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ANALYSIS | Are the Middle East's biggest potential clean hydrogen exporters on track for 2030?

Governments have announced major targets, with increasing activity when it comes to funding projects overseas, writes Polly Martin ahead of the World Hydrogen MENA conference

The construction site for the green hydrogen and ammonia complex at Neom.
The construction site for the green hydrogen and ammonia complex at Neom.Photo: NGHC

Many of the Middle Eastern states that built their fortunes on oil & gas are exploring hydrogen as a way to continue supplying their traditional customers in Europe and Asia, many of which have pledged to reduce emissions.

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But despite a flurry of major announcements since 2020, with several countries announcing ambitions to corner a specific share of the global trade in H2, the progress of these grand plans has been more opaque.
For another, it has been difficult to quantify the exact value of government support on the table. Many states in the region have taken a more subtle approach to support than the direct subsidies per kilogram of H2 produced favoured by the EU and US, generally opting for extremely low tax regimes or awarding land development rights.

Many of the large Middle Eastern companies that have announced major hydrogen projects or spending to date are themselves fully or partially state-owned, with their direction therefore aligned with government targets.

However, 2030 is rapidly approaching. Beyond domestic interim goals for that year, the EU has promised to import ten million tonnes of renewable H2 a year by the start of next decade. But given gigawatt-scale projects are estimated to take between six and ten years to develop, exporters may be running out of time to build out production capacity.

So how far along have the four Middle Eastern countries expected to play a key role in hydrogen exports — the United Arab Emirates, Saudi Arabia, Qatar and Oman — gotten when it comes to breaking ground on projects? (Note: we are including Egypt as part of North Africa, which will be assessed in a follow-up article).

Oman

Oman is targeting one million tonnes of hydrogen production a year by 2030, with the government’s main tactic being the allocation of blocks of land via auction body Hydrom to development consortia seeking to leverage the country’s combination of strong wind and solar resources to produce extremely cheap green hydrogen.

In a 2023 report arguing that Oman could be the largest H2 exporter in the Middle East, the International Energy Agency estimated that green ammonia could be produced for $400 per tonne, with an extra $50 in shipping costs, which could compete with blue or grey NH3 markets, given the volatility of gas prices.

Hydrom has already announced the results of its first tender for land, bringing the country’s project pipeline to 925,000 tonnes of annual production capacity, and is due to award another three blocks of land in Dhofar at the end of this quarter.

However, while these awards reserve development rights, they do not represent the final land lease agreements, which will be signed once projects are further along in their development.

Many of the projects that have won blocks of land in the Hydrom auctions are still in the middle of feasibility studies or front-end engineering and design. However, Hydrogen Insight understands from conversations with Hydrom officials that when companies take a final investment decision on their projects, the commitments set out in their bids will become legally binding.

One of Hydrom’s four criteria for bids is “in-country value”, with developers that have successfully bid to date claiming that their projects will be built with between 10% and 30% local content.

Hydrom is also assessing projects based on technical feasibility, economic viability, and likelihood of offtake, with preference given to development consortia with an offtaker already on-board.

However, Oman’s focus on “in-country value” could have a double meaning. While many of the consortia plan to export hydrogen produced in Oman to global markets, at least one — Amnah — plans to supply the local steel industry with H2 for direct iron reduction.

Vulcan Green Steel, a subsidiary of India’s Jindal Steel Group, had already kicked off construction for its $3bn green steelworks in Duqm, which will initially run on fossil gas but is capable of switching to 100% hydrogen.

Green steel has been raised by some analysts as the most effective use of hydrogen for decarbonisation, while a recent UN report argued that the decarbonised metal would provide more economic benefits to host countries compared to directly exporting the H2 to steelworks overseas.

Saudi Arabia

Saudi Arabia, already the world’s largest oil exporter, appears to have taken an early lead in the race to build out large-scale hydrogen production and export capacity, even without a formal H2 strategy in place.

Its flagship 2.2GW green hydrogen and ammonia complex at the Neom development in the country’s far northwest is the world’s first gigawatt-scale project to reach financial close and start construction.

The first wind turbines have already been delivered, with the developer, the Neom Green Hydrogen Company (NGHC), bullish that it will be able to start up the 1.2 million tonnes of NH3 production capacity in 2026.

While the project is located on the Red Sea, NGHC has told Hydrogen Insight that construction has not been delayed by the ongoing risk of attacks by Yemen’s Houthi militant group on commercial shipping.

“While we continue to monitor the situation in the Red Sea, and are working closely with supply chain partners, deliveries of major equipment for NGHC’s project continue to arrive at the Port of NEOM as scheduled,” a spokesperson for the developer said.

In the short-term, a 20MW electrolyser from Thyssenkrupp Nucera, the main supplier of the Neom project, is set to be installed this year for test purposes, with the eight tonnes of hydrogen produced going towards heavy-duty transport and a pilot e-fuels project by state oil company Aramco.

