Saudi Arabia Bets on Green Hydrogen

Saudi Arabia, the world’s largest oil exporter, is hoping to become a leader in green hydrogen in the coming decades.


The Financial Times reports that there are plans to build a multi-billion dollar hydrogen plant on the northwestern coast of Saudi Arabia, as the country bets on becoming the world’s largest producer of the clean energy source.


If the new plant meets its target of producing 650 tons of green hydrogen per day, it will be the largest in the world.


Construction on the large-scale facility at the planned city of Neom on the Red Sea coast has not yet begun, but an official told the Financial Times that production is due to start in 2026.


Saudi Plan


The Financial Times says the Saudi plan to dominate hydrogen production is part of its efforts to diversify its oil- and gas-dependent economy and create jobs.

With about 60 percent, or $149 billion, of Saudi Arabia’s 2021 budget derived from oil, the kingdom needs to diversify its sources of income as global demand for fossil fuels changes.

“We see ourselves as serious players in hydrogen production and we want to increase the size of this market,” Energy Minister HH Prince Abdulaziz bin Salman said at a technology conference. “We are sure we will be the most competitive producer.”

But with Russia and the United Arab Emirates among several countries also vying for a share of the market, some wonder if the Red Sea plant will deliver all that Riyadh hopes for.

Unlike oil, so-called green hydrogen – the most carbon-friendly option that involves water and renewable energy – can be produced anywhere.

Analysts say that if the market takes off as expected – at $600 billion by 2050 – the competition will be fierce.




Alexander Aran, the chief analyst for exploration and production in the Middle East at McKinsey & Company, said: “It is clear that Saudi Arabia is repositioning itself.”

For decades, hydrogen has been welcomed as an alternative to fossil fuels, and it could provide 12 percent of the world’s energy needs by 2050, according to the latest research from the International Renewable Energy Agency.

Hydrogen can be used to power cars, as well as in industry, or even to heat homes and provide power.

“It makes sense for Saudi Arabia to continue with this,” said Kristin Dwan, a senior resident fellow at the Gulf States Institute in Washington.





Green hydrogen, made using renewable electricity to split water, is the most environmentally friendly form. The northwestern coast of Saudi Arabia enjoys year-round sunshine and steady winds that can power solar panels and wind turbines.

Blue hydrogen is made by separating the methane molecule in natural gas and capturing the carbon. Riyadh said it will allocate a gas field for this purpose. Aran said: “Saudi Arabia is betting on blue and green hydrogen.”

The Red Sea hydrogen plant is a joint venture signed in 2020 between US-based Air Products, Saudi Arabia’s ACWA Power and Neom, but the main driver of Saudi Arabia’s green initiatives is the Public Investment Fund, a $500 billion sovereign wealth fund headed by HRH Crown Prince Mohammed bin Salman.


Major Warnings


In addition to the Neom plant, the Public Investment Fund  (PIF) last month signed a memorandum of understanding with two South Korean companies – Samsung and POSCO – to study a hydrogen project targeting exports. Neom also aims to host a factory to build hydrogen fuel cell cars.


In early July, ENGIE and the PIF of Saudi Arabia agreed to work together to develop green hydrogen projects in the Kingdom. The two companies will evaluate the feasibility of co-developing projects for the production of green hydrogen and its derivatives, which could be used for export.

Green hydrogen is produced using renewable energy to split water into hydrogen and oxygen. It is a clean and emissions-free fuel that has the potential to decarbonize a wide range of sectors, including transportation, industry, and power generation.

Saudi Arabia has ambitious plans to develop the green hydrogen sector as part of its efforts to diversify its economy and reduce its reliance on oil. The country has abundant renewable resources, including solar and wind power, that can be used to produce green hydrogen.

The MoU between ENGIE and PIF is a significant step forward for the development of the green hydrogen sector in Saudi Arabia. It is a testament to the commitment of the two companies to working together to decarbonize the global economy.



Neom hydrogen project manager Roland Keppler said the new Saudi project comes at a time when the world is looking for ways to replace fossil fuels. “You cannot decarbonize every industry just by providing it with electricity,” he added.


However, there are still major warnings. Hydrogen not only faces major production challenges, but it is also difficult to store and transport, and it is still expensive.

“The question is the cost,” said Robin Mills, chief executive of Qamar Energy Consulting. “Are customers willing to pay the premium?”


Saudi Arabia has excellent solar and wind resources, available land, and a good location for exporting to Europe, so the fundamentals are good.

“I’m not saying Saudi Arabia doesn’t have the capabilities,” Mills added.

“They now need to prove it.”

In turn, the Saudi energy minister said: “We are the lowest-cost producer when it comes to oil and gas. We are the lowest-cost producer when it comes to electricity from renewable energy.”




The Future of Green Hydrogen


The global market for green hydrogen is still in its early stages, but it is growing rapidly. The cost of producing green hydrogen is coming down, and it is expected to continue to fall in the coming years. There is also a growing demand for green hydrogen from a variety of sectors.

Governments around the world are supporting the development of green hydrogen through policies such as carbon pricing and renewable energy subsidies. This is helping to create a more favorable environment for the growth of the green hydrogen market.

The future of green hydrogen is bright. As the cost of renewable energy continues to fall and the demand for clean fuels grows, green hydrogen is well-positioned to become a major player in the global energy market.

There are a number of challenges that need to be addressed before green hydrogen can reach its full potential. These include:

  • The high cost of producing green hydrogen.
  • The lack of infrastructure for the production, transportation, and storage of green hydrogen.
  • The need for more research and development to improve the efficiency of green hydrogen technologies.

However, these challenges are not insurmountable. As the market for green hydrogen grows, the cost of producing and transporting hydrogen is expected to come down. Governments are also investing in the development of hydrogen infrastructure, which will help to overcome the challenges of transporting and storing hydrogen.



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