Hydrogen in the Gulf

Hydrogen in the Gulf

GCC countries use large quantities of ‘grey’ hydrogen based on natural gas, about 8.4 Mt/year, or ~7% of the world total. Some of this may be suitable for retrofitting with carbon capture, use and storage (CCUS). Most hydrogen units exist as part of refineries, steel factories and petrochemical facilities. Gas-to-Liquids (GTL) represents an estimated 39% of H2 consumption in the region, followed by oil refining (27%), ammonia production (21%), methanol production (9%) and steel manufacturing (4%). • The GCC’s ample low-cost land, low cost of capital, existing industrial capacity, excellent solar and (in places) wind resources, and geographical proximity to growth markets sets it in an excellent position to become a green hydrogen producer. Similarly its low-cost natural gas and ease of carbon capture, use and storage (CCUS) allow it to produce cost-competitive blue hydrogen. • Currently, hydrogen production is not high on the agenda of oil and gas companies1 in the region, but is rather the focus of utilities, power plant developers and industries.

There is one advanced large-scale green hydrogen production project in the GCC, the US$5 billion, 237 000 tonne/year Neom Helios project in NW Saudi Arabia developed by Acwa Power and Air Products. • Current costs of hydrogen production vary depending on the technology and region, which is projected to change in the long run. ‘Green’ hydrogen could become cheaper than ‘blue’ hydrogen as technology improves and carbon pricing is increasingly adopted. Green hydrogen costs are expected to fall from US$ 3.5-7.5/kg in 2020 to US$ 1.6-2.2/kg by 2030. • Decarbonisation policies, particularly in Europe, pose a risk to the GCC’s exports of hydrocarbons and energy-intensive materials. Hydrogen could be exported directly, and/or GCC states could export decarbonised materials made with blue or green hydrogen, such as ammonia, steel, glass, and fertilizers. • The EU’s potential carbon border tax could cut the profits from exports of oil, steel, and wood pulp by 10-65%, impacting both EU and non-EU producers of goods. GCC countries are considered amongst the most exposed and least resilient to an EU carbon pricing scheme.

This could encourage increased production of H2-derived materials to reduce the carbon footprint of energyintensive materials exported to Europe. • Global demand for green hydrogen is expected to grow rapidly in the medium term to 530 Mt, displacing 10.4 billion barrels of oil equivalent by 2050 or 37% of 2020’s global oil production. This should urge Gulf countries to target low-carbon export products.

Hydrogen for the Middle East