While the region is on track to become a global solar manufacturing hub – with 44 GW of production capacity expected by 2028 – achieving net zero by 2060 would require cumulative investment of $5.3tn, says the market analyst. Under its base case scenario, the region is projected to restrict global warming to a maximum of only 2.6°C of warming, falling short of the 1.5°C net zero pathway most countries have pledged.

‘The Middle East’s energy transition reflects a fundamental tension between climate ambitions and economic reality,’ said Jom Madan, Principal Analyst at Wood Mackenzie. ‘Oil and gas remain central to national economies, and the region supplied 40% of global energy exports in 2025. While power generation has advanced rapidly with utility-scale solar deployment, deeper economy-wide decarbonisation will depend on policy follow-through and credible demand signals from trade partners.’

The outlook reveals stark contrasts in how countries are approaching the transition, largely driven by their remaining hydrocarbon reserves and economic vulnerability to energy transition risks.

Among the key findings, Oman (which is forecast to have approximately 20 years of oil and gas resources at current production levels) is found to be ‘pursuing the region’s most aggressive decarbonisation strategy’, according to Wood Mackenzie. The country is reported to be on track to exceed its 30% renewables target by 2030 and reach 89% by 2050. ‘Facing challenging geology and higher production costs than its neighbours, Oman is positioning clean energy and industrial diversification as economic necessities, not just climate commitments’, notes the outlook.

Qatar, with gas reserves exceeding 2,000tn ft³ and over 100 years of supply at current production, is reported to face ‘minimal transition pressure in the near term’. The country is doubling down on its LNG leadership, aiming to expand export capacity from 77mn t/y to 142mn t/y by 2032, says Wood Mackenzie. It also notes that ‘Qatar’s strategy reflects confidence in resilient long-term gas demand across all climate scenarios’.

Meanwhile, Saudi Arabia, with roughly 50 years of oil resources at current production, is said to be balancing both strategies – ‘scaling renewables to divert domestic crude consumption towards more valuable exports while continuing upstream expansion’. The kingdom aims for 50% clean power by 2030 but is tracking toward 20% in Wood Mackenzie’s base case.

The United Arab Emirates (UAE) is rapidly expanding both fossil fuel production and clean energy infrastructure simultaneously, finds the outlook. The country is forecast to exceed its 30% clean power target by 2030, but may fall short of its 47% emissions reduction goal by 2035.

‘The ambition countries show in reducing emissions depends on two factors: their reliance on hydrocarbon revenue and how their resources compare with other producers,’ noted Madan. ‘Producers with large, low-cost reserves face little pressure to transition quickly, while those with declining reserves see the shift as a strategic necessity.’

Power sector advances rapidly, while solar manufacturing emerges as major opportunity

Progress is most visible in electricity generation, where utility-scale solar is being deployed at a rapid pace, notes Wood Mackenzie. Regional installed solar capacity is projected to surge from 30 GW in 2025 to 97 GW by 2030, reaching 580 GW by 2050.

‘This domestic demand surge is attracting significant manufacturing investment, with solar production capacity expected to reach around 44 GW by 2028, positioning the Middle East as a global solar supply chain hub rivalling Southeast Asian centres,’ it adds. Key drivers are reported to include tariff advantages when exporting to major markets, domestic content requirements and abundant low-cost energy.

Battery storage is increasingly paired with renewables to manage peak demand, particularly as cooling and desalination needs rise with population and income growth, according to the outlook. While solar and wind generation are expected to meet most incremental demand, with their combined share of regional power supply rising from 14% in 2025 to approximately 67% by 2050.

Hydrogen emerges as strategic export opportunity

Beyond the power sector, hydrogen is increasingly being viewed as a cornerstone of the region’s long-term energy transition strategy.

According to Wood Mackenzie, the Middle East has significant potential to become a major exporter of low-carbon hydrogen and hydrogen-derived fuels such as ammonia, leveraging its abundant solar resources, existing energy infrastructure and proximity to key import markets in Europe and Asia.

Several countries in the region are already positioning themselves to capture a share of the emerging market. Saudi Arabia, the UAE and Oman are developing large-scale hydrogen projects aimed at supplying international demand, particularly for hard-to-abate sectors such as steel, chemicals, shipping and aviation.

However, the outlook cautions that hydrogen’s role remains highly uncertain. Production costs remain significantly higher than conventional fuels, and large-scale deployment will depend heavily on the pace of policy development, international demand and infrastructure investment in importing regions.

As a result, while hydrogen could eventually become an important pillar of economic diversification for hydrocarbon exporters, large-scale export markets may take longer to materialise than some current national strategies assume.

Oil and gas investment resurging despite climate targets

Meanwhile, despite ambitious climate commitments, oil and gas investment across the region is rising as supply security increasingly shapes national policy worldwide. National oil companies are expanding capacity and attracting international capital, positioning Middle Eastern exporters to maintain or increase global market share through 2050.

State-run oil companies continue to expand upstream capacity and LNG infrastructure, betting on resilient long-term demand and positioning natural gas as both a transition fuel and petrochemical feedstock. This reflects confidence that oil and gas will remain economically viable for decades, even as clean energy expands.  

Regional power demand to double by 2060

Power demand across the Middle East is projected to grow from approximately 1,450 TWh in 2025 to 1,650 TWh by 2030 (up 12%) and nearly 2,400 TWh by 2060.  

Growth will be driven by rising incomes and population, increased cooling requirements due to extreme heat, growing desalination needs to address water stress, industrial expansion in energy-intensive sectors, and emerging demand from data centres seeking low-cost, reliable power, says Wood Mackenzie.

Gas-fired generation will remain significant throughout the period, providing flexible capacity to balance variable renewable output and supporting emerging hydrogen production pathways, concludes the market analyst.  

To download the Executive Summary from Wood Mackenzie’s Middle East energy transition outlook, go to https://www.woodmac.com/market-insights/topics/energy-transition-outlook/eto-middle-east/