By Hashem Osseiran, DUBAI
UAE
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 percent 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.
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.”
Most hydrogen is produced from
polluting fossil fuels, but green hydrogen is extracted from water using
renewable energy such as wind, solar and hydropower.
While fossil fuels create
harmful greenhouse gases when they burn, hydrogen emits only water vapour. It
is touted for potential use in high-polluting industries such as transport,
shipping and steel.
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 $8.4-billion 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.
“Hydrogen will be a critical
fuel for the energy transition,” said Hanan Balalaa, a senior official at the
UAE’s oil firm ADNOC, calling it a “natural extension” for the company.
“We believe hydrogen and its
carrier fuels have great potential as new, low carbon fuels, that the UAE is
well placed to capitalise” on, Balalaa told AFP.
But it is Oman, which lags
Saudi Arabia and the UAE in fossil fuel production, that looks poised to lead
the Gulf’s clean hydrogen race.
The sultanate is on track to
become the sixth-largest exporter globally and the biggest in the Middle East
by the end of the decade, the International Energy Agency said in a June
report.
Oman aims to produce at least
one million tonnes of green hydrogen a year by 2030, and up to 8.5 million
tonnes by 2050, “which would be greater than total hydrogen demand in Europe
today”, the IEA said.
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.
By 2050, North Africa and
Australia are projected to have the greatest potential, although Gulf states
will remain “export leaders”, the company said in a June report.
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.
“It will take years of trial
and error for green hydrogen to become a commercially traded commodity,” the expert
said, adding that it “can be the new fuel of the future” once the technology
matures and costs fall.
Demand for hydrogen also
remains unclear.
But Gulf states are long-time
energy suppliers of import-dependent Asian countries such as Japan and South Korea
that plan to incorporate it in their decarbonisation plans.
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 told AFP.
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