The story of Neom Green Hydrogen Company (NGHC) may be unique but it is also one that should serve as a guide, perhaps a beacon, for other green hydrogen projects. The 2.2GW complex will produce both green hydrogen and ammonia in the planned Neom city in 2026 and will help drive Saudi Arabia’s Vision 2030 sustainable development goals. But rather than be considered as a one-off, the initiative should be seen as a catalyst for growth especially across the Middle East which can funnel oil and gas wealth into other natural resources.

“The Middle East has all of the ingredients needed to make it a key region for green hydrogen development,” said Alec Johnson, a partner in law firm White & Case's project development and finance group based in Riyadh, highlighting the region’s abundant resources for wind and solar which are key inputs for power generation and large amounts of undeveloped land. The Middle East is well-placed for exports, given its proximity to the Suez Canal for European markets and existing shipping lanes to Asian markets.

“There is an enormous amount of capital to be expended in the region given recent sky-high oil prices, both on the equity side with large sovereign wealth funds and other government related entities investing heavily in infrastructure projects, particularly those in non-traditional sectors,” Johnson said.  “Also on the debt side, given the maturity of the banking market here, particularly for projects that can be characterised as green and also the number of state-owned development funds that are active in the infrastructure sector,” he added.

“The reason we have gone at scale is to really drive down that cost, to make it economically viable[…]whilst we may be the first, we do not expect it to be the last,” Edmondson, NGHC

And this all plays out against a supportive policy framework that backs green hydrogen especially in the big oil producers such as Saudi Arabia and the UAE. But there is certainly an opportunity for coordinated government support across the Middle East for green hydrogen in the form of investment incentives or regulatory changes. After all, the region is a hot bed for hydrogen derived from fossil fuels which has been a focus as well.

David Edmondson, CEO of the NGHC told Petroleum Economist about Saudi Arabia's commitment, their desire to be one of the leading energy exporters by 2030, and that some bold commitments around Vision 2030 were a key driver.

“When the three shareholders – Neom, Saudi renewables developer Acwa Power and industrial gases distributor Air Products  – came together, back in 2019, they agreed they wanted to build a world class green hydrogen facility[…] At the time, green hydrogen was not really talked about in the public, but there was a commitment from the chairmen of the three companies,” Edmondson explained. “They believed they could make this happen and they believed that the market would come. And that was fairly visionary at the time,” he added.

The project is likely to produce up to 600t/d of green hydrogen from 110 20MW alkaline electrolysers powered by 4GW of wind and solar. Some 1.2mt/yr of ammonia will eventually be exported.

Edmondson also points out that size really does matter. “The reason we have gone at scale is to really drive down that cost, to make it economically viable,” he said, adding “whilst we may be the first, we do not expect it to be the last.”

The CEO explained that “we have actually opened a lot of doors for other businesses and other companies to look at these investment opportunities” given that with investment it has shown that “this business proposition is absolutely viable and we have proved it with a 30-year offtake”.

Carina Radford, a partner in White & Case’s energy infrastructure and project finance group, points out that the “finance appetite was clearly there” and that while the scale was unique and there was innovation within its commercial structure and operations, it was about rooting it in the familiar and highlighting that the individual parts such as solar and wind farms or ammonia production had experienced players attached who knew the risks.

“We tried to undo some of the scary headline aspects of this and lean into some of the things that the financiers recognised, some of the risk allocations that they have seen across many of these projects before and hold their hand as much as possible through the technical and commercial story,” Radford said.

Edmondson said that “one of the things that made it so compelling was the offtake agreement.” And again, if you look at the shareholders, there is so much synergy between them and so much experience in their fields of expertise, Edmondson underlined.

“The challenge I think other investors have got is bringing a project to financial close. We did that with a 30-year offtake,” Edmondson, NGHC

Edmondson said that Air Products were willing to commit to take all of the product at a price and for a duration that they believed would enable them to supply the market long term. And that was at a time when there really was no market for green hydrogen. Even now there is no real understanding about market pricing on green hydrogen, Edmondson explained.

With a total investment of $8.4b, the project has reached financial close. “The challenge I think other investors have got is bringing a project to financial close. We did that with a 30-year offtake,” said Edmondson, underscoring the great leap that was made.

Clearly the importance is on creating both supply and demand. “So policy and incentives obviously need to be focused both on production but also on the customer side,” Radford said.

“How do you incentivise the uptake of hydrogen as a fuel in various industries and at the same time incentivise people to make some large capex investments in the supply side so that they come together gloriously at one moment, a kind of field of dreams. Kevin Costner moment?” The demand has to be there, was the answer.

Edmondson also talked up the importance of collaboration. “To have reached financial close in the time that we did, considering where we started was huge[…]everyone had to play their part because without that we could have come undone at any moment in time.”

The NGHC will undoubtedly serve as a model for other green hydrogen projects in the region. Some of these projects might look a lot like Neom and the offtake agreement will be key even if they will not be as fully integrated.

What is clear is that Neom will serve as the benchmark for all new green hydrogen projects in the region. 

---

Author: Paul Hickin, <BR>Editor-in-chief