After decades of fossil energy booms, Gulf countries are turning to green hydrogen in an attempt to transform their economies and mitigate the climate crisis in one fell swoop.
Oil producers Saudi Arabia, the United Arab Emirates and Oman are investing heavily in green hydrogen, a zero-carbon energy source, to find alternatives to crude oil and natural gas revenues.
Green hydrogen is hydrogen produced by electrolyzing water through renewable energy. Because of its high calorific value, low carbon and environmental protection, it is regarded by many people as the ultimate energy source to solve the problem of carbon neutralization.
However, green hydrogen accounts for less than 1% of the total global hydrogen production and has not yet been commercialized. At present, most of the hydrogen in the world is produced from fossil energy, which is what we often call gray hydrogen.
Fossil-rich Gulf countries may have a natural advantage in gray hydrogen, so how will they develop green hydrogen? "The Gulf States aim to lead the global hydrogen market," said Karim Eljadi, an associate research fellow
at Chatham House. They see green hydrogen as the key to maintaining their status as a major energy power, allowing them to continue their influence in the face of declining demand for fossil energy. Backed
by its huge investment capital, wealthy Saudi Arabia is building the future city of NEOM on the Red Sea coast, with a total investment of $500 billion. Saudi Arabia is also building the world's largest green hydrogen plant here. The $8.4 billion plant, which will integrate renewable energy generation resources such as solar and wind power for hydrogen production by electrolysis of water, is expected to produce up to 600 tons of green hydrogen per day by the end of 2026,
officials said. In
July, the United Arab Emirates, which will host the United Nations Climate Change Conference (COP28), approved a hydrogen strategy aimed at making it one of the world's top 10 hydrogen producers by 2031. "Hydrogen will be a key fuel for the energy transition," said Hanan Balalaa, a senior official at the
UAE's national oil company ADNOC, who sees it as a "natural extension" for the company. "We believe hydrogen and its carrier fuels have great potential as a new low-carbon fuel and the UAE is well placed to take advantage of this potential," she said.
Still, Oman, which lags behind Saudi Arabia and the United Arab Emirates in fossil fuel production, seems poised to take the lead in the Gulf race for green hydrogen. Oman is expected to become the world's sixth largest hydrogen exporter by 2030 and the largest hydrogen exporter in the Middle East, the
International Energy Agency said in a report in June.
Oman aims to produce at least 1 million tons of green hydrogen annually by 2030 and increase its annual production to 8.5 million tons by 2050. "This would exceed Europe's total hydrogen demand today," the International Energy Agency said.
Saudi Arabia's Minister of Energy, Abdulaziz bin Salman Al Saud, announced in October 2021 the goal of becoming the world's largest hydrogen producer, building on existing infrastructure and knowledge while advancing the decarbonization of exports. In July
this year, the UAE Cabinet approved the National Hydrogen Strategy, which aims to accelerate hydrogen economic growth and establish the UAE as a leading producer of low-carbon hydrogen in 2031. At the end of last year, Oman released a green hydrogen strategy, which is expected to invest $140 billion by 2050, and created a central independent agency (Hydrom) to accelerate the development of the hydrogen sector. In the short term, Middle Eastern countries, mainly in the Gulf, will dominate the global trade in clean hydrogen, exporting about half of their domestic production by 2030,
according to Deloitte.
According to a Deloitte report in June, the Gulf States will retain "export leadership" by 2050, although North Africa and Australia have the greatest potential for hydrogen production.
However, the Gulf countries' investment in green hydrogen has not stopped its expansion in the oil and gas industry. Both the UAE and Saudi Arabia plan to continue developing their oil and gas sectors.
Experts predict that the Gulf countries will maintain their trading position in the field of oil and natural gas until they can compete economically with fossil energy alternatives. This could take many years, as green hydrogen cannot yet be produced profitably, despite the reduction in the cost of renewable energy due to technological advances. "The Gulf countries will focus on maximizing the sale of fossil energy whenever possible," said Aisha al-Sarihi, a researcher at the Middle East Institute at the National University of
Singapore. "It will take years of trial and error for green hydrogen to become a commercially traded commodity," the expert added. Once the technology matures and costs come down, green hydrogen "could be the new fuel of the future," she added. A recent study by the
Rethink Energy Research predicts that the hydrogen market will lead to one of the biggest disruptions in the history of the energy sector. As one of the world's lowest-cost producers of oil, gas and renewable energy, the Gulf Arab States can competitively produce blue and green hydrogen. They also have ports and other infrastructure to export hydrogen. These advantages of the
Gulf countries are expected to translate into cost competitiveness. The first large-scale hydrogen projects in the
region are in the planning and/or implementation stages.
