Egypt’s fledgling green hydrogen industry witnessed a quietly seminal moment at the turn of the year, as the country’s parliament nodded through a package of financial and regulatory incentives for prospective producers.

The House of Representatives’ on passed a seven-article bill on 2 January laying out in detail the tax and non-tax incentives to be offered to producers of green hydrogen and its derivatives.

Its provisions include 33–55% tax relief on project revenues and exemptions from VAT on inputs and exports, customs duties on imports and numerous government fees.

The law also enshrines a single approval process for project-related imports and exports—promising developers the chance to sidestep Egypt’s famously labyrinthine bureaucracy—and permits foreign labour to comprise up to 30% of the workforce.

To qualify, production is required to commence within five years of signature of the final project agreements, 70% of financing must come from abroad, and 20% of materials should be sourced domestically. Technology transfer and local training commitments will also be mandatory.

The heavily trailed legislation should help galvanise the schemes announced thus far and tempt other developers to choose Egypt when assessing the offerings of the myriad states jostling for a role in the green hydrogen space.

Firming up

In the meantime, a growing number of memorandums of understanding (MOUs) have been firmed up into framework agreements.

In December, Saudi Arabia’s state-affiliated clean energy powerhouse, Acwa Power, did so on an estimated $4b project intended to produce 600,000t/yr of green ammonia in the first phase, ultimately rising to 2mt/yr. Similar to other putative investors, the company was heavily involved in Cairo’s renewables buildout last decade, while the two governments are close political allies. Egypt is one of only four international destinations on the hydrogen radar of the Saudi firm: it broke ground on a proposed plant in Uzbekistan in November and announced plans for production in Indonesia and Jordan during COP28 in December.

33–55% tax – Tax relief

In October, Danish shipping giant Maersk upgraded its MOU of March 2022, provisionally agreeing to invest around $3b through its newly created subsidiary C2X in a green methanol facility, yielding an initial 300,000t/yr.

Northern European companies, deprived domestically of the climatic conditions suited to large-scale green hydrogen production, are prominent in the Egyptian investor rollcall.

Germany’s DAI Infrastruktur has signed an MOU with compatriot Siemens to collaborate on a planned 2mt/yr green ammonia plant at East Port Said, at the Mediterranean end of the Suez Canal—for which the former has secured offtake commitments from UK-based Freepan Holdings and Greece’s Naftomar Shipping and Trading for a combined 50% of the output. Belgium’s DEME and Norway’s Scatec are also provisionally committed to production projects.

China and India

China and India are also circling.  In late October, Beijing-owned Energy China picked Suez for its first international investment—inking a framework agreement for an estimated $6.75b, 1.2mt/yr green ammonia plant.

Meanwhile, India is assuming an increasingly important role in Cairo’s clean energy plans—reflecting and further bolstering deepening political ties, with Egyptian President Fattah el-Sisi and Indian Prime Minister Narendra Modi exchanging visits in 2023.

Haryana-based Acme moved from MOU to framework agreement in June on a planned 2.2mt/yr green ammonia plant at Ain Sokhna on the Red Sea coast, starting with a 100,000t/yr pilot on which construction is scheduled to begin in 2024.

Compatriot Ocior is due to finalise agreements shortly on a planned $4b, 1mt/yr facility, while early mover Renew Power’s plans for an estimated $8b plant producing 220,000t/yr of raw green hydrogen at the Suez Canal Economic Zone reached framework agreement stage in late 2022.

Symbolically, Egypt’s first-ever green ammonia export cargo was dispatched to India—with Emirati/Dutch firm Fertiglobe and partners delivering a shipment to Tuticorin Chemicals and Fertilisers in November.

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Author: Clare Dunkley