Gulf Arab States Embrace Green Hydrogen in Pursuit of Energy Transition

After riding the wave of fossil-fuel prosperity for decades, Gulf Arab states are setting their sights on “green” hydrogen as a means to transition their economies and combat the climate crisis in a single stride.

Oil giants such as Saudi Arabia, the United Arab Emirates (UAE), and Oman are pouring substantial investments into this environmentally friendly fuel, searching for alternative revenue sources beyond crude oil and natural gas.

Green hydrogen, generated through the electrolysis of water using renewable energy, offers a promising solution to several challenges: it’s low in pollutants and versatile in applications, which could make it both profitable and planet-saving.

However, while green hydrogen makes up less than 1% of the total hydrogen production at present, it’s not yet economically viable and requires a significant increase in renewable energy sources, a process that could span several years.

Nonetheless, Gulf states recognize an opportunity to maintain their status as energy market powerhouses as oil revenues decline.

Karim Elgendy, an associate fellow at the Chatham House think tank, notes, “Gulf states aim to lead the global hydrogen market… allowing them to continue their influence as fossil fuel demand declines.”

Green hydrogen is produced using renewable energy sources like wind, solar, and hydropower, distinguishing it from most hydrogen derived from fossil fuels. While burning fossil fuels releases harmful greenhouse gases, hydrogen combustion only produces water vapor. This makes it a promising candidate for industries like transportation, shipping, and steel that are typically high-polluting.

Leading the Charge

Saudi Arabia, leveraging its considerable investment capital, is constructing the world’s largest green hydrogen plant in NEOM, a $500 billion futuristic megacity on the Red Sea. This $8.4 billion project aims to integrate solar and wind energy to produce up to 600 tonnes of green hydrogen daily by 2026.

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Similarly, the UAE, set to host the United Nations’ COP28 climate conference, approved a hydrogen strategy in July to become one of the top 10 hydrogen producers by 2031.

Oman, although trailing Saudi Arabia and the UAE in fossil fuel production, is positioning itself to lead the Gulf’s clean hydrogen race. The sultanate is on track to become the Middle East’s largest exporter and the world’s sixth-largest by the end of the decade, according to the International Energy Agency.

Oman targets producing at least one million tonnes of green hydrogen annually by 2030, and potentially 8.5 million tonnes by 2050, a volume surpassing Europe’s current hydrogen demand, the IEA stated.

Hurdles and Hopes

Despite the enthusiasm for green hydrogen, Gulf countries have not curtailed their expansion in oil and gas sectors. Experts predict it might take years before green hydrogen production in these countries can compete cost-wise with fossil fuel-based alternatives.

While renewable energy costs have dropped due to technological advancements, producing green hydrogen profitably remains a challenge. Experts suggest that Gulf nations will continue prioritizing hydrocarbon sales as long as possible.

Aisha al-Sarihi, a research fellow at the National University of Singapore’s Middle East Institute, anticipates a period of trial and error before green hydrogen becomes a commercially viable commodity. Yet, once the technology matures and costs decline, it could herald a new era of fuel.

Although demand for hydrogen remains uncertain, Gulf states hold an advantage as established energy suppliers to import-dependent Asian nations like Japan and South Korea that plan to incorporate hydrogen in their decarbonization strategies.

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Despite the potential, challenges such as inadequate infrastructure and substantial investments in modifications persist.

In the end, while the road to green hydrogen’s dominance is marked with hurdles, Gulf Arab states are determined to secure their roles as leaders in the evolving global energy landscape.

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