matures and assets need to be replaced; replace gas with green hydrogen when economically feasible; and deploy carbon capture, utilization and/or storage (CC(U)S ) after 2030 in hard-to-abate sectors (cement, ammonia, methanol, petrochemicals). The remaining 11% (4.0Mt CO2e) would fall under last mile measures. By 2050, alternative production methods would almost fully replace conventional production. The energy mix would change from hydrocarbon-dominant to a 50/50 split with renewable sources. 21 Oil & Gas Baseline and growth  Fuel consumption from upstream production contributes more than half of the emissions in oil & gas in 2021 25%  ~3 BCM p.a. of natural gas available to be repurposed in 2050 of Oman’s 22.8 Mt  Current increasing emission trajectory in business as CO2e usual case is expected to peak in 2030, resulting in a emissions 50+% reduction by 2050 in 2021 Levers Production Fugitives/venting Emissions reduction by lever to 2050, Mt CO2e Flaring LNG -54% -94% 22.8 12.3 10.5 1.1 2.0 2.1 1.1 1.8 1.1 1.3 Baseline Change in BAU Efficiency Process CC(U)S Grid Repur- Operational Last-mile 2021 activity 2050 improve- electri- connection pose excellence & emissions level ment fication gas infrastructure 2050 replacement Pathway and technological enablers Broader implications Anticipated emission reduction, Mt CO2e ~10-15 TWh 60-70% 30 of renewable electricity of abatement potential is -7% -84% -94% required by 2050 for economical with a carbon electrifying production price of 100 USD/t 20 10 ~1-3 Mtpa ~3 BCM p.a. CO2e CC(U)S capacity of natural gas available to be required by 2050 repurposed in 2050 0 2021 30 40 2050 Emissions abated per lever, Mt CO2e Conventional 30 Electrified 25 CCUS 20 Efficiency improvement 15 Operational efficiency 10 Replaced infrastructure & assets Grid connection 5 Repurposed gas 0 2021 2030 2040 2050 22 Oil and Gas The oil and gas sector accounts for 22.9Mt of CO2e and ~26% of Oman’s total emissions in 2021. The business-as-usual scenario forecasts a ~50% reduction in emissions from current production by 2050. It is assumed that new production from exploration above this projection would be fully decarbonized. Combined, the lowest cost decarbonization levers could abate ~23% of the sector’s total emissions. These levers would include continuing ongoing energy efficiency measures, capturing and repurposing natural gas (mainly from flaring), enhancing production and flaring efficiency and lower-cost electrification of upstream production processes. Trade-offs would need to be considered around the remaining abatement required through more costly electrification (e.g., of LNG terminals) or CC(U)S . Full electrification of the sector would require upgrades to the electricity grid, more extensive renewable energy generation and long-duration energy storage. The economic feasibility of CC(U)S would depend on the availability of concentrated point sources of carbon, enhanced oil recovery (EOR) opportunities, scale and/or carbon pricing. Upstream oil and gas is characterized by disperse low-concentration gas streams, making capture more complex. CC(U)S is more broadly applicable downstream where there are more concen- trated point sources. Cross sectoral projects (CC(U)S + H2) and scaling would help reduce the cost of CC(U)S . Replacing existing infrastructure (pipelines) and assets (compressor rod packaging, seals, connections) would eliminate remaining emissions directly addressable by the sector. Together, these system choices could address ~18% (4.0Mt CO2e) of emissions abatement, leaving 6% (1.3Mt of CO2e) for last-mile measures. 23 Power Baseline and growth  97% of electricity in 2021 is generated by fossil fuels, mostly natural gas 19%  ~13 BCM p.a. of natural gas available to be repurposed in 2050 of Oman’s  Growth in the business as usual case (58%) is mainly driven by 17.1 Mt an increase in electricity demand in industry and buildings CO2e emissions  Growth would increase by 359% if accounting for the electricity in 2021 demand increase driven by electrification in a net zero pathway Levers Diesel generators Onshore wind Emissions reduction by lever to 2050, Mt CO2e Gas Gas with CC(U)S Solar Nuclear +359% -99% 78.3 48.6 61.3 14.1 17.1 7.8 7.8 0.1 Baseline Change in BAU Solar PV Onshore Gas with Nuclear Last-mile 2021 activity level 2050 wind CC(U)S emissions 2050 Pathway and technological enablers Broader implications Anticipated emission reduction, Mt CO2e 65 Mtpa ~50% 20 -3% -57% -99% of renewables