Gulf states’ quest to seek out ‘new oil’ turns to hydrogen

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Feb 16, 2021

Electricity is poised to turn out to be the lifeblood of the worldwide financial system within the power transition period, underlining the essential significance of electrical energy storage. “Electricity could not be transported over long distances, whereas now, and this is a completely new point, hydrogen, produced from electricity, can be stored and exported,” stated Gerard Mestrallet, honorary chairman of French power group ENGIE and waste and water administration agency SUEZ.

Green hydrogen, a climate-friendly power service obtained by splitting water molecules utilizing electrolysis powered by renewables, is rising as a clear gasoline of the long run to energy transportation and energy-intensive industries resembling metal manufacturing.

For the Arab Gulf states, which have among the highest photo voltaic exposures on this planet, the prospect of exporting massive volumes of renewable electrical energy within the type of hydrogen is a well timed alternative as they try and diversify away from oil and fuel revenues. In the United Arab Emirates (UAE), three state-run entities fashioned the Abu Dhabi Hydrogen Alliance to place the fossil fuel-rich emirate as a serious exporter of blue and inexperienced hydrogen.

“The expansion of the hydrogen market is part of a very large, deep, gigantic movement to transform the world’s energy systems toward green energy sources,” Mestrallet instructed Al-Monitor. Although estimates fluctuate extensively, a European Union report stated analysts predict clear hydrogen might meet 24% of world power demand by 2050.

Yet inexperienced hydrogen stays much more costly than different fuels, and S&P Global Ratings estimated that the climate-friendly power service’s manufacturing prices would wish to “fall by over 50% to $2.0-$2.5/kg” to turn out to be a “viable alternative to conventional fuels.”

Leverage fuel reserves

Identifying different fuels is of the utmost significance for Gulf oil exporters who plan to capitalize on current billion-dollar infrastructures and substantial experience within the power trade to retain their place as international power suppliers. Mestrallet stated the event of hydrogen is “an essential part of the transformation of their energy industry.”

Yet not all hydrogens are environmentally pleasant, and 98% of pure hydrogen manufacturing entails carbon-intensive strategies utilizing pure fuel or coal, HSBC reported. Indeed, gray, brown and black hydrogen manufacturing requires fossil fuels, whereas blue hydrogen is a lesser evil as greenhouse gases emitted through the manufacturing are captured and saved.

The Emirati tripartite alliance can be a car for the Abu Dhabi National Oil Company (ADNOC) to discover inexperienced hydrogen alternatives. But the corporate’s chief government, Sultan Ahmed Al Jaber, additionally acknowledged {that a} “special emphasis” can be positioned on rising current blue hydrogen manufacturing capacities to leverage the emirate’s “significant gas reserves.” The federation of seven emirates is well-positioned to turn out to be “one of the lowest-cost and largest producers of blue hydrogen in the world,” Jaber stated.

The world’s greatest exporter of hydrogen

Such financial alternatives additionally whet the urge for food of Saudi Arabia.

The kingdom plans to construct the world’s largest inexperienced hydrogen plant powered by photo voltaic and wind power in its futuristic megacity NEOM, as a part of a broader ambition to turn out to be the world’s greatest exporter of hydrogen. The challenge is “pivotal” to determine town as “a global leader” in inexperienced hydrogen manufacturing, its chief government officer stated.

But regardless of market alternatives, transporting hydrogen nonetheless presents distinctive and expensive challenges, significantly the necessity for terribly low temperatures. The world’s first-ever liquid hydrogen tanker, the Suiso Frontier, cooled to -253°C, was launched in 2019 in Japan.

The plant in NEOM is scheduled to be onstream in 2025 to supply yearly about 240,000 tons of inexperienced hydrogen and 1.2 million tons of inexperienced hydrogen-based ammonia, an power service simpler to move than gaseous hydrogen. Saudi energy plant developer and operator ACWA Power, which is a part of the $5 billion challenge, declined to remark.

Oil large Saudi Aramco exported the world’s first cargo of blue ammonia in September 2020 to Japan. The island nation plans to slash its dependence on oil, fuel and coal imports to turn out to be a hydrogen-based society and be carbon impartial by 2050.

Desalination vegetation powered by fossil gasoline

Gulf states face steep competitors within the race for international hydrogen management. Australia’s Minister for Energy stated the nation has a “natural competitive advantage” to be “a world leader” in exporting hydrogen. Globally, greater than $150 billion value of inexperienced hydrogen tasks have been introduced within the 9 months previous December 2020.

Mestrallet famous the competitiveness of Gulf international locations’ inexperienced hydrogen productions may also be “penalized by the absence of freshwater resources in large quantities.” Indeed, the six Gulf Cooperation Council member states are ranked among the many world’s 10 most water-stressed international locations in 2040, and the recent water wanted to supply inexperienced hydrogen needs to be equipped by energy-intensive desalination vegetation powered by fossil gasoline.

However, this will change as NEOM introduced in January 2020 a deal to construct the primary “solar dome” desalination plant to depend on photo voltaic power to supply recent water.

Despite prices related to seawater desalination, entry to very low-cost electrical energy is the decisive factor in hydrogen manufacturing, and Gulf states are well-positioned. Abu Dhabi secured in 2020 the world’s lowest tariff for photo voltaic power. Globally, the price of photo voltaic power dropped by 82% within the final decade to turn out to be the lowest-cost electrical energy ever seen.

Fossil gasoline divestment? Not but.

Environmentalists view Gulf states’ ambitions in hydrogen with suspicions. Greenpeace’s Middle East and North Africa senior campaigner Ahmed El Droubi instructed Al-Monitor, “We don’t see these moves as a clear change in approach unless they are implemented simultaneously with a clear strategy of divestment from fossil fuels.”

Indeed, fossil fuels still dominate the world’s energy market as global demand for crude oil amounted to 100 million barrels per day in 2019. The Gulf states, which have some of the lowest production costs globally, are not walking away from fossil fuel production, rather projecting themselves as the last man standing in a decarbonizing world.

Saudi Arabia’s climate actions are deemed “critically insufficient” to restrict international warming beneath 2 levels Celsius (35.6 levels Fahrenheit) this century, in response to the Climate Action Tracker, a scientific evaluation that tracks authorities local weather motion.

In the UAE, massive onshore oil fields were discovered in November 2020, and oil output capacities are expected to increase from 3 million barrels a day in 2016 to 5 million by 2030. “We will not leave any opportunity unturned,” ADNOC’s chief executive told the Financial Times, insisting Emirati oil will still be needed in the energy transition era.

El Droubi emphasized Gulf states’ richnesses extend far beyond having some of the world’s largest oil and gas resources, and include, in particular, “an abundance of renewable energy sources”. Therefore, the Senior Campaigner said sustainable activities “must be at the forefront of government policies”. 

The region, weakened by the economic impacts of the COVID-19 crisis and low oil prices, is likely to choose a middle way, however: maintain the flow of hydrocarbon revenues to sustain short-term financial needs while shaping the future by investing in clean energies. In 2015, the crown prince of Abu Dhabi said, “Early preparations are on to ensure that our resources remain sustainable until the last drop of oil.”