Oil-rich Gulf bets on ‘green’ hydrogen

Oil-rich Gulf bets on ‘green’ hydrogen
DUBAI: 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 per cent 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.

Saudi Arabia, UAE and Oman investing heavily in search for alternative revenues to crude, gas

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.”

‘Export leaders’

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 $8.4bn 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

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.

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.

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 said.