Thanks to rapidly declining renewable energy costs and technological advances, hydrogen can become the medium of choice for transporting cheap clean energy across the globe.
The growing importance of hydrogen is part of a broader trend toward decarbonization, that the COVID-19 pandemic has accelerated, by reducing hydrocarbon demand sustainability. The regional chemical industry is well-positioned to capture the hydrogen opportunity that lies ahead and become a leading producer and exporter of blue and green hydrogen. Thanks to its abundant supply of natural gas, low cost of capital, existing industrial capacity, as well as geographical proximity to growth markets, the Arabian Gulf region can emerge as a world-leader in the clean energy transition.
The role of hydrogen in the energy transition is increasingly being seen as a necessity and poses a global challenge as the world is starting to transition to a cleaner and more sustainable energy system. In an effort to decarbonize the world, hydrogen can play a powerful role in enabling the transition as it offers clean, sustainable, and flexible options for overcoming multiple obstacles that stand in the way of a resilient low-carbon economy.
Being the lightest element on the periodic table, hydrogen’s unique properties make it a powerful enabler for the energy transition, with benefits for both the energy system and end-use applications. These benefits play an important role in decarbonizing major sectors of the economy. (see figure 1)
Powered by renewable sources, green hydrogen can fuel a range of applications, from industry processes to passenger cars. By seizing the green hydrogen opportunity, countries can lay the foundation for economic growth in a decarbonized world and ensure their continued influence in the energy market.
Many countries have ambitious plans for green hydrogen production. More than 30 countries have unveiled hydrogen roadmaps worldwide, with 228 large-scale hydrogen projects announced across the value chain. Of these, 85 percent are located in Europe, Asia and Australia, according to the Hydrogen Insight 2021 report. Thanks to the Arabian Gulf region’s abundance of inexpensive solar energy, green hydrogen is a market where GCC countries have an advantage.
Many GCC countries’ national visions are aligned with the circular economy concept especially with regards to hydrogen production. The world’s first blue ammonia shipment from Saudi Arabia to Japan last September is a testament to this and represents an exciting opportunity for the region to showcase its potential for extracting further value from hydrocarbons as a reliable and affordable source of low-carbon hydrogen and ammonia.
Untapped potential of hydrogen in the GCC region
Green hydrogen represents a promising opportunity for the Arabian Gulf region. It can be produced to boost domestic industries and for export. Although countries such as China and the US are seeking to invest in green hydrogen projects, their export prospects are limited by large domestic demand that will probably consume most of their production. By contrast, the GCC can export much of their green hydrogen and still have ample, low-cost renewable energy to fulfill local demand.
Efforts in the Arabian Gulf region to decarbonize the energy system need to pull on four main levers: improving energy efficiency, developing renewable energy sources, switching to low/zero carbon energy carriers, and implementing carbon capture and storage (CCS) as well as utilization (CCU).  All of these levers are making tremendous strides in the Arabian Gulf region, especially in Saudi Arabia, as highlighted by Ahmad Al Khowaiter, CTO of Saudi Aramco, during a GPCA podcast. He stated “the Arabian Gulf region is leveraging its tremendous renewable resources and hydrocarbon resources to avail low carbon products in the future”.
The Arabian Gulf region has a clear cost advantage over competition in terms of green hydrogen production. However, transportation to the most attractive import markets in Europe and Asia requires that it is converted to green ammonia during shipping, and then converted back to gaseous hydrogen at the destination, through a process called ‘cracking’.
Hydrogen plays a very important role in decarbonization, and with the significant investments made in hydrogen technology, the region is playing on the availability of hydrogen to further expand its demand.
The driving demand for hydrogen stems from many different areas. The first includes decarbonizing some of the existing technologies and having access to blue and green hydrogen to help reduce the carbon footprint. For many developing countries, increased pressure on the carbon footprint of some products to ensure a low CO2 emission is also driving the demand along with ensuring that customers on the receiving end are satisfied. There have been many efforts made to ensure access to renewables, especially with blue and green hydrogen, all to expand the regional product portfolio and help in decarbonizing some of the technologies to secure a low carbon footprint. https://hydrogencouncil.com/wp-content/uploads/2017/06/Hydrogen-Council-Vision-Document.pdf
How the GCC can maintain a competitive edge
As other countries have already begun investing in green hydrogen, GCC policy makers need to realize the value timing plays here. They should focus on several strategic imperatives to remain competitive:
- Develop capabilities to produce green hydrogen at scale and at the lowest possible cost (including technologies most suitable for at-scale green hydrogen production)
- Increase green ammonia production
- Focus on master cracking
- Develop green hydrogen hubs
Ensuring the right incentives, policy frameworks and infrastructure investments will be needed to leverage the region’s hydrocarbon resources and remain competitive. With factors like low carbon capture prices, low natural gas prices and the abundance of natural resources, the region will have a competitive advantage in the production of both green and blue hydrogen.
