Saudi Arabia has been slower than regional oil rivals the UAE and Oman to set out its hydrogen plans. But when it did unveil its intentions last month, they turned out to be predictably ambitious. Half-measures are anathema to de factor ruler Crown Prince Mohammed bin Salman, at least on paper. Despite talk of diversification, the government has no intention of ceding its pivotal position in the global energy industry—whatever its future form—without a fight.

So it was that Energy Minister Abdelaziz bin Salman, an oil industry veteran better known for his dogged insistence about the world’s continued need for Saudi Arabia's legacy products, took to the stage at the first Saudi Green Initiative forum in late October to declare the Kingdom would become the leading global supplier of blue and green hydrogen—producing and exporting 4mn t/yr by 2030. To put that in perspective, Saudi Arabia exported its first 40t last year and so far has investment commitments for a single project due to yield only around 240,000t/yr, and that at a cost of over $5bn.

Nonetheless, Riyadh is well-placed should it deploy its massive financial resources and energy sector expertise in pursuit of the new goal. With respect to blue hydrogen, state-owned Saudi Aramco has been experimenting with sequestering carbon dioxide for use in enhanced oil recovery at the supergiant Ghawar oilfield for several years. The 40t test cargo of blue ammonia sent to Japan in September last year was the fruit of talks with Tokyo ongoing since at least 2017 on the potential development of hydrogen supply chains,  albeit initiated at a time when neither party could have foreseen the speed with which the fuel would come to monopolise the energy transition conversation.

Riyadh is well-placed should it deploy its massive financial resources and energy sector expertise in pursuit of the new goal

When Aramco embarked two years later on a renewed push to develop its surprisingly scarce reserves of non-associated gas, the focus was on freeing up for sale abroad the millions of barrels of crude burned annually in the country's power plants, and ultimately establishing a gas export capacity, to which end the government approved last year the investment of $110bn over 15 years to extract gas from the 200tn ft³ Jafurah unconventional field in the southeast of the country. However, Abdelaziz bin Salman also revealed last month a new intent to use a portion of the gas production, which is  due to plateau at 2.2bn ft³/d by 2036, to make blue hydrogen. Like Abu Dhabi, which is shaping up to be its main regional competitor in natural gas-based hydrogen, the Kingdom benefits from a vast existing energy infrastructure base and export relationships dating back decades.

Japan, which has the most clear hydrogen plans of the big global energy importers, has become the first major battleground. Tokyo estimates it will need 30mn t/yr of ammonia, equivalent to around 5mn t/yr of hydrogen, to decarbonise its power and shipping sectors by mid-century. In March, following a string of similar tie-ups by fellow parastatal Adnoc, Aramco signed a memorandum of understanding (MoU) with the Asian giant's largest refiner, Eneos, to study the establishment of a hydrogen and ammonia supply chain.

Going green

However, the Kingdom's first major project announcement, made in July last year, was for a green hydrogen plant. The Helios scheme, being developed by government-affiliated Acwa Power and US industrial gases firm Air Products, would produce 650t/d of green hydrogen from 4.3GW of renewable power in the Kingdom’s far northwest.

Saudi Arabia has huge—albeit woefully underdeveloped—renewables potential derived from high solar irradiation throughout the year and vast tracts of unused desert land. Buttressed by support at the highest level in the Saudi state and a full offtake commitment from Air Products—which intends to export the hydrogen produced for use in the transport sector—Helios is due to reach financial close and enter construction by mid-2022 in time for first supplies in early 2026.

Nonetheless, the venture will make barely a dent in the 2030 target. Potentially far greater could be the impact of a collaboration only vaguely outlined so far in an MoU signed in late October between Aramco and Hong Kong-based Intercontinental Energy (ICE) “to develop a green hydrogen and ammonia project in Saudi Arabia”.

4mn t/yr – Saudi Arabia’s 2030 clean hydrogen production goal

No details on scope, timeframe or cost were provided, but ICE's other two planned green hydrogen projects—which call for 26GW and 25GW production hubs in Australia and Oman respectively—give an idea of the scale the partners are presumed to have in mind.

However, the progress of ICE’s existing schemes also induces some caution. ICE’s Australian development has been on the drawing board for seven years with construction yet to start, while the project in east-central Oman is not slated for a FID until 2026.

However, as the international hydrogen market gathers momentum later this decade, the Kingdom can probably count on being a destination of choice for numerous other would-be producers - encouraged by a ruler whose reputation is staked on navigating his oil-bound nation through the energy transition with its wealth and global economic status intact.

---

Author: Clare Dunkley