Saudi Arabia’s flagship Neom green hydrogen project has seen its cost rise from an original estimate of $5bn to $8.5bn, co-developer industrial gases firm Air Products revealed in its Q1 earnings call.

Inflation since 2020 accounts for c.$500mn of this increase, while the other $3bn is spread between additional costs, including project financing and “scope to make the project more self-sufficient and lower operating costs”, the US company says.

The three joint venture participants—Air Products, Saudi government-affiliated Acwa Power and state developer Neom—have opted to shake up the project’s financing structure, and will now fund it with 25pc cash and 75pc non-recourse financing. This takes Air Products’ investment down from $1.7bn to $800mn.

$8.5bn – Estimated development cost

The project has seen significant interest from global financial institutions, with commitments from more than 20 lenders. “Later this month, we expect to complete what we call the dry close, which is the signing of the definitive financing agreement, and we expect the full financial close to be completed a few months later,” says Seifi Ghasemi, CEO of Air Products.

The Neom project earlier this week received an industrial operating licence from the Saudi government. And construction has already started, with 30pc of the project’s engineering complete, Ghasemi says.

Sole offtaker

Air Products is the sole offtaker for the Neom project’s green ammonia under a 30-year contract. “We continue to see significant opportunities to use this green ammonia to bring green hydrogen to consumers around the world,” says Ghasemi.

“The offtake price for this green ammonia remains the same as when we negotiated the original project in the summer of 2020, when we announced the project,” he adds, confirming that financing costs have not changed the agreed offtake price.

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Author: Polly Martin