COP27: World Starts to Coalesce Around Hydrogen Trade

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Global hydrogen trade is emerging as a viable commercial opportunity and climate solution, market participants told Energy Intelligence during the COP27 climate summit in Egypt. Investments are surging globally in hydrogen production, with governments willing to make ambitious bets on expanding their domestic markets for the fuel.

The future success of hydrogen developments depends mostly on geography, with access to low-cost renewable power crucial for the development of green hydrogen, and the availability of natural gas resources for blue hydrogen, which is produced from gas with the CO2 stored and captured. Oil and gas players were also seen to make moves to find a space in the emerging hydrogen market, encouraged by positive voices at COP27, which wrapped up over the weekend.

New Era for Hydrogen

Global hydrogen trade is possible on a “mass scale” and is entering a “new era”, according to Andrea Lovato, the director of global hydrogen at Saudi-based Acwa Power, the operator of the world’s largest commercial-scale green hydrogen project. Hydrogen is being looking at for use in distributed applications, as well as in households or businesses, similar to how solar power is used in rooftops. “Today it’s not mainstream, but there are already some companies looking at it,” Lovato told Energy Intelligence at COP27.

Green hydrogen is scaling up much like solar did over the last decade when that renewable energy source saw 85% cost reductions. “The same will happen in clean hydrogen, but even faster, because all the world is looking at hydrogen,” he added.

Obstacles affecting the speed of the ramp up include limited financing options and a supply crunch “because all this capital is going to be deployed at the same time and you need equipment suppliers,” Lovato said. The ideal conditions to pursue these projects are also a constraint, as green hydrogen needs a presence of both strong wind and solar, plenty of land to develop renewables and then to produce the hydrogen, and finally having the geographic access to high-demand markets, he says. No one magic solution exists for transporting hydrogen, as some regions will prefer to transport it in ships and other through pipelines.

​Investment Surge​

Governments are ramping up investments in all shades of low-carbon hydrogen.

Namibia, for example, is aiming for first hydrogen production in 2026-27, with a target of producing 10 million-15 million tons/yr of hydrogen by 2050, the country’s green hydrogen minister James Mnuyape said at COP27. He said Namibia is engaging with Japan on what it hopes will lead to a "strategic market for the products we want to make,” namely hydrogen and ammonia. Similarly, Singapore just launched its national hydrogen strategy last month, and a senior official said that it will focus first on cost-cutting in transmission and distribution. In South America, Chile is also looking to become a major green hydrogen producer, targeting some $5 billion of investment by 2025, its energy minister said.

In the US, the Department of Energy recently offered $7 billion in funding to help develop hydrogen hubs around the country, with as much as $60 billion requested from applicants, Energy Secretary Jennifer Granholm said at COP27. Hydrogen produced using natural gas was included in the funding, with an expectation that suppliers will have "taken care of" the methane. "We expect that there will be eight to 10 hydrogen hubs in the US as a result," Granholm said. "Some of them will, I'm sure, be interested in proposing ammonia. Some of them will be used for heavy industry."

Spotlight on Oman

Oman is also investing heavily and is pursuing four large-scale green hydrogen projects — two in the eastern port city of Duqm and two in the Dhofar region in western Oman. The government is aiming to produce 1 million tons of annual hydrogen by 2030 from six of the blocks it has offered, expecting it to grow to 8 million tons country-wide by 2050.

Omani industry leaders told Energy Intelligence at COP27 that the output is mainly eyed for export but will also be used to meet growing domestic demand. Nasser al-Rizeiqi, director of hydrogen policies and strategies at Oman's Ministry of Energy and Minerals, said they are planning to have hydrogen clusters, or hubs, in the Duqm and Salalah regions, leaving it open to developers as to which end-product they want to produce, whether it’s ammonia or methanol. Between two and three hubs are possible in places with existing power demand and industrial complexes.

Oman believes it is well suited for green hydrogen due to its abundant sun and wind resources. Onshore wind in Oman is performing at similar levels than offshore, which “should put us in the top five countries in terms of cost,” according to Najla al-Jamali, the head of the alternative energy division at Omani energy company OQ. "If you use a combination of solar and wind at the same time, it will ensure you have a big efficiency of your electrolyzers, drop your levelized cost of hydrogen — and this is how we see our advantages as a country," al-Rizeiqi said.

​Role for Gas Players​

More natural gas and oil firms are positioning themselves to play a role in the emerging hydrogen market. In June, the heads of 31 European gas infrastructure companies pledged to set up hydrogen supply corridors by 2030 to enable the creation of a hydrogen market as part of the European Hydrogen Backbone initiative.

In North America, two of the largest natural gas pipeline operators Williams and TC Energy are exploring ways to transport hydrogen in line with a projected uptick in demand. At Williams' Wyoming Clean Energy Hub pilot, the company is aiming to produce green hydrogen from renewable sources and blend it with natural gas in existing pipelines. Hydrogen would also be used to create natural gas by combining it with captured carbon dioxide. TC Energy is now in the early phases of evaluating blending hydrogen with natural gas on one of its pipelines at smaller volumes than envisioned by Williams.

Acwa — which itself has roots in oil, gas and coal — wants to advise other oil and gas companies to move straight to green hydrogen solutions and avoid middle-ground approaches like fossil gas with low upstream methane emissions intensities, Lovato said. He gave TotalEnergies as an example of an oil and gas major making strong progress in green hydrogen.

Hydrogen, Emerging Technologies, Gas Pipelines, Corporate Strategy
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