Mideast Nations Eye Emerging Hydrogen Market

Led by Saudi Arabia, Mideast Gulf oil and gas producers have been looking for silver linings in the energy transition gloom and mostly finding them in hydrogen. The International Energy Agency (IEA) has suggested that if the world is serious about hitting net-zero carbon emissions, demand for hydrogen could soar from 87 million tons per year in 2020 to 528 million tons/yr by 2050 (IOD May.28’21). This increase will come overwhelmingly from "blue" hydrogen made from natural gas in combination with carbon capture and storage and "green" hydrogen produced from electrolysis of water using renewable electricity. And the Middle East enjoys some natural advantages with both processes. Saudi Aramco is focusing its initial efforts on blue hydrogen and plans to take advantage of its low-cost hydrocarbons and carbon capture capabilities, says Chief Technology Officer Mohamed al-Khowaiter. "Our view is that as the market scales for hydrogen demand, we are in a good position to supply that market," he told reporters at a presentation of Aramco's hydrogen ambitions on Sunday (IOD Mar.23'21). However, a functioning international market for blue hydrogen would probably not develop before 2030, he added. Cost Advantage Aramco's focus on blue hydrogen was based is based on its lower production cost of $1-$2 per kilogram, versus $4-$8/kg for green hydrogen, al-Khowaiter said. In the long run, however, there is a consensus that green hydrogen will become more competitive. And Saudi Arabia's flagship green hydrogen project, to be built in the high-tech city of Neom, is looking like it will test industry cost assumptions (IOD Jul.9'20). Located in the northwest part of the kingdom, Neom is blessed with both favorable wind and solar conditions. "They are calculating around $1.50 [per kilogram] in 2024-25," Frank Wouters, director of the EU-GCC Clean Energy Technology Network, tells Energy Intelligence. The $5 billion project, with a targeted capacity of 650 tons of hydrogen per day, is a collaboration between Air Products of the US, Saudi Arabia's Acwa Power and the Saudi government. Wouters notes that it represents a "massive scale-up" compared with previous hydrogen projects. Financing has not been finalized yet, but electrolyzer tenders have been issued and "there is no doubt in my mind that the project will happen," he argues. UAE, Oman and Kuwait The United Arab Emirates is running a bit behind Saudi Arabia, but it is also looking at a mix of blue and green hydrogen projects, including a 1 million ton/yr blue hydrogen project at Ruwais (IOD May.24’21). In Oman, state-owned OQ is planning a large green hydrogen project and TotalEnergies is also in discussions to add hydrogen and carbon capture components at a planned LNG bunkering project. Kuwait is still studying a major hydrogen report that was presented in January by the Kuwait Foundation for the Advancement of Sciences. Sources say the report proposes fast-track development of a hydrogen hub in Kuwait and a fund to finance both blue and green hydrogen projects, with an emphasis on the former. "In Kuwait we are typically good with plans. But we are usually not so good with implementation," one source laments, however. Markets to the East and West Hydrogen has started to attract interest and investment because technology development has lowered costs and also because there is a growing realization that hydrogen is one of the only viable solutions for energy-intensive but hard-to-decarbonize industries, such as steel and cement manufacturing. China is expected to be a key driver of future hydrogen demand, much as it has played a similar role in the global oil market in recent years. "We see China, of course, as our largest market going forward, and so we're very excited about the deployment of hydrogen in China," said al-Khowaiter. But Europe will be important, too. "The hydrogen policy of the EU acknowledges that industry in Europe will have such huge demand for hydrogen that they will need to import also significantly," says Noe van Hulst, a hydrogen adviser to the IEA. "For a big country like Germany, they think the majority of their clean hydrogen will have to come from abroad, meaning North Africa, the Middle East, but also others," he says. Rafiq Latta, Nicosia