There was one main talking point at the Gulf Petrochemicals and Chemicals Association’s annual forum — the self-proclaimed “voice of the chemicals industry in the Arabian Gulf” — in Dubai last December: hydrogen.
Olivier Thorel, vice president of chemicals at Saudi Aramco, told the conference that hydrogen was a “huge opportunity” for the Middle East, with its strong wind and solar potential.
A flurry of green hydrogen announcements in the form of strategic partnerships and memoranda of understanding emerged at the end of last year, involving global energy companies, investors and governments, from the UAE and Saudi Arabia to Engie, Mubadala and ThyssenKrupp.
With net-zero targets set for 2050 and 2060, the Emirati and Saudi governments have been throwing their weight behind renewables expansion through planned strategies and government incentives. The additional element of hydrogen offers a perfect blend to the region’s renewables potential and its hydrocarbons expertise, but beyond the announcements much still needs to be determined over how these green hydrogen hubs will be implemented and certified.
Frontrunners in green hydrogen?
Alun Davies, a senior director at IHS Markit, says that the Gulf — and the Middle East region more broadly — is in a good, competitive position “for the production of hydrogen, primarily because of the availability and cost of the renewable resource it offers”.
Prior experience in liquified natural gas and hydrocarbons, along with its location between Europe and the other export regions in east Asia, “give these markets a further boost in terms of realising the export potential they have”, he says.
In December, ThyssenKrupp and Industrie De Nora announced a joint venture to supply a two-gigawatt (GW) electrolysis plant for one of the world’s largest green hydrogen projects in Neom, Saudi Arabia’s futuristic mega-city.
Under the contract, ThyssenKrupp will operate the facility, which will produce hydrogen to be synthesised into carbon-free ammonia and then exported exclusively by US-based Air Products to global markets.
Samir J. Serhan, chief operating officer at Air Products, called this project the “kickoff to become a frontrunner in the green hydrogen economy.”
In the UAE, French energy company Engie and Masdar, the renewables subsidiary of the Emirati sovereign wealth fund, the Mubadala Investment Company, signed a strategic alliance agreement worth $5bn to develop projects with a capacity of at least 2GW by 2030.
In January, they announced their first project, an agreement with nitrogen fertiliser and ammonia producer Fertiglobe, to develop a green hydrogen facility for ammonia production.
Export and value chains
Frédéric Claux, managing director of thermal and supply in Africa, Middle East and Asia at Engie, tells fDi that “the big dream of this region is to replace oil and gas with hydrogen [within] 20 years, and to export green or blue hydrogen to Europe and Asia”.
With the cost for green hydrogen still relatively high, the immediate objective is “to drive the cost down and to make it more competitive”, he adds; however, Mr Claux remains confident that there will be demand for green products and regulatory frameworks to support this in the EU and Asia.
As with all [gigawatt-scale] planned projects, many things still need to happen
“Export is not really our only focus,” he stresses. “We want to develop a green hydrogen hub with local value chains of hydrogen because it’s a much more sustainable way to grow the business. Of course, export is one option, but we can have different projects with a local use,” Mr Claux says, such as in mobility or industrial sectors like steel.
José Miguel Bermúdez Menéndez, energy technology analyst at the International Energy Agency, expects projects such as Engie’s and ThyssenKrupp’s to go ahead, but explains that “as with all [gigawatt-scale] planned projects, many things still need to happen”.
He cites technological improvements; the need to generate demand for clean hydrogen among industrial users and in hydrogen fuel cells; international standards for measuring the carbon footprint of the production; certification schemes; and infrastructure.
Not the new oil
Mr Menéndez is also keen to stress that “hydrogen is not the new oil”. “It’s going to play a role in certain sectors, where it will be critical, but not across the whole energy system,” he says.
One thing remains clear: renewable energy capacity also needs to be increased across the region. With strong irradiation levels, solar energy appears to be an easy win.
But it is not as if Gulf Cooperation Council (GCC) countries have seen a year-on-year rise in greenfield renewable projects. fDi Markets recorded a peak of 13 projects announced in 2019 in the renewables sector in the GCC countries. This number has dropped to 10 in 2020 and down further to six in 2021.
Analysts point out, however, that it is not the case that the Gulf countries are “running before they can walk”, as most green hydrogen projects and government initiatives are accompanied by parallel plans to boost renewables capacity.
As part of its hydrogen strategy, issued last year, Oman is looking to expand its green energy capacity to 1GW by 2025 and 10GW by the end of the decade.
Dubai is also currently building the 5GW Mohammed bin Rashid Al Maktoum Solar Park, set to be the world’s largest single-site solar park.
Meanwhile, the solar energy benefits in the region are also attractive to investors looking to implement their carbon neutral goals, with or without the added hydrogen pledge.
German logistics firm DHL Global Forwarding, which was involved in the 5GW Mohammed bin Rashid Al Maktoum Solar Park, announced a strategic solar partnership with French energy group TotalEnergies last year. DHL will power its facilities through solar parks provided by Total. These will eventually include charging stations for its electrified fleet.
Alice Moraes, marketing and sales manager for DHL Global Forwarding Middle East and Africa, tells fDi that DHL is looking at “every and any opportunity” to green their facilities and fleet, but could not comment further on specific technologies. She maintains that the partnership with TotalEnergies is “an important step in that direction”.
Reflecting on Engie’s new billion-dollar partnership, Mr Claux says this is just one of many strategic partnerships the energy giant is involved in, others being in Australia, Chile and Europe. But the region’s location, as the name would suggest, remains strategic.
“It’s true that there is competition between different regions in the world. I think that the unique advantage of the Middle East is that it is in the middle of Asia and Europe, so they can export both ways,” he says.
This article first appeared in the February/March 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.