with reduction in total system 15-30 GW of Long Duration costs by 2050, likely to be Energy Storage able pay back additional Capex by ~2045 10 5 GW capacity of a combination of ~13 BCM p.a. gas + CC(U)S and nuclear of natural gas available to 0 2021 30 40 2050 be repurposed in 2050 Activity level by segment, TWh 180 Diesel generators 150 Gas Solar 120 Onshore wind 90 Gas with CC(U)S 60 Nuclear 30 0 2021 30 40 2050 24 Power The power sector accounts for 17.1Mt CO2e of emissions, which equates to 19% of Oman’s overall emissions. Today, approximately 92% of electricity is generated by fossil fuels, mostly natural gas. Emissions are expected to rise 58% (9.8Mt CO2e) by 2050 under the business-as-usual scenario on the back of rising electricity demand in the industry and building sectors. An orderly transition pathway would see the electrification of the remaining sectors and total emissions for the power sector (if unabated) would rise 4.5 times to 78.3Mt CO2e. The pathway to net zero involves building out renewables (mainly solar PV and onshore wind) to ~60% of the power supply mix, without significant (long- duration) storage requirements. Oman’s strong wind and solar resources already make these renewable technologies 20-25% cheaper than new gas-fired power plants. To decarbonize the remaining 40% of fossil-based power supply, Oman could select technology options that balance economic and strategic implications. These could include further renewables penetration with long-duration energy storage, supported by a combination of low-utilization gas with CC(U)S and/ or nuclear. A decision on the final mix of technologies would not need to be immediate. In the short term, Oman would focus on building out its renewables to reach 60% penetration around 2034. Over the next five years, technology costs will decline and market mechanisms (e.g., carbon pricing) will become clearer. 25 Buildings Baseline and growth  As the buildings sector is entirely electrified, there are no scope 1 emissions  The buildings sector consumes ~80% of the electricity and 0% thereby is indirectly contributing ~15% to Oman’s total of Oman’s emission through the power sector, mostly driven by cooling 13.5 Mt demand in the residential sector CO2e emissions  Energy consumption Growth in the business as usual case in 2021 by 2050 (~90%) is driven by an increase in dwellings to house expected population growth Levers Electricity consumption reduction by lever to 2050, TWh +86% ~-40% 194 30 2 25 90 9 13 104 114 Baseline Change in BAU 2050 Efficiency LED New build DRM Retrofits 2050 2021 activity improvements lighting insulation Net Zero level standards scenario Pathway and technological enablers Broader implications Anticipated electricity consumption in pathway, TWh 1.5% <15-year 60 ~-30% ~-40% per annum payback time of active retrofits of residential retrofitted dwellings between buildings, including improved ~-20% 40 2021-2050 insulation and solar panels 20 7.5% reduction in the energy demand by 0 2050 through rapid demand- 2021 30 40 2050 side response management Activity level by segment, # of dwellings +1.2 3 (+87%) Commercial 2 Governmental Residential 1 0 2021 25 30 35 40 45 2050 26 Buildings The building sector has no direct emissions as it is fully electrified. However, the sector consumes 80% of power demand (2021) and therefore indirectly accounts for ~13.5 Mt CO2e in the power sector (or ~15% of Oman’s overall emissions). Low-cost priority levers could reduce total energy demand ~30% by 2050 versus business-as-usual by improving the energy efficiency of air conditioning units and appliances, switching to LED lighting, and setting building standards for all new builds (e.g., insulation, solar panels and smart design such as passive cooling). As the power sector moves toward full decarbonization by 2050, reducing energy consumption will lower system costs rather than further contributing to emissions savings. The systems choices to be considered are retrofitting current buildings and rapid demand response management (DRM) to further reduce electricity consumption by ~10% by 2050. 