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Oxford Business Group

Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia…

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Hydrogen Will Play A Key Role In The Gulf’s Energy Transition


With hydrocarbon-rich countries in the Gulf increasingly looking to reduce their carbon emissions, some in the region are turning towards multi-coloured hydrogen as a more environmentally sustainable solution.

Along with renewable sources like solar and wind, hydrogen is seen as a potential low-carbon or zero-carbon fuel that is key to the transition away from fossil fuels.

However, it is important to note that there are different types of hydrogen with different impacts on the environment.

For example, blue hydrogen is created when natural gas undergoes a steam reforming process. Although this process also produces CO2, the vast majority of it is captured and stored, subsequently producing a low-carbon fuel.

The most environmentally friendly form is green hydrogen, which is created by splitting water through a process called electrolysis, producing only hydrogen and oxygen. Powered by renewable sources such as solar and wind, green hydrogen is considered the most effective fuel for the future, although at present it accounts for just 0.1% of hydrogen produced globally.

Grey hydrogen is the most common form of the fuel and has been produced for many years. It is created through a steam reforming process similar to that of blue hydrogen, although the CO2 byproduct is not captured, leading to a more significant environmental impact.

Similar to green hydrogen, pink hydrogen is also produced by electrolysis, although the process is powered by nuclear rather than renewable energy.

Though hydrogen accounted for just 4% of global energy consumption in 2019, according to the International Energy Agency, some estimates suggest that it could reach 18% by 2050.

The Gulf takes charge

While hydrogen has the potential to transform the global energy industry, countries in the Gulf in particular stand to benefit.

“For green hydrogen, the two main components to look at are renewable electricity and electrolysers. The region has a competitive advantage when it comes to generating low-cost renewable electricity,” Ahmed Ali Attiga, the CEO of Arab Petroleum Investment Corporation, told OBG.

“As for blue hydrogen, MENA has a competitive advantage in terms of its abundant resource base, low cost of natural gas resources and access to depleted oil wells for CO2 storage.”

In light of this, some countries have taken significant steps to develop their capabilities, with the UAE one of the regional leaders in this regard.

In May Khalifa Industrial Zone Abu Dhabi (KIZAD), a unit of the publicly owned Abu Dhabi Ports, announced plans to develop a green hydrogen and ammonia production facility in the zone.

Special project vehicle company Helios Industry will invest $1bn in the construction of the plant, which will be powered by solar energy. Once fully completed in 2026, the plant will have the capacity to produce 40,000 tonnes of green hydrogen annually, which will be converted into 200,000 tonnes of its carrier fuel, green ammonia, for transport.

This was followed by Abu Dhabi Ports’ announcement in early July that it had signed a preliminary agreement with the Abu Dhabi National Energy Company to discuss the development of a 2-GW green hydrogen and ammonia facility, also to be located in KIZAD.

In another development, in May Abu Dhabi National Oil Company (ADNOC) announced that it had joined forces with local chemicals company Fertiglobe, in which it owns a 42% stake, to develop a blue ammonia facility in Ruwais. Set to open in 2025, the facility will have a production capacity of 1m tonnes per year.

Saudi Arabia has established itself as another key player in the growing hydrogen market.

In July last year NEOM, the $500bn smart city under construction in the country’s north-west, announced that it had signed an agreement with US gas company Air Products and local company ACWA Power to build a $5bn green hydrogen-based ammonia facility.

Described by the companies as the largest of its kind in the world, the plant will produce 650 tonnes of hydrogen per day and 1.2m tonnes of green ammonia per year once it comes on-line in 2025, saving an estimated 3m tonnes of CO2 annually.

Meanwhile, in Oman, government-owned oil firm OQ is heading up a consortium to develop a solar- and wind-powered project capable of producing millions of tonnes of zero-carbon green hydrogen per year.

Alongside this, in May Greece-headquartered Consolidated Contractors Company announced it had struck a deal with Ireland’s Fusion Fuel Green to develop green hydrogen plants across the Gulf, namely in Oman, Kuwait and Qatar.

In many instances, governments and companies alike have outlined various uses for hydrogen, from fuelling public transport vehicles in Dubai, to powering industrial production in Abu Dhabi – and, as OBG has detailed previously, powering freight ships in order to curb the shipping industry’s carbon footprint.

Developing an export market

In addition to domestic use, governments in the region are looking to capitalise on their expertise in exporting liquid fuels to develop an effective hydrogen export industry.

As such, hydrogen is emerging as a solution to help meet both energy and economic diversification goals.

Complementing Abu Dhabi’s efforts to expand its hydrogen production capacity, in August Fertiglobe signed three separate deals to ship blue ammonia to Japanese companies INPEX, Idemitsu and Itochu.

Highlighting scope for further export deals in the future, in July ADNOC released a joint study with a number of Japanese companies that explored the possibility of exporting 1m tonnes of blue ammonia to Japan annually, while in March it signed an agreement with South Korea’s GS Energy to explore hydrogen export opportunities.

Saudi Aramco delivered the world’s first blue hydrogen shipment to Japan last year, with the company noting that it was actively exploring potential export markets in Asia.