Qatar has launched a project to build the world's largest blue ammonia production facility. Saudi Arabia's Green Initiative envisions the development of large-scale production of green hydrogen and green ammonia around NEOM. If fully implemented, the project will establish the world's largest practical green hydrogen facility.
The UAE is also developing green hydrogen at home and abroad. In January, the Abu Dhabi National Oil Company (ADNOC) entered into an alliance with the UAE's ADQ and Mubadala Investments to jointly explore the possible adoption and use of hydrogen in utilities, mobility and industry. Oman recently signed six agreements with international developers to build integrated hydrogen projects.
The Gulf Arab States have been able to produce economically competitive hydrogen. According to a Bain report released in June, the cost of producing green hydrogen in the region could fall to about $1 per kilogram by 2035.
At the same time, Gulf countries can produce blue hydrogen as a transitional variety at low cost to meet growing demand in Europe and the Asia-Pacific region, including Japan, while pursuing ambitious plans.
But the Gulf States need external assistance to implement their hydrogen strategy, which is to develop the infrastructure needed to improve the economics of supplying hydrogen to targeted green hydrogen export markets. In fact, the
future global demand for hydrogen is still uncertain. The Gulf States have long been energy suppliers to Asian countries such as Japan and South Korea, which are planning to include hydrogen in their decarbonization plans.
However, Abdullah al-Nuaimi, a former climate change minister of the United Arab Emirates, warned that "the current hydrogen transport infrastructure is inadequate and needs to be modified by large-scale investment". "It will take too long to overcome and solve the challenges facing hydrogen," he said.
In Asia, Japan is one of the countries that attach the most importance to hydrogen energy. Japan has pledged to become carbon neutral by 2050. To achieve this ambitious goal, its Ministry of Economy, Trade and Industry (METI) has developed a new green growth strategy, which includes supporting carbon reduction innovation in key industrial sectors through a 2 trillion yen ( $19 billion) Green Innovation Fund. Hydrogen is expected to play a key role in Japan's clean energy transition.
METI's strategy aims to significantly increase the hydrogen market in Japan, relying on sourcing blue and green hydrogen from stable low-cost producers around the world and then shipping it back to Japan using energy carriers such as hydrocarbons, ammonia or methane. This will require strengthening links with potential hydrogen exporters.
As the pioneer of hydrogen diplomacy, Japan is seeking to develop a new model of energy interdependence with its long-term partners, the Gulf Arab States.
According to the METI Hydrogen and Fuel Cell Strategic Roadmap released in March 2019, the Japanese government's efforts in the global hydrogen supply chain strengthen government-level relations with countries with abundant renewable resources, such as oil and gas producers in the Middle East. In September
2020, SABIC, Mitsui and Nippon Oil partnered to deliver the first shipment of blue ammonia from Saudi Arabia to Japan for zero-carbon power generation.
Six months later, ENEOS Corporation, Japan's largest refining company, signed a memorandum of understanding with Saudi Aramco to consider developing a CO2-free hydrogen and ammonia supply chain. In July, JERA Co., Inc., Japan's largest power generator. (JERA) signed a memorandum of understanding with the UAE's Public Investment Fund (PIF) to jointly develop green hydrogen projects and derivatives
. Japan and the UAE are also working together to strengthen industrial cooperation and promote new opportunities for hydrogen and renewable energy. In 2021, Japan Oil, Gas, and Metals National Corporation entered into a joint research agreement with ADNOC to explore the commercial potential of developing blue ammonia capacity in the UAE.
Also in 2021, Japanese companies bought blue ammonia from ADNOC. Recently, Mitsui of Japan and GS Energy of South Korea agreed to jointly develop a blue ammonia plant at Ruwais and work with ENEOS and ADNOC to assess the development of a commercial clean hydrogen supply chain between the UAE and Japan. In January, METI and ADNOC established the Japan-UAE Advanced Technology Cooperation Program, which includes cooperation in the development of decarbonization technologies.
Japanese companies are also involved in hydrogen project development in Oman. Sumitomo has partnered with ARA Petroleum to develop a hydrogen production facility in Oman.
The current Japanese government is committed to developing new energy options and leveraging the country's competitive advantages in clean energy technologies to strengthen ties with important energy suppliers in the Gulf region.
Japanese Prime Minister Fumio Kishida visited the Gulf region in July to ensure stable oil and gas supplies and promote cooperation between Japan and the Gulf countries in the field of hydrogen and other renewable energy.
In the era of fossil energy, Asia, with its rapid economic development, is one of the most important oil and gas export regions in the Gulf countries. In the era of hydrogen energy, Asian countries are still at the forefront of the world. It is a foregone conclusion that
the Gulf countries are betting on green hydrogen, and it is an inevitable choice for the Gulf countries to continue to maintain their trade leadership and strengthen their relations with Asian countries.
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