27 Transport Baseline and growth  Emissions in 2021 are driven by passenger cars (~60%) and trucks (~29%) 18%  ~50mn BOE p.a. of oil available to be repurposed in 2050 of Oman’s 15.9 Mt  Growth in the business as usual case in 2050 (41%) CO2e is mainly driven by an increase in vehicles emissions proportional to population increase in 2021 Levers 2&3 Wheelers LCVs Trucks Emissions reduction by lever to 2050, Mt CO2e Buses Passenger cars +41% 2.3 22.4 1.0 18.0 15.9 6.5 1.1 Baseline 2021 Change in BAU 2050 Behavioral Biofuels Electric H2-powered activity level changes Vehicles fuel cells Pathway and technological enablers Broader implications Anticipated emission reduction, Mt CO2e 16 TWh ~20-25% 20 of electricity required by full average reduction in cost 3% 34% 100% electrification of light vehicles of owning a car by 2050, including charging 10 ~0.1 Mtpa infrastructure investments of hydrogen required by transition to H2-fuel cells for ~50mn BOE p.a. long-distance buses and of oil available to be 0 trucks 2021 30 40 2050 repurposed in 2050 Activity level by segment, bn vkm 60 BEV Trucks BEV LCVs and 2&3 Wheelers 40 FCEV Trucks ICE Trucks BEV Cars ICE Cars 20 BEV Buses ICE Buses FCEV Buses ICE LCVs and 2&3 Wheelers 0 2021 30 40 2050 28 Transport The transport sector emits 15.9Mt of carbon each year or 18% of Oman’s emissions in 2021. Passenger cars make up ~60% of this total (1.3 million cars account for ~87% of the transport fleet). Emissions are expected to grow by 41% by 2050 under a business-as-usual scenario, driven by population growth. The pathway to net zero involves full electrification of light vehicles and short- distance heavy vehicles and a transition to hydrogen fuel cells for long- distance heavy vehicles. Behavioral changes such as increased use of public transit and car-pooling are expected to reduce car usage resulting in 10% lower emissions. Uptake of battery electric vehicles (2023-30) and fuel-cell electric vehicles (2035) is expected to rise when their cost matches that of internal combustion engine (ICE) vehicles from a total cost of ownership perspective. Government fleets are expected to lead the transition by adopting these technologies early. Policy changes and investment in infrastructure would be needed to see full penetration of electric vehicles and fuel-cell electric vehicles by 2050. 29 30 The last mile Several options could help reduce the remaining 7Mt CO2e of hard-to-abate emissions. Oman could lead in negative emission technologies that will likely be required to reduce most emissions (e.g., DAC that removes atmospheric CO2 directly from the air and carbon utilization or storage), as it has a large number of aquifers and a vast amount of peridotite rock, a rare material that has unique carbon absorption and storage properties. Together with behavioral changes, this could abate most of the last mile. Nature- based solutions, such as mangrove tree planting or grassland management could help to abate the remainder. 31 Decarbonization technologies Six main decarbonization technologies would account for more than ~90% of 2050 abatement (Exhibit 6): improving the energy and resource efficiency of equipment and processes to reduce fuel needs and process emissions; replacing fossil fuels through electrification and renewables (solar and wind energy); replacing internal combustion engines with battery electric technologies (passenger cars, buses, trucks); replacing fossil fuels with sustainable (green) hydrogen and its derivatives in industry and transport; decarbonizing industrial and/ or power processes by capturing and storing carbon; and adopting negative-emission solutions through breakthrough decarbonization technologies and natural negative emissions (e.g., DAC of carbon with storage in depleted reservoirs or planting mangrove trees to absorb atmospheric carbon). “Green electrification”, based on electrification, renewables and battery electric technologies, would account for 50-60% of decarbonization and would therefore drive the 2030-40 abatement. Carbon capture and storage is needed for 5-25% and can be a viable option within the decade for select industrial point sources. Domestic hydrogen would account for 5-10% of decarbonization and could provide a sizeable export opportunity. To enable these decarbonization technologies, four conditions would need to be in place. 32 Exhibit 6: Decarbonization technologies Most of the abatement is driven by electrification & renewables, and battery electric technologies Abatement percentage vs. BAU in an Orderly Transition pathway, 2050 ​ 0% 0-5% 5-15% 15-25% Oil and Trans- Total Category Industry Power1 gas port Other abatement Energy and resource 6% efficiency Electrification and 35% renewables Battery electric 20% technologies Sustainable 8% hydrogen​ Carbon capture and 15% storage Negative- emission 7% solutions2 ​ Other 9% solutions3 100%

