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More than 350 industry professionals gathered in Dubai last week to give hydrogen a reality check.
It became apparent during two days of discussions that, as a future fuel for the Middle East and North Africa (MENA), hydrogen will not be easy to establish. The flurry of project announcements over the past few years has slowed and few have reached financing.
“As we’ve heard, there’s a lull,” said one speaker at World Hydrogen MENA.
A sense of hard work ahead seemed to prevail. Yet there was general agreement that the promise of carbon-free hydrogen, as a new fuel to power the region’s economy and energy transition, remains very much alive.
The stronger projects in many countries continue to develop, moving from initial agreement to actual study phase.
Meanwhile, the world’s most notable green hydrogen project is surging ahead in Saudi Arabia, putting a powerful spotlight on MENA’s great potential for future energy.
NEOM gets going
The NEOM green hydrogen project, which will deploy renewable power to produce 600 tonnes of hydrogen per day, and up to 1.2m tonnes of green ammonia for export annually beginning in 2026, seemed unlikely when announced in 2020.
Yet today the hydrogen factory is being built with over 2.2GW electrolysis capacity, while 4GW of wind and solar power is now being installed on the enormous NEOM site, with dedicated high power lines to the production site. A dedicated jetty for ammonia export is being built.
The NEOM Green Hydrogen Company, the Saudi power and water development company ACWA Power, and the US-based industrial gasses company Air Products, have formed an effective consortium.
The key to the project’s momentum is a 30-year off-take agreement with Air Products for all the produced green ammonia. The company’s well established position in the global ammonia industry ensures that potential losses, should it need to deliver its green hydrogen at gray hydrogen prices, will be spread across its broad revenue streams.
With that in place, banks were banging down NEOM’s door to get in on the deal. More than 20 financial institutions entered the non-recourse financing structure, finalized last summer to finance $6.1bn of the $8.4bn project.
Diverse approaches
The question now is where other big projects will launch. They might in many places, as the policy environment for hydrogen development in MENA countries becomes increasingly sophisticated with continuing development of institutional support.
Oman has a one-stop shop approach with its Hydrogen Oman (Hydrom) to work with developers and plan for infrastructure. It has awarded land blocks to five consortia at its Special Economic Zone at Duqm (SEZAD). Hydrom will next award three land blocks in the southern Dhofar region, with announcements anticipated next month. A national network of pipeline infrastructure is planned, while special tax breaks are promised for early project completion.
The UAE has adopted a National Hydrogen Strategy, published last summer by its Ministry of Energy and Infrastructure, with a ‘hydrogen framework’ of ten parts or ‘levers’, each with an implementation plan and timeline of activities to 2031.
While the plan is national, the action is focused on the largest emirate Abu Dhabi, whose Department of Energy has produced a low-carbon hydrogen policy that focuses on ‘hydrogen oases’ to attract investment. This document may prove more significant for developers.
The Abu Dhabi DOE is taking a project-by-project approach, with a technical committee analyzing proposals on their merits, looking at what needs to be done to get a project going and ensure its value for the emirate. The two guiding lights are the emirate’s national oil company ADNOC, and its clean energy company Masdar, which will be involved in all hydrogen development consortia.
Egypt has a plethora of projects, with some 30 memorandums of understanding between companies having been signed, and approximately ten projects advanced to framework agreements. Much of the activity is centered on the large Suez Canal Economic Zone (SCEZ), with large renewable power projects and opportunities for shipping fuel production in the vicinity.
Morocco, guided by its Institut de Recherche en Energie Solaire et en Energies Nouvelles (IRESEN), is looking at hydrogen as a ‘green’ industrialization strategy for economic development, with focus on its domestic fertilizer industry. The country is also preparing a program to attract developers and planning for pipelines to Europe.
Saudi Arabia, for its part, is not resting content with its green hydrogen breakthrough. The national oil company Aramco is betting on blue hydrogen with carbon capture, seeking to decarbonize its own operations and related industries. A regional specialization is emerging, with green hydrogen production in the windy northwest of the country and blue hydrogen in the industrial east.
Robust foundation
The countries’ diverse approaches, under discussion at World Hydrogen MENA, were seen as integral parts of the ongoing development of an emerging market. But there was also much focus on the demand side, which must continue to develop for the stronger projects to eventually take hold.
“Many projects in the region are stalled as they wait for off-take, particularly from Europe,” said Dan Feldman, Partner at King & Spalding attorneys in Abu Dhabi. “Therefore, while we strive in MENA to lower cost, if there aren’t policies on the other side to develop their infrastructure and demand, we can’t proceed.”
There was much discussion of European programs that are gradually coming into place to accelerate a global hydrogen market. These combine mandates in the EU’s updated Renewable Energy Directive (RED III) with market mechanisms such as Germany’s H2Global market that takes a ‘contracts for difference’ approach to support long-term purchase agreements with a government-backed off-taker.
Whether these will eventually be sufficient to spur demand for MENA hydrogen is not yet known. For now, industry professionals are striving to identify and support the more viable projects.
