RIYADH: The Kingdom of Saudi Arabia and the United Arab Emirates (UAE), major Middle Eastern oil producers, are making a big bet on hydrogen, the clean fuel that has been generating a lot of interest across the globe since the onset of the Covid-19 pandemic.
Saudi Arabia, the world’s largest exporter of oil, has pledged to become the world’s top exporter of hydrogen. The UAE, Opec’s third-largest oil producer, is drawing up a hydrogen road map and is looking to add the fuel to its clean energy mix by 2050.
Paddy Padmanathan, chief executive of Acwa Power, said the clean fuel can be a catalyst for a new, decarbonised industrial economy in Saudi Arabia.
“There is no particular reason why the kingdom of Saudi Arabia cannot become a steel producer – a green steel producer – on the back of very cost-competitive green hydrogen, it is able to generate. So, I think the possibilities are very large,” he said. Acwa Power and Air Products are involved in a $5 billion project – the world’s largest – to produce green hydrogen in Saudi Arabia’s futuristic city Neom.
The 4-gigawatt Acwa Power-Air Products project will use renewable sources to produce green hydrogen. The clean gas will then be converted to liquid ammonia, one of the most efficient ways of transporting hydrogen. The gas will be sold to buyers in the Far East who will then “recrack” to generate electricity or use it in hydrogen fuel cells in the transport sector.
The hydrogen economy is expansive. The global market for green hydrogen is expected to grow to 500 million tonnes by 2050, with annual revenue set to hit $200bn in the same period, according to Dubai-based consultancy Dii and Roland Berger.
The region is likely to be positioning itself to be a $11 trillion market for hydrogen by 2050, according to Bader Chaudhry, energy sector chief at Mashreq Bank in Dubai. “This will not be entirely internal consumption. There will be a significant consideration around exporting this energy source,” he says.
In the Middle East, money is pouring into both green and blue hydrogen as big oil companies such as Adnoc move to harness the potential of decarbonising their businesses by playing to their conventional strengths. The company is pushing for large-scale production of blue hydrogen through steam methane reformation, which splits natural gas into hydrogen and carbon dioxide.
Adnoc intends to significantly increase its hydrogen output to about 500,000 tonnes, from the 300,000 tonnes currently produced in its downstream activities. It has also attracted partners such Fertiglobe, its joint venture with Amsterdam-listed OCI to produce a large-scale blue ammonia plant.
The state oil company plans to develop a plant with a production capacity of 1,000 tonnes and capitalise on its oil trading relationships in Asia to sell the clean form of energy.
It sold its first batch of blue ammonia to Japan’s Itochu on Monday last and is also exploring options to produce the fuel with other entities.