1. Incl. all electricity consumption in buildings

2. Incl. forestation, advanced carbon capture and storage or utilization

3. Incl. f-gases decarbonization and waste reduction 33 First, technology would have to mature. The levelized cost of electricity for solar and wind would have to fall by 30% and 20% respectively, and electric and hydrogen fuel cell vehicles would have to compete in price with ICE options. If sustainable hydrogen is to scale, costs would need to fall to ~USD 2-3/kg. Second, the new technologies would require major infrastructure. For example, grid extension to 50% of downstream oil and gas facilities, a charging network for electric vehicles and carbon capture and storage infrastructure for industrial (energy) players. Third, legislation and policies would need to incentivize behavior changes (e.g., switch from ICE to electric vehicles), enable green products or production routes (e.g., grid regulation to facilitate new grid connections) and encourage private investors and developers to invest. Finally, market mechanisms such as domestic and international carbon-pricing may be needed to incentivize the scale-up of more costly decarbonization technologies, notably carbon capture and storage. Oman’s pathway aspiration is bold. The Carbon Management Lab has already identified ongoing and planned projects that are estimated to contribute ~50% of Oman’s expected abatement by 2030, largely through energy efficiency measures and green electrification (Exhibit 7). 34 Exhibit 7: Oman 2040 Vision Lab project pipeline ~50% of total projected abatement in pathway Approved projects Expected projects by 2030 (~13 Mt CO2e abatement1) Enablers in place: Few Multiple Most All Key abatement Enabling initiatives initiatives Energy and Reduce routine gas flaring, Energy efficiency resource energy efficiency in O&G law in industry and 73% 3,5 Mt efficiency and ISO5001, efficiency building regulation & CO2e measures and feedstock requirements change in industry Electrification & renewables Clean energy projects in Oil & Gas, electrification, biogas Reducing high-cost green energy 94% 8.8 Mt and waste-to-energy in generation initiative CO2e industry and solar and wind capacity in power sector Battery Not applicable as lever is Regulations and N/A 2 electric more about adoption, not incentives to support 0 Mt technologies projects the usage of BEVs CO2e Sustainable Blue hydrogen project, incl. Educational center hydrogen ammonia for export and for alternative fuel, 14% 0.2 Mt FCEV buses incl. hydrogen and CO2e study use of green H2 in industry Carbon capture and N/A, Potential CC(U)S projects (blue hydrogen, CC(U)S structure set up potentially 0% 0 Mt storage decarbonization aluminum) included in GHG CO2e are captured under other emission reduction levers to avoid double scope 1 & 2 project counting Negative- emission Afforestation and cultivation initiatives across industry, Oil Sustainable city initiative supports 19% 0.4 Mt solutions & Gas, building and biofuels carbon deductive CO2e in transport activities, excl. DAC, BECCS projects