The GCC holds significant advantages in the production of green hydrogen due to abundant, low-cost solar energy. However, challenges still remain. Green hydrogen entails significant transportation costs to supply large export markets in Europe and Asia and ammonia cracking technology still requires further development to extract high-purity hydrogen cost effectively and at the volumes required.
The best way for GCC producers to supply large export markets is to use renewable energy to convert green hydrogen to green ammonia (NH3, an effective hydrogen-carrying compound). GCC producers would then “crack” the ammonia at the import destination to extract the hydrogen for end use. With several large-scale demonstrator projects currently under way, and significant infrastructure support and investment in the region, commercialization is imminent for green ammonia production in the region.
It is crucial for GCC industries to tap into this opportunity. Based on the current trends of rapid scale up and technology improvements, and with cheaper renewable energy, Green hydrogen production costs are expected to fall sharply. Green hydrogen adoption will, thus, likely reach a turning point by 2030. By 2050, global green hydrogen demand is expected to reach over 530 million tons, equivalent to around 7 percent of global primary energy consumption. This would displace 10 billion barrels of oil equivalent per year, around 37 percent of current global oil production.
The Arabian Gul region is already pushing ahead with plans to be the world’s top ‘green hydrogen’ producer. Saudi Arabia is leading the way in this field as many energy experts describe the Kingdom as the one to watch in the global hydrogen race.
Promising regional green hydrogen projects
Air Products, Acwa Power, and Neom’s deal for a $5 billion green hydrogen-based ammonia production plant powered by renewable energy is a momentous step in a greener direction for the world’s biggest oil exporter. The project, which could be the world’s largest green hydrogen unit, will supply 650 tons per day of carbon-free hydrogen for global transport and reduce 3 million tons of carbon dioxide per year The hydrogen plant will be located in the megacity of NEOM, which lies north of the Red Sea. It will be powered entirely by the sun and wind. Green hydrogen is produced by using renewable energy instead of fossil fuels, and producing a kilogram of the gas currently costs about $5. Saudi Arabia could drive this cost down to $1.5 per kilogram by 2030, according to Bloomberg’s energy research arm.
United Arab Emirates
Mubadala, Adnoc and ADQ’s deal to create the Abu Dhabi Hydrogen Alliance, which aims to establish the UAE’s capital as a leader in providing low-carbon green and blue hydrogen to emerging and international markets. ADNOC already produces around 300,000 tons per annum of hydrogen for its downstream operations, with plans to expand to more than 500,000 tons. ADNOC is also planning to capitalize
DEME Concessions and OQ Alternative Energy plan to partner in a major green hydrogen plant in the Special Economic Zone at Duqm, in co-operation with The Public Authority for Special Economic Zones and Free Zones. The envisaged electrolyser capacity for a first phase is estimated between 250 and 500 MW. Sohar Port and Freezone has also outlined ambitions to set up the country’s first industrial-scale green hydrogen plant at the industrial port on Oman’s Batinah coast. The venture is part of a longer-term vision to develop Sohar Port into a global hub for green hydrogen, which can be harnessed to power heavy industries, including steelmaking.
Although many countries have ambitious plans for green hydrogen, the GCC states have unique advantages that could allow them to lead the hydrogen economy. They also have an incentive to move away from fossil fuels. By seizing the green hydrogen opportunity, GCC countries can lay the foundation for economic growth in a decarbonized world and ensure their continued influence in the energy market. There is a huge market awaiting those nations who can lead the world in supplying hydrogen and technology to exploit it. This signals a promising future for the Arabian Gulf.
The Gulf Petrochemicals and Chemicals Association (GPCA) represents the downstream hydrocarbon industry in the Arabian Gulf. Established in 2006, the association voices the common interests of more than 250 member companies from the chemical and allied industries, accounting for over 95% of chemical output in the Arabian Gulf region. The industry makes up the second largest manufacturing sector in the region, producing over USD 108 billion worth of products a year.
The association supports the region’s petrochemical and chemical industry through advocacy, networking and thought leadership initiatives that help member companies to connect, share and advance knowledge, contribute to international dialogue, and become prime influencers in shaping the future of the global petrochemicals industry.
Committed to providing a regional platform for stakeholders from across the industry, GPCA manages six working committees – Plastics