For its part, Helios Industry’s green ammonia project will target imports mainly to the US and Europe once production begins in the second quarter of 2024.



While hydrogen fuel offers significant benefits in the transition away from fossil fuels, the industry has some hurdles to overcome to fulfil its potential.

Despite its promise, many analysts see hydrogen playing only a minor role in the Middle East’s energy mix over the coming decades.

One of the major barriers to expansion is cost.

“Hydrogen has a critical role to play in delivering energy while lowering carbon dioxide emissions. If research and development is to contribute to both corporate success and broader socio-economic development goals, a sizeable investment is required at the early stages of any given technology, well before there is any certainty of a breakthrough,” Ali Al Janabi, country chairman for Shell in Iraq and the UAE, told OBG.

“Hydrogen-based fuels are no exception to this, with Shell working on the idea as early as the 1990s. Shell is part of several initiatives aimed at encouraging the adoption of hydrogen in transport, and we are exploring solutions to provide hydrogen to homes and businesses, as well as refineries and factories.”

Although there is significant appetite for alternative fuels to help cut carbon emissions, hydrogen production and export projects are likely to cost billions of dollars, requiring significant commitment from would-be investors.

“Irrespective of the colour, the key obstacle to developing the hydrogen economy is logistics. Hydrogen must be stored and transferred to the consumer in a cost-efficient manner. However, setting up the necessary infrastructure will be relatively expensive,” Oussama El Jerbi, area managing director for Qatar at Consolidated Contractors Company, told OBG.

“For the investment to be economically viable and generate a timely and adequate return on investment, the hydrogen volumes to be transferred should be large enough. Therefore, in the early days of the hydrogen industry, the challenge is to scale production up and make the process commercially sustainable.”

Underlining these concerns, earlier this year international media reported that hydrogen-producing countries in the Gulf were seeking investors to purchase equity stakes in hydrogen export facilities as well as sign long-term supply contracts before moving ahead with the projects.

By Oxford Business Group

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  • Mamdouh Salameh on September 26 2021 said:
    The only energy transition the Arab Gulf should embark on is replacing oil and natural gas in electricity generation and water desalination plants with solar power and nuclear energy so as to release more oil for export and gas for its petrochemical industries. Another measure is for national oil companies (NOCs) to use the latest carbon capturing technologies when producing oil and gas.

    Therefore, I doubt whether hydrogen will play a key role in the Gulf’s energy transition. Two major hurdles dictate against such a course of action: the huge investments needed and cost.

    Whether green, blue, pink or grey, hydrogen is a non-starter. It is more expensive to produce than natural gas. Furthermore, it needs far more energy to produce than it will eventually provide.

    Producing green hydrogen from water by electrolysis using solar or nuclear energy is extremely expensive, at least twice that of fossil-based hydrogen and the quantity produced is minute. Also producing blue hydrogen from natural and grey hydrogen from fossil fuels is far more expensive than producing natural gas.

    In 2020 roughly 87 Mt of hydrogen was produced worldwide amounting to a tiny 0.54% of global primary energy consumption. So the projections of hydrogen share in the final energy by the International Renewable Energy Agency (IRENA), the Brussels-based Hydrogen Council and the EU at 12%, 18% and 24% respectively by 2050 are pure hype.

    Moreover, the production of green hydrogen is minuscule. IRENA, in its energy transition roadmap to 2050, estimates that global production of green hydrogen must reach approximately 400 Mt, which would require a total installed electrolysis capacity of 5 terawatts (TW) or 5,000 GW by 2050. Today, total installed electrolysis capacity worldwide is approximately 8GW.

    If this is the case, wouldn’t be far more economical to skip the production of hydrogen altogether and use natural gas directly to generate electricity while employing the latest carbon capture technologies to prevent CO2 being released?

    Why not use the solar electricity or nuclear energy used in producing green hydrogen by electrolysis to enhance current electricity generation and make it cheaper to customers and industrial plants rather than using a convoluted process of electrolyzing it and then using it to generate electricity thus adding to customers’ costs.

    Furthermore, the heat generated from nuclear reactors could be used to generate more electricity in a combined cycle for use in industrial plants instead of hydrogen.

    The Arab Gulf shouldn’t let itself be seduced or conned by foreign investors to waste a big chunk of its investments on pies in the sky when these precious investments could be easily invested in far more lucrative ways such as adding value to its oil and gas exports and investing in food production as well as in highly profitable companies around the world in the manner of Norway’s Sovereign Fund, the world’s largest.

    The only country in the world where a hydrogen economy could possibly succeed is Iceland. The reason is that it has plentiful geothermal power and water. Geothermal power already generates virtually all Iceland’s electricity.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Kay Uwe Boehm on September 27 2021 said:
    Biggest hydrogen producer in world is already Abu Dhabi but on base of CH4 methane with water and heat setting free CO/CO2 mainly for chemical industry not hydrogen fuel cell cars
    recommended also for making of cheap titanium reducing TiO2 to TiH2 with CaH as catalysator and heat then with more heat full decomposition etc.

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