After riding a fossil-fuel boom for decades, Gulf Arab states are eyeing “green” hydrogen as they try to transition their economies and ease the climate crisis at a stroke.
Oil producers Saudi Arabia, the United Arab Emirates and Oman are investing heavily in the climate-friendly fuel in a search for alternative revenues to crude and gas.
Green hydrogen, which is the hydrogen created when renewable energy electrolyses water, appears to solve many problems: it is low-polluting and has widespread potential uses, which could make it lucrative and planet-saving at the same time.
But the fuel, which currently makes up less than one percent of total hydrogen production, is not yet commercially viable and needs a major scaling-up of renewable energy sources — a process that could take years.
Despite this, the Gulf monarchies sense an opportunity to remain major players in energy markets as oil revenues fall.
“Gulf states aim to lead the global hydrogen market,” said Karim Elgendy, associate fellow at Britain’s Chatham House think tank.
“They see green hydrogen as critical to remain major energy powers, allowing them to continue their influence as fossil fuel demand declines.”
Most hydrogen is produced from polluting fossil fuels, but green hydrogen is extracted from water using renewable energy such as wind, solar and hydropower.
While fossil fuels create harmful greenhouse gases when they burn, hydrogen emits only water vapour. It is touted for potential use in high-polluting industries such as transport, shipping and steel.
Wielding its massive investment capital, oil-rich Saudi Arabia is constructing the world’s largest green hydrogen plant at NEOM, the $500 billion futuristic megacity being built on the Red Sea.
The $8.4-billion plant will integrate solar and wind energy to produce up to 600 tonnes of green hydrogen a day by the end of 2026, officials say.
In July the UAE, which will host the United Nations’ COP28 climate conference this year, approved a hydrogen strategy that aims to make it one of the top 10 producers by 2031.
“Hydrogen will be a critical fuel for the energy transition,” said Hanan Balalaa, a senior official at the UAE’s oil firm ADNOC, calling it a “natural extension” for the company.
“We believe hydrogen and its carrier fuels have great potential as new, low carbon fuels, that the UAE is well placed to capitalise” on, Balalaa told AFP.
But it is Oman, which lags Saudi Arabia and the UAE in fossil fuel production, that looks poised to lead the Gulf’s clean hydrogen race.
The sultanate is on track to become the sixth-largest exporter globally and the biggest in the Middle East by the end of the decade, the International Energy Agency said in a June report.
Oman aims to produce at least one million tonnes of green hydrogen a year by 2030, and up to 8.5 million tonnes by 2050, “which would be greater than total hydrogen demand in Europe today”, the IEA said.
According to auditing firm Deloitte, Middle Eastern countries, primarily the Gulf, will lead global clean hydrogen trade in the short-term, exporting around half of their domestic production by 2030.
By 2050, North Africa and Australia are projected to have the greatest potential, although Gulf states will remain “export leaders”, the company said in a June report.
Hope or hype?
The investment in green hydrogen has not curbed expansion in oil and gas, with both the UAE and Saudi Arabia planning to grow their hydrocarbon industries.
Experts predict it could still take years before Gulf countries can produce green hydrogen at a cost competitive with fossil fuel-based alternatives.
While the cost of renewable energy has fallen due to technological advances, green hydrogen cannot yet be produced at a profit.
“Gulf countries will focus on maximising the sales of hydrocarbons as long as possible,” said Aisha al-Sarihi, a research fellow at the National University of Singapore’s Middle East Institute.
“It will take years of trial and error for green hydrogen to become a commercially traded commodity,” the expert said, adding that it “can be the new fuel of the future” once the technology matures and costs fall.
Demand for hydrogen also remains unclear.
But Gulf states are long-time energy suppliers of import-dependent Asian countries such as Japan and South Korea that plan to incorporate it in their decarbonisation plans.
Abdullah al-Nuaimi, the UAE’s former climate change minister, cautioned, however, that “the existing infrastructure for transporting hydrogen is not adequate and would require massive investment to modify”.
“The time required to overcome and solve the challenges facing hydrogen is too long,” he told AFP.
Big potential for green hydrogen in North Africa
By 2050 North Africa could become a leading exporter of green hydrogen with Europe its main market, according to a recent report projecting the future of an industry still in its infancy.
So-called green hydrogen is set “to redraw the global energy and resource map as early as 2030, creating a $1.4 trillion-a-year market by 2050,” according to the report from accounting consultancy Deloitte.
Hydrogen fuel which can be produced from natural gas, biomass or nuclear power is considered “green” when hydrogen molecules are split from water using electricity derived from renewables such as solar and wind that do not produce carbon emissions.
Less than one percent of the world’s hydrogen production presently qualifies as green.
But the climate crisis coupled with both private and public investment has sparked rapid growth in the sector.
The Hydrogen Council, a lobbying group, lists more than a thousand hydrogen projects in the pipeline worldwide.
Projects launched before 2030 would require about $320 billion dollars in investment, the Council said.
By 2050, according to Deloitte, the main green hydrogen exporters are likely to be North Africa ($110 billion per year), North America ($63 billion), Australia ($39 billion) and the Middle East ($20 billion).
Management consultancy reports can be assumed to heavily reflect the financial interests of their corporate clients, including some of the world’s largest carbon polluters.
But the need to meet climate targets and generous subsides are driving demand for clean energy of all kinds, including green hydrogen.
Long-haul aviation and shipping industries for which the type of electric batteries powering road vehicles is not an option are also keen on hydrogen as an alternative to fossil fuels.
Moroccan Sun and wind
The emergence of a clean hydrogen market from solar and wind could also make the industry more inclusive of developing countries, says the report.
It would also allow Global South steel industries, for example, to leapfrog past coal.
For now, however, 99 percent of the global production remains “grey,” meaning that hydrogen is produced by splitting methane molecules, which releases greenhouse gases no matter what kind of energy drives the process.
Truly green hydrogen releases hydrogen from carbon-free water molecules (H20) using an electrical current from a renewable source.
This is where Northern Africa may have a major role to play, says Sebastien Douguet, director of the Deloitte Energy and Modelling team and co-author of the report, which is based on International Energy Agency (IEA) data.
“We’re seeing that a number of North African countries such as Morocco or Egypt are taking up the hydrogen issue, and that ‘hydrogen strategies’ are being announced there just a few years behind the European Union and the United States,” Douguet told AFP.
“Morocco has very strong potential for wind energy that is often overlooked, and a great potential for solar power, and Egypt has the means to become the principal exporter of hydrogen to Europe in 2050 thanks to an existing natural gas pipeline” which could be adapted to transport hydrogen, he said.
Saudi Arabia also benefits from sunbaked and available land with the potential to produce 39 million tonnes of low-cost green hydrogen in 2050 four times its domestic demand that would help diversify its economy away from petroleum, according to the report.
The report predicts investment will end by 2040 for carbon capture and storage as a solution to the emissions of methane-based hydrogen, which is the current strategy of the oil-rich Gulf States, as well as the United States, Norway and Canada.
Hydrogen produced this way is not be labelled green, but rather “blue”.