Is ‘Oil Miracle’ Middle East Now Seeking to Become a Hydrogen Capital?

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In the wake of hydrogen, especially green hydrogen (produced through electrolysis using renewable energy), being posited as an ideal alternative to fossil fuels for producing electricity, the oil powerhouse Middle East has set out to become a major producer of the new clean fuel—green H2.

Many oil-dependent economies within the OPEC (Organization of the Petroleum Exporting Countries) are working towards branching out into green energy exports so as to reduce reliance on oil and conform to the low-carbon transition that is already underway in the world at large. And maintain their status as energy exporters.

Last month, a solar-driven green hydrogen project was inaugurated at the Mohammed bin Rashid Al Maktoum (MbRAM) Solar Park in Dubai. The project, implemented in collaboration with Dubai Electricity and Water Authority (DEWA), Expo 2020 Dubai, and Siemens Energy, is the first solar-driven green hydrogen-producing facility in the Middle East and North Africa (MENA). Meanwhile, Arabian country Oman announced plans to build one of the largest green hydrogen plants in the world—with a capacity of 25 GW.

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Additionally, Saudi Arabia, the world’s largest oil exporter, has also been preparing to hold a stake in the emerging green hydrogen market. In July last year, NEOM, the $500 billion plus futuristic sustainable city promoted by Saudi Crown Prince Mohammed bin Salman, signed a deal with US-based Air Products and Saudi utilities developer ACWA Power for a $5 billion green hydrogen-based ammonia production project, which will export the product. It was reported in April this year that the design and early works for it are now underway. The kingdom also has high hopes from its fertilisers industry, which is a key non-oil export sector, that could also be a consumer of green hydrogen.

It is, however, worth mentioning that green H2 should not be viewed as a blanket alternative to fossil fuels. A recently released German study recommends that hydrogen-based fuels should primarily be used in sectors such as aviation or industrial processes that cannot be electrified. In many other cases, producing these fuels is too inefficient, costly and their availability too uncertain, to broadly replace fossil fuels. For most sectors, directly using electricity- for instance, in battery electric cars (BEV) or heat pumps- makes more economic sense.

In fact, new hydrogen-based fuels could keep combustion technology alive longer, which in turn would ensure continued dependence on fossil fuels and thus further greenhouse gas emissions and endanger the climate targets.

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But the investments being channeled towards green hydrogen in the middle east, much like the high interest and focus in that other major energy exporter, Australia (as the largest exporter of coal) shows that energy exporters see in green hydrogen, and opportunity to redeploy their oil or coal legacy, as it were. It helps of course that for the oil industry in particular, producing green hydrogen can mean repurposing  existing infra to produce methanol and green hydrogen, as some pilot projects are already doing.