While Saudi Arabia continues to develop its oil industry, it is not shying away from alternative energy options, with state-owned Aramco now heavily investing in hydrogen technology.
Saudi Arabia still leads the world in oil production and exports but following an International Energy Agency (IEA) report earlier this year and recent investor pressure to adopt greener practices and embrace renewable alternatives the country is looking to develop its hydrogen industry.
Aramco Chief Technology Officer Ahmad Al Khowaiter explained last week, “Today we’re showing that the technologies for the use of hydrogen are mature and commercially available… and we see this kind of as an inflection point in the market for hydrogen.”
The announcement comes as Saudi Crown Prince Mohammed bin Salman launched a national strategy for transport and logistics with the objective of increasing the sector’s contribution to annual non-oil revenues to $12 billion by 2030.
Most current hydrogen projects still rely on fossil fuels, which create brown or grey hydrogen. The end product may be clean, but the production process releases a significant quantity of carbon dioxide into the atmosphere. In contrast, hydrogen created this way but using carbon capture (CCS) technology creates a cleaner product known as ‘blue hydrogen’, which is the focus of Saudi Arabia’s efforts.
Aramco, the world’s biggest oil company, is looking to build a market and promote its hydrogen strategy as other countries lag behind, expecting to establish a significant customer base by the end of the decade.
Saudi Arabia has already made efforts to ensure its oil production processes have a low-carbon intensity through investment in CCS technology. This same technology is used in the production of blue hydrogen and means Saudi Arabia is one of the first countries to have developed an infrastructure for substantial blue hydrogen production.
Bank of America expects hydrogen to replace 25 percent of all oil demand by 2050. If that prediction proves to be correct, then Saudi Arabia is eager to ensure it maintains the same dominance over hydrogen markets that it currently holds over oil markets.
Saudi Arabia is also looking to develop green hydrogen from renewables. But Aramco acknowledges it will need to find ways to reduce costs to make it viable, as green hydrogen production is around five times more expensive than blue hydrogen.
Looking forward, Pennsylvania-based Air Products & Chemicals Inc. and Saudi’s ACWA Power International are investing $5 billion in the construction of a plant in the north-eastern city of Neom, which will produce the more environmentally-friendly green hydrogen.
This follows the construction in May of the region’s first industrial-scale green hydrogen plant, powered by solar energy, by Siemens Energy and Dubai Electricity and Water Authority (DEWA), in neighboring Dubai. Abu Dhabi is expected to follow in Dubai’s footsteps by building a $1 billion green ammonia and hydrogen plant.
With these investments, Saudi Arabia and the UAE could lead the way for blue and green hydrogen production and exportation, perfectly situated between European and Asian markets.
Ben Cahill from the Energy Security and Climate Change Program, at the US-based Center for Strategic and International Studies, believes that “Ultimately this is about shifting with the times and meeting market demand for lower-carbon energy.” He went on to say that “Aramco and ADNOC have huge absolute emissions — especially Aramco — but want to reduce emissions intensity and decarbonize operations as much as they can.”
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The race is now on to see if Saudi Arabia can become a world leader in hydrogen markets just as it is in oil markets.
By Felicity Bradstock for Oilprice.com
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