Gulf countries are making bold strides into the hydrogen sector but appear likely to target exports over domestic markets
The energy sector has turned its focus on hydrogen as governments and producers around the world seek new ways to meet energy demand with an increased emphasis on sustainability.
Blessed with around 834bn bl of oil and 2,670tn ft3 (75.6tn m3) of natural gas, the Middle East accounts for a 48pc and 38pc, respectively, of global reserves of those fuels. As a result, the region does not face the same urgency as some when it comes to investing in costly new technologies and—together with Africa—it has quickly fallen behind Europe, Asia and the Americas when it comes to renewables.
Gulf countries have significant solar and wind power potential, but the difficulty of exporting electricity has presented a challenge for states accustomed to selling natural resources. The nascent hydrogen sector offers a solution.
“Rather than conventional natural gas reforming, we are focusing on the gasification of oil residues” Hirai, IEEJ
Conversion of hydrogen to ammonia provides a viable state in which to transport the atoms for re-conversion back into hydrogen at their final destinations, with ammonia’s energy density by volume nearly double that of liquid hydrogen. “In many ways, it is ideal,” says Tim Hughes, head of energy storage research projects at German conglomerate Siemens.
Meanwhile, as the Gulf’s state oil firms prioritise gas as a means to cater to electricity demand and free up larger volumes of crude for export, there is also the prospect of generating hydrogen through steam methane reforming.
With governments around the world seeking to reduce the carbon intensity of their primary energy supplies, the Middle East’s state companies must act to protect their market share. Acquiring midstream and downstream assets dedicated to receiving crude oil and LNG is one way of doing this, but it is clear they see hydrogen as part of the long game.
This was demonstrated recently by a pilot project between Saudi Aramco, Saudi state-controlled Sabic and the Institute of Energy Economics, Japan, which saw a 40t consignment of blue ammonia shipped to Japan for use in clean power generation.
Speaking to Petroleum Economist, Harumi Hirai, associate director at the IEEJ said: “Rather than conventional natural gas reforming, we are focusing on the gasification of oil residues,” with plans to develop ammonia plants close to existing refineries.
He adds that the IEEJ’s ultimate aim is to bring about “a renewal and restructuring of [the] downstream by using gasification and ammonia production, carbon capture and storage/enhanced oil recovery and CO2 long-distance transportation networks all over the world”. The IEEJ envisages a market in which Saudi Arabia and the UAE, alongside Australia and the US, are the key suppliers, providing more than 30mn t/yr of ammonia by 2024 and catering to around 10pc of Japan’s baseload demand.
As well as the Aramco trial, Saudi Arabia’s hydrogen efforts include mobility pilot projects and the world’s largest hydrogen development—a $5bn project set to harness 4GW of solar and wind power. One of the developers, international industrial gases company Air Products, will be the sole offtaker and intends to export the produced green ammonia.
Elsewhere in the region, state-owned Petroleum Development Oman has been studying the potential for domestic use of hydrogen in Oman through its Ejaad digital research platform, although the firm is understood to be courting investment from Japan, which would suggest a portion of output would likely be destined for Asia. Meanwhile, plans have been announced to construct a green hydrogen plant at the Omani port of Duqm, where a large export-focused refinery and petrochemicals facility is also being developed. The Hyport Duqm facility is expected to have an electrolyser capacity of 250-500MW from the first phase, with products again earmarked for export.
“In many ways, [ammonia] is ideal” Hughes, Siemens
The UAE is putting together a roadmap for hydrogen, with the Dubai Electricity and Water Authority constructing a pilot green hydrogen mobility project at the Emirate’s Expo 2020 event. The project will power fuel cell vehicles with hydrogen generated through electrolysis from the Mohammed bin Rashid Al Maktoum Solar Park.
This week, the UAE’s Ministry of Energy highlighted its comparatively low solar power costs as an enabler for competitively priced green hydrogen.
As with most large initiatives in the region, hydrogen will get nowhere in the Gulf without state backing. However, with the current focus on the energy transition, low-carbon energy and weak oil prices, sentiment is positive. If these state-supported pilot projects can come to fruition, there are likely to be incentives to expand the sector to harness byproducts from oil and gas as well as increasing the value gained from large renewables projects.