The race is on to unlock North Africa’s vast potential as a low-cost green hydrogen supplier. The latest big hitter to enter the fray is BP. The London-based oil and gas major has agreed to take on the role of main developer and operator of a potential large-scale project in Egypt, as part of a consortium comprising UAE renewables firm Masdar, Egypt’s Hassan Allam Utilities and Masdar joint venture Infinity Power.

The consortium has signed a framework agreement with the Egyptian government to start feasibility studies.

BP’s decision to join the consortium makes a lot of sense, given the company’s existing footprint in Egypt, where it has invested about $35b over the last 60 years. Together with its partners, BP currently produces around 70% of Egypt’s gas. 

However, developing green hydrogen production at scale in Egypt and elsewhere in Africa is a risky business, despite the continent’s massive renewable power potential. Sharing that risk with the likes of Masdar, one of the most ambitious green developers around, looks like a shrewd move at this stage. 

BP’s commentary around the agreement does not, however, suggest a big-ticket investment is imminent: “Hydrogen has a role to play in the future of global energy. We look forward to working with our partners to try to unlock hydrogen’s potential in Egypt’s energy story,” said Felipe Arbelaez, BP’s senior vice-president for hydrogen and CCS.

“We look forward to working with our partners to try to unlock hydrogen’s potential in Egypt’s energy story” Arbelaez, BP

Arbelaez’s cautious tone is understandable, given the state of play in Egypt’s nascent hydrogen sector. Projects notionally worth more than $80b have been outlined in memorandums of understanding, as international developers eye the market potential of production facilities sited along the banks of the Nile. But very little progress towards FID and construction is evident. Offtakers remain reluctant to sign up, while funding costs have risen because of Egypt’s high levels of political and economic risk and associated junk credit ratings.

Risks aside, the fundamentals are promising. Egyptian green hydrogen is not a pure export play, as the potential for local demand is significant. The country is the world’s sixth-largest exporter of ammonia-based fertilisers, Africa’s leading steel manufacturer, and produces sizeable volumes of aluminium, chemicals and refined fuels. And the EU’s carbon border adjustment mechanism has upped the pressure on these exporting industries to decarbonise. 

‘Offre Maroc’

While the Egyptian government is moving at pace to secure investment, Morocco looks to have edged ahead in the African green hydrogen race. It is widely touted as a top-tier exporter—alongside Australia, Norway and the Middle East—and European governments are keen to lock it in as a future supplier of cheap green molecules

Earlier this year, the Moroccan government set out its “Offre Maroc”—a bold new strategy designed to reboot its hydrogen policy in line with rapidly growing interest from international investors. The strategy includes the designation of 1m hectares of state-owned land for green hydrogen projects. The government claims to have received interest from almost 100 prospective investors and aims to sign the first land allocation contracts by the end of September.

At the government level, Morocco is very high on Germany’s wish list of potential suppliers. In late June, it agreed to form a climate and energy alliance with Morocco to support renewable energy expansion and hydrogen production, the latest move in an ongoing charm offensive launched in the wake of Europe’s Russian gas import crisis.

“Morocco has the best conditions for the energy transition and the production of green hydrogen. Germany wants to import hydrogen,” said German Development Minister Svenja Schulze, who signed the alliance declaration with Moroccan Foreign Minister Nasser Bourita in Berlin.

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Author: Stuart Penson