1. Excl. other initiatives ~0.3 Mt CO2e of out-of-scope industries, like glass recycling

2. Initiatives centered around enablers, with abatement expected to be naturally driven by uptake Source: Oman’s Carbon Management Lab 35

3. Broader impact of an orderly transition for Oman 36 The net zero pathway to 2050 would entail ~USD 190 billion in additional capital investment relative to Oman’s business-as-usual scenario (~15% net of opex savings). The big-ticket items would mainly be in power and hydrogen infrastructure, e.g., to upgrade and extend the electricity grid, build out hydrogen pipelines and storage, build an electric vehicle charging infrastructure and deploy long duration energy storage at scale. If we include the investment needed to unlock the hydrogen export economy, the investment required would increase by a further ~USD 230 billion (60-65% additional capex vs business as usual). These incremental expenditures are not expected to be financed fully by the Government; public estimates suggest that the private sector could finance 70- 80% of the global energy transition by 20506. This investment would also support Oman on its broader objectives Energy system costs. The pathway would affect sectors differently (Exhibit 8). For example, in transport it could reduce the total cost of vehicle ownership by ~20-25% by 2050 (even with the required charging infrastructure). In power, the transition to solar and onshore wind could halve generation costs per kWh (upfront infrastructure costs are expected to be recovered by approximately two-thirds of the aggregate cost savings through 2050). However, in industry it could increase the levelized cost of steel production by 10-15% (which could be offset by a green steel premium in the short term). Economic impact. An orderly transition could contribute an additional 50% to GDP by 2050 (vs 2021), two-thirds of which would come from domestic investment in hydrogen (including export infrastructure) and the rest from expanded green power capacity. Electrifying the economy could free up a large amount of gas, creating a compelling opportunity for Oman to capture a “fuel double play”. An estimated 1.5 MTPA (rising to 4.0 MPTA by 2050) of excess gas could be directed to a mix of additional LNG and blue hydrogen exports. Developing the blue hydrogen infrastructure could pave the way for up to 8 MPTA of green hydrogen exports by 2050. Social impact. Together with new green business growth opportunities, an orderly transition could increase total employment in Oman by 20-30%, mainly in the power sector (~43% of total new direct jobs) and the emerging hydrogen economy (~57% of total new direct jobs, in domestic and export markets). Omani citizens could be upskilled and reskilled – e.g., in the technical expertise needed for clean technologies like hydrogen, electric vehicles and carbon capture and storage – to supply trained workers to fill these jobs. 6 IEA, IRENA 37 Oman’s economy will benefit from new GDP contributors, reduced household costs and job gains in certain sectors Additional required New employment New GDP investments opportunities contributors ~15% ~40%+ 60%+ addional Capex in power by 2050 from the hydrogen economy is required at a system- ~55%+ level for a Net-Zero transition (net of Opex savings) in H2 by 2050 30%+ from green power Share of newly created ~20% direct jobs capacity expansion recovered Opex Driven primarily by a new by 2050 Jobs to redeploy with hydrogen export sector up- and reskilling needs and an increased power 20% of 2021-50 Capex (i.e., technical expertise for sector, incl. electricity grid, could be recuperated clean techs like CC(U)S, and renewable energy through Opex savings hydrogen, and EVs) generation Energy system costs to end-users Future security of supply Adoption of decarbonization technologies leads to: Self-sufficiency in supplying domestic demand for ~2% ~15% power and hydrogen in in 2030 in 2030 2050 and hydrocarbons in the transition phase. 20-25% ~50% Increased dependency in 2050 in 2050 on several imported Decrease in total costs Costs reduction of clean technologies and of ownership of cars1 power generation2 materials (e.g., batteries, EVs, rare-earth metals)

1. Weighted average of the total costs of ownership of the total vehicles fleet vs. BAU, including additional Capex (e.g., EV charging infrastructure) only in 2050 when the total system costs allows for a decrease >5% thus able to absorb the increase in capex