In 2022, Aramco itself had set a target of 11 million tonnes of blue ammonia production by 2030, aiming to draw gas feedstock from its massive Jafurah field, which it plans to expand to two billion cubic feet per day of production capacity by 2030.

Later that year, it delivered to South Korea its first test shipment of blue ammonia, where CO2 emissions were captured and used in downstream industrial processes — a controversial definition, given the greenhouse gas could end up back in the atmosphere depending on the end-use of the downstream products.

This was followed by another test shipment to Japan in 2023, which was also criticised over the perceived lack of emissions reductions, given that the ammonia was used for co-firing with gas to generate electricity at an oil refinery.

However, after these two shipments, Aramco has slowed down its work on blue hydrogen and ammonia, with its CEO raising concerns in 2023 that the likely price of H2, at $250 per tonne, was far too high for offtakers to sign up to long-term contracts without government support for their purchases.

Beyond these domestic developments, much of Saudi Arabia’s recent activity in hydrogen appears to be leveraging its capital to develop both projects and start-ups abroad.

ACWA Power, which is 50% owned by Saudi sovereign wealth fund PIF, has already kicked off the construction of a 3,000-tonnes-a-year green hydrogen project in Uzbekistan, with plans for a second phase producing 500,000 tonnes a year.

The developer had in 2022 signed a memorandum of understanding with Thai state-owned oil company PTT to build a $7bn green hydrogen and ammonia project in Thailand.

And at the end of last year, it inked a similar agreement with Indonesia’s electricity utility PLN and fertiliser company Pupuk Indonesia to build a $1bn renewable NH3 facility by 2026.

In December, ACWA Power also joined the long list of hydrogen developers to have signed a framework agreement with Egypt to build a multi-billion-dollar green ammonia project alongside the Suez Canal.

Meanwhile, Aramco’s venture-capital arm has participated in fundraising for a number of hydrogen-focused start-ups, including Parallel Carbon, which aims to combine electrolysis with direct air capture, and OXCCU, which plans to produce low-cost sustainable aviation fuel using captured carbon and green hydrogen.

United Arab Emirates

As the host of COP28, the UAE sought to emphasise its climate credentials despite exporting nearly three million barrels of crude oil a day.

This included a push from COP28 president Sultan Ahmed Al-Jaber — also the CEO of state-owned oil company Adnoc and chairman of renewables developer Masdar — for governments to drastically scale-up their domestic clean hydrogen deployment, with the final agreement from the conference the first to include any reference to low-carbon H2 as a climate mitigation measure.
But while the UAE’s hydrogen strategy targets one million tonnes of green hydrogen and 400,000 tonnes of blue H2 (made from fossil gas with carbon capture and storage) produced a year by 2031, as well as a 25% share of the global market, domestic deployment appears to have stagnated.
To date, only one facility, Fertiglobe’s Fertil plant in Ruwais, Abu Dhabi, has started to produce an unspecified quantity of blue ammonia. This plant has captured CO2 emissions from existing processes, transferring the gas to the Al Reyadah carbon capture facility for injection into underground reservoirs for enhanced oil recovery. Small volumes of ammonia produced at this facility have already been sent in test shipments to customers in Japan and Germany.

Adnoc — which bought out OCI’s stake in Fertiglobe to become its full owner at the end of last year — had in 2021 pledged to start operating a one-million-tonnes-a-year blue ammonia facility at Ruwais in 2025. However, a final investment decision was due in 2022, which came and went with no announcement.

Meanwhile, although state-owned renewables developer Masdar has pledged to build out a million tonnes of green H2 annual production capacity by 2030, it has not specified what proportion of this target will be sited in the UAE.

Work also seems to have stalled on a $1bn green hydrogen project in the Abu Dhabi’s Khalifa Industrial Zone by Helios Industry, a special purpose vehicle for UAE-based energy company Petrolyn Chemie. While Korea Electric Power Corporation, Samsung, and Korea Western Power had all joined the project consortium in June 2022, there has been no further updates on its development since then.

Qatar

Qatar is the world’s leading exporter of liquefied natural gas, the infrastructure for which many hydrogen proponents have suggested could be retrofitted for H2, although the feasibility of such repurposing has been questioned by others.

Like Saudi Arabia, the country has not published a hydrogen strategy nor set specific targets, but it has still made a major investment in the sector.

The government-owned Qatar Fertiliser Company (QAFCO) signed a contract with Thyssenkrupp in August 2022 to build a $1bn blue ammonia plant, which is due to be completed in the first quarter of 2026.

It is unclear whether QAFCO plans to export the blue ammonia directly, or use it to produce fertilisers sold domestically or to the global markets.

Aside from that project, there have been few updates in recent years about Qatar’s hydrogen ambitions.

Updated on 13 February with comment from NGHC on whether Red Sea shipping crisis will affect construction timelines.
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Middle EastOmanSaudi ArabiaUnited Arab EmiratesQatar
Published 12 February 2024, 08:43Updated 13 February 2024, 13:42