February 15, 2022 4:07 pm
On the northwest coast of Saudi Arabia, work is being done to build a hydrogen production plant that costs several billion. The world‘s leading oil exporter is looking to become the leading producer of this clean energy source. If it were to meet the goal of producing 650 tons per day of “green” hydrogen without impact on the environment, it will become the largest plant in the world.
In the city of Neom, on the Red Sea coast, large-scale construction has not yet started. A local official told the Financial Times that work is expected to begin in 2026. The Saudi plan to dominate the field of hydrogen production is part of an attempt to diversify an economy dependent on gas and oil and create new jobs.
In 2021, 60 percent of the Saudi budget came from oil ($ 149 billion) and it is now clear that the country needs to find other sources of income in a world that will rely less and less on fossil fuels in the future. “We rely heavily on hydrogen and we want to conquer this market. We will be the most competitive producer, ”Saudi energy minister Prince Abdulaziz bin Salman said at a conference in early February.
Fierce competition
However, other countries have set their sights on this market, starting with Russia and the United Arab Emirates. There are doubts that the plant on the Red Sea will give the desired results. Unlike oil, so-called “green” hydrogen – the least harmful option for the atmosphere which includes the use of water and renewable energy – can be produced anywhere. If the market takes off as planned ($ 600 billion by 2050), competition will be fierce.
“It is clear that Saudi Arabia would like to have a dominant position,” explains Alexandre Araman, an analyst at the consultancy firm Wood Mackenzie. For decades, hydrogen has been considered an alternative to fossil fuels and, according to the latest research from the International Renewable Energy Agency, could meet up to 12 percent of the world‘s energy needs by 2050.
Behind Saudi Arabia’s green initiatives is the Public Investment Fund, chaired by Mohammed bin Salman
This resource can be used to power automobiles, for industrial production, and even to heat and light homes. “Hydrogen is certainly the path that oil companies want to take in their decarbonisation path. The idea that Saudi Arabia moves in this direction makes perfect sense, ”explains Kristin Diwan, a representative of the Arab Gulf states institute in Washington.
Green hydrogen, produced through water electrolysis, is the least harmful fuel for the environment because it comes from renewable energy. On the northwestern shores of Saudi Arabia, there is plenty of sunlight and wind all year round to power the solar panels and wind turbines. Blue hydrogen, on the other hand, is obtained by separating the molecules from a fossil fuel such as methane gas and then requires a process of capturing the CO2 emitted. “Saudi Arabia will bet on both green and blue hydrogen,” explains Araman.
Doubts remain
Behind Saudi Arabia’s green initiatives is the Public Investment Fund, a $ 500 billion sovereign fund of which Crown Prince Mohammed bin Salman is president. In addition to the Neom plant, in January the fund signed a memorandum with two South Korean companies – Samsung and Posco – to study a project for hydrogen exports. Neom is also expected to house a plant for the construction of hydrogen-powered cars. Neom’s project leader Roland Kaeppner points out that the Saudi initiative comes at the right time in a world looking for new ways to get away from fossil fuels. “You can’t decarbonise every industry by using only electricity,” he explains.
But the doubts remain. Hydrogen is difficult to produce, store and transport, and the costs are likely to remain prohibitive. “The real problem is the cost. Will consumers be willing to pay more? ”Asks Robin Mills, managing director of consulting firm Qamar energy. Saudi Arabia can count on “excellent solar and wind resources, available land and quick links with Europe for export. So the basics are encouraging, ”adds Mills. “I’m not saying that Saudi Arabia doesn’t have the skills to do it, but now it’s time to show them.”
The Saudi energy minister specified: “When it comes to gas and oil, we are the producer with the lowest costs, and the same goes for electricity produced from renewable sources”. But there are other countries that have decided to focus on hydrogen.
Russia would like to control 20 percent of the hydrogen market by 2030, while the UAE has announced the construction of a hydrogen plant and plans to control 25 percent of the market by 2030. Oman, Morocco and Egypt have announced the construction of new plants. The UAE borders Saudi Arabia and is an important political ally of Riyadh, but now the economic rivalry between the two countries is spreading from oil to hydrogen production and export.
In September 2020, Saudi Arabia became the first country to export ammonia – an easily transportable element to store hydrogen – to Japan. A year later, the Abu Dhabi national oil company (Adnoc) announced its first ammonia shipment. “We have noticed that Saudi Arabia is trying to establish itself as a leader,” Araman points out. “Every time they do something like this, Adnoc immediately follows suit by increasing investments”.
(Translation by Andrea Sparacino)
To know
The colors of hydrogen
Green hydrogen: produced through the electrolysis of water using electricity from renewable sources. Currently very expensive.
Blue hydrogen: produced through the separation of CO2 from the methane molecule and the sequestration of the resulting carbon dioxide emissions. Production is currently very low due to the lack of CO2 capture systems.
Gray hydrogen: it is the most common, produced through the reformation of methane but without the sequestration of emissions.
Brown hydrogen: produced through the gasification of coal. It is the cheapest way to produce hydrogen, but also the most harmful to the environment.
Turquoise hydrogen: produced through the pyrolysis of methane. The process does not emit greenhouse gases directly, but it has not been fully tested and there are concerns about possible methane leaks.