2. Weighted average of the LCOE of the energy mix in 2030 and 2050 vs. BAU. Excluding additional Capex required for energy storage (e.g., LDES) and system balancing 38 Security of supply. By 2050, Oman could become self-sufficient in power and hydrogen, using hydrocarbons during the transition. The execution risk is low as most decarbonization technologies are already proven and Oman has high solar radiation, adequate wind speed densities and aquifers for carbon storage. However, other risks would need to be managed. An orderly transition implies greater dependency on some imported clean technologies and materials, e.g., the supply of batteries and electrolyzers must be secured and the grid will need to be built out to support large-scale electrification of the economy. Exhibit 8: Energy system cost implications Selected examples across the priority sectors Transport Buildings Industry Power Oil & Gas ~20-25% <15-year 10-15% ~50% lower ~15% of average reduction in cost of owning a payback levelized cost increase in generation costs per kWh by 2050 abatement driven by levers “in the car by 2050 time transition to green hydrogen in 20302 due to transition to solar PV and money” Infrastructure needs of active retrofits of Next ~45% requires onshore wind for electric vehicles1 likely covered by residential buildings, including improved Breaking Projected upfront carbon price of up to 50 USD/t CO2e, this reduced cost of car ownership insulation and solar panels even requires infrastructure invest- ments recovered and the last 20-40% up to 100-220 margin reduction by 2/3rd of USD/t CO2e in the long-run expected savings or capturing (short- in generation lived) green through 20503 steel premium of 50-100 USD/t

1. Assuming cumulative EV charging infrastructure investments of 10.8 bn USD by 2050, spread over 30 years and 2.4 mn EVs; implying a 0.007 USD/km cost increase, which translates to a 3.7% increase in total cost of ownership for EVs

2. Assuming: Steel-price of 800 USD/t, NG DRI EAF opex of 431 USD/t and capex of 650 USD/t, H2 DRI EAF opex of 472 USD/t and capex of 850 USD/t, NG price: 4.76 USD/mmbtu, H2 price: 2.11 USD/kg H2, lifetime: 30 years

3. Infrastructure investments including Long-Duration Energy Storage and grid capacity expansion 39

4. The way forward 40 Oman is at the beginning of a longer journey to net zero emissions by 2050. Laying the right groundwork over the next 24 months is critical to its success (Exhibit 9). This would include: � Continuing to build credible momentum. Balance longer-term planning with near- term delivery by deciding which priority levers to implement first to unlock their full potential, capture immediate value and remove future bottlenecks. � Organizing for success. Develop an integrated approach with clear ownership supported by the Oman Sustainability Center whose role would be to set up (and execute on) governance, track progress, ensure alignment across initiatives and develop a financing plan with the Ministry of Finance. � Establishing regular and structured communication. Ensure all stakeholders know and understand the actions to be taken, where decisions need to be made, and how decarbonization initiatives are interdependent across sectors. � Aligning policies, legislation and regulation. Translate national targets into sub- and cross-sectoral policies to change behavior on the ground and develop end-to-end climate law to close legislative and regulatory gaps. Exhibit 9: Next steps and the way forward Completed OCT MAY NOV Target set to achieve Detailed First FID Net Zero by 2050 implementation taken on plan at sectoral priority levers Establishment of level, including Oman Sustainability quick wins and Center owners COP 28 COP 29 2023 2024 NOV OCT JUN Defined detailed Detailed implementation First decision- pathway and plan for new value making on vision chains, including priority system choices levers and key unlocks with first FIDs Source: Oman’s Carbon Management Lab Oman’s vision for a cleaner, greener future is as compelling as it is challenging. But the oppor- tunities presented by the energy transition are transformative and hold the promise for a bright and sustainable future for all Omanis. With the guidance of Almighty Allah, Oman will move forward boldly to stake its position as a leader in the energy landscape of the future. 41