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Why the Gulf is attractive for clean hydrogen production

Why the Gulf is attractive for clean hydrogen production

Saudi Arabia, the United Arab Emirates and Oman have ranked in the top 25 countries globally on a new hydrogen investability index produced by Cranmore Partners and Energy Estate. Hydrogen has been dubbed the fuel of the future as it has the capability to be produced with net zero emissions. Green and blue hydrogen will

Saudi Arabia, the United Arab Emirates and Oman have ranked in the top 25 countries globally on a new hydrogen investability index produced by Cranmore Partners and Energy Estate.

Hydrogen has been dubbed the fuel of the future as it has the capability to be produced with net zero emissions. Green and blue hydrogen will be a crucial part of countries energy mixes as they increasingly pledge to get to net zero emissions by 2050 and 2060, but many countries lack carbon pricing, which would incentivise the shift to clean hydrogen. Other hurdles include a lack of policy and regulation and ways to minimise storage and transportation costs.

“Already, countries representing nearly 90 percent of global gross domestic product have policies or initiatives that support hydrogen markets. The Hydrogen Council estimates that there are now more than 350 large-scale hydrogen projects worldwide with $500 billion of global investments in projects and value chain anticipated by 2030,” the report said.

Saudi Arabia to use $110bn gas project for blue hydrogen

A large portion of gas from the Jafurah development will be used for blue hydrogen, according to Energy Minister Abdulaziz bin Salman

Green hydrogen is currently two-to-three times more expensive to produce than blue hydrogen, which is produced from fossil fuels with the carbon dioxide by-product captured and stored. Grey hydrogen, currently the cheapest to produce, is the most polluting and is produced from fossil fuels.

Saudi Arabia

For Saudi Arabia, which ranked 18th on the index, clean hydrogen is a pathway to badly needed economic diversification in the kingdom, where petroleum makes up 40 percent of GDP and almost 90 percent of the national budget. The country has said it will invest $15.9bn into renewables.

Saudi’s futuristic planned mega-city Neom, Saudi-based ACWA Power and US-based Air Products & Chemicals have signed a $5bn deal to develop an integrated green hydrogen facility

“While Saudi hosts large, energy-intensive industries, the lack of carbon pricing domestically means that there is little underlying economic incentive for local clean hydrogen use. Development of clean hydrogen projects may therefore continue to be government-led, rather than organic private sector efforts, which in turn would leave it to the government to dictate the pace of clean hydrogen deployment,” the report found.

The UAE

The ambitious UAE intends to be one of the lowest-cost clean hydrogen producers in the world. Estimates for green hydrogen production costs vary widely. The International Renewable Energy Agency (IRENA) sets the cost to produce green hydrogen between $0.8/kg and $1.6/kg by 2050. Siemens puts it between $1 and $1.50/kg in the same time frame. For the UAE, Bloomberg LEF has guessed the country can produce the clean fuel for $0.7/kg to $0.8/kg by 2050.

The Abu Dhabi Hydrogen Alliance, comprising Mubadala Investment Company, Abu Dhabi Holding Company (ADQ) and the Ministry of Energy and Infrastructure, formed in early 2021 to accelerate these plans.

“Existing world class fuel shipping infrastructure, such as the UAE’s Port of Fujairah, the world’s third largest bunkering hub, offers significant synergies in the development of hydrogen export facilities,” the report said.

Oman

Under Oman’s 2040 vision, the sultanate intends to create an export commodity out of green hydrogen, in turn diversifying its economy away from oil and gas.

“A confluence of low oil prices, dwindling reserves and increasing production costs have strained Oman’s fiscal buffers in recent years, resulting in successive credit rating downgrades,” the report said. “The infrastructure market nevertheless remains active and well banked, with recent renewable tenders attracting strong international interest and very competitive pricing.”

Like Saudi Arabia, Oman has no carbon pricing mechanism in place to support local demand.

“Accordingly, the focus is likely to be on clean hydrogen export, or supply to exporting industries. In addition to world class solar resource and abundant land, Oman has the further advantage of having some ammonia export infrastructure, as well as the Qalhat LNG Terminal, the second largest in the Middle East,” according to the report.

The future

The hydrogen debate isn’t new, but over the last decade it has picked up real steam as countries more fully recognise its potential and the push to slow climate change accelerates. Challenges around how to store and transport hydrogen remain and the debate is complex, though the technology has been rapidly developed – now what’s needed is policy and incentives.

“Now there is no doubt: Support to scale up hydrogen is both dramatic and permanent,” the report said.

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