Japanese Prime Minister Fumio Kishida’s state visit to Saudi Arabia in mid-July yielded a pledge to cooperate on hydrogen development, a week after the Kingdom signed a memorandum of understanding (MOU) with France to the same effect.

Such promises have become almost routine when either Crown Prince Mohammed bin Salman, the de facto ruler, or his influential energy minister, Abdulaziz bin Salman, meet international counterparts. It is reflective of the centrality of the nascent sector to Riyadh’s economic diversification plan, but in the case of both Tokyo and Paris—as well as Seoul, with which international cooperation is most-advanced—the rhetoric is giving rise to more-concrete agreements.

11m t/yr – Saudi 2030 blue ammonia production target

On 13 July, shortly after the French and Saudi energy ministers’ met, French power company Engie signed an MOU with Saudi Arabia’s Public Investment Fund (PIF) to assess the feasibility of co-developing a plant producing green hydrogen and its derivatives in the Gulf state. They also agreed to jointly formulate an international marketing strategy to secure offtake agreements. Engie already operates around 7.5GW of mainly gas-fired power capacity in the Kingdom.

The MOU was a bilateral one, but the French firm signed an agreement in 2022 to explore opportunities for joint hydrogen development in the Middle East with South Korean steelmaker Posco—which signed similar deals in July and October 2022 first with PIF-affiliated renewable developer Acwa Power and then with the PIF itself. Engie also owns a 25% stake in a South Korean-led consortium including Posco that won provisional approval in June for an estimated $6.7b green hydrogen project in eastern Oman.

Green ammonia

Like the UAE, Saudi Arabia has so far focused primarily on South Korea and Japan as potential customers for its hydrogen, mainly in the form of green ammonia. The two nations plan to import millions of tonnes of the fuel to enable decarbonisation of local power generation and heavy industry. Bar two symbolic shipments of blue ammonia to Japan in 2020 and in April 2023, collaboration with Seoul has appeared closer. However, days after Kishida’s visit, the PIF signed an MOU with Japanese power company JERA to explore opportunities for the development of green hydrogen and derivatives projects, primarily for export from Saudi Arabia.

Japanese industrial conglomerate Marubeni, which, like Engie, is already a major investor in Saudi power and desalination projects, also signed an MOU with the PIF in March to conduct a feasibility study on a green hydrogen project. Like the Kingdom’s potential South Korean partners, the Tokyo-based firm’s regional production plans have thus far focused on Oman, where a more-advanced legal and regulatory regime exists—with its SalalahH2 consortium signing a commercial agreement with Muscat in March for a 400MW green hydrogen and ammonia facility in the sultanate’s far south.

Notably, all recent Saudi deals with prospective co-producers have concentrated on green hydrogen, but NOC Saudi Aramco continues to insist on its intent to produce 11m t/yr of blue hydrogen by 2030. However, the market for green and blue hydrogen remains challenging. In May, Aramco publicly acknowledged the difficulty of securing long-term offtake commitments. The flagship Neom green project is the exception as US shareholder Air Products has committed to buying the entire output for 30 years for intended supply to the international transport sector. The plant formally entered construction in early July, when the selected contractors were issued with notice to proceed: startup is planned for 2026.

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Author: Clare Dunkley