The additional delay announced in early May to the long-promised FID on Egypt’s flagship green hydrogen project at Ain Sokhna is symptomatic of the loss of domestic and international momentum behind the fledgling industry.

However, in keeping with the global consensus, Cairo and its aspiring producers still believe a dramatic take-off in demand is only a matter of time—with a French government-affiliated firm recently reaffirming commitment to a multibillion-dollar scheme on the Red Sea coast in the presence of the two countries’ presidents and a giant army-led project in the South Sinai formally unveiled to investors.

The estimated $500m, 100MW green hydrogen and ammonia plant planned by Norway’s Scatec at in the Suez Canal Economic Zone (SCZONE) is relatively small compared with many of the nearly two-dozen projects provisionally outlined in memorandums of understanding (MOU) over the past five years. However, its unique combination of advantages makes its progress a bellwether for that of the wider sector. It was one of the first to be announced, in late 2021, and to have its MOU replaced by a framework agreement—implying more detailed feasibility studies and technical planning. FID was originally planned for 2022.

H2 2025 – Expected timeframe for FID on Ain Sokhna project

The Egyptian state (via the Sovereign Fund of Egypt) and, indirectly, the UAE (through Abu Dhabi government-affiliated Fertiglobe) are co-investors in the Ain Sokhna project. It received an $80m concessionary loan from the European Bank for Reconstruction and Development in 2022 and in October obtained a €30m ($34m) grant from Berlin’s PtX Development Fund.

Most crucially, in July it secured an elusive offtake commitment to provide Fertiglobe with the green ammonia required to fulfil a landmark supply contract (which at its upper end would absorb roughly all of the plant’s planned 74,000t/yr output) awarded to the firm that month by H2Global. The latter is a German government vehicle conducting a ‘double-auction’ procurement process designed to surmount the key obstacle dogging schemes in Egypt and worldwide: the lack of demand and price certainty for either producers or consumers.

Scatec said in its quarterly earnings presentation that FID, previously targeted for the end of June, was now anticipated in H2 2025, with first production in 2027—the year Fertiglobe is due to begin its European deliveries (starting at 19,500t/yr and rising to 40,000t/yr in 2028–33, with options for the buyer to take an additional 17,500–33,000 t/yr). The Ain Sokhna project is still expected to proceed and to be the first to receive investment sanction, but its interminable delays are emblematic of the problems facing hydrogen developments. None of the other major schemes appears close to reaching this stage.

Challenges and opportunities

The goal enshrined in Cairo’s National Low-Carbon Hydrogen Strategy—published several years later than promised in August—to produce 1.5mt/yr of green hydrogen by 2030 appears patently unrealistic.

Nonetheless, the North African country’s advantages as a production hub—plentiful sun and wind, lots of empty land, proximity to the key European market, a position on key international trade routes, and a commitment from the government (for which green hydrogen is central to its economic development strategy)—make its ambitions achievable over the longer term. This means investors remain on board—albeit unready as-yet to make major capital commitments.

Scatec, which dropped a proposed project in Oman to focus on Egypt, cites reasons for its selection as location and the presence of a large existing gas-based ammonia industry (and associated export and storage facilities), which can be incrementally converted to run on renewables-based hydrogen

Cairo’s sectoral strategy sees an increasing proportion of total production being absorbed domestically, from 0.7% in 2030 to just over a third a decade later, mainly to decarbonise the country’s fertiliser industry as carbon border taxes take hold in key export markets.

Paris joined Berlin in signalling confidence in Egypt’s green hydrogen potential in April, albeit motivated in the short term chiefly by the perceived need to show support for Cairo in the face of intense regional political pressures.

1.5mt/yr – 2030 green hydrogen production goal

On a state visit to the country, President Emmanuel Macron witnessed the signature of a new ‘co-operation agreement’ on a project first unveiled in 2022 for French utility EDF to develop a €7b green hydrogen project at Ras Shuqair, further south on the Gulf of Suez than most of the proposed schemes, in a joint venture with the UAE’s ZeroWaste. According to an Egyptian government statement, the first of three phases, producing 300,000t/yr of green ammonia, is scheduled for startup in 2029 and will require investment of around €2b. Total derivatives production is slated to reach 1mt/yr.

In March, the government also released details of a mammoth project that has been quietly under discussion since 2023 for Renergy Group Partners (a collaboration between the National Organisation of Military Production, local firm Green Tech and Bahrain-based Oak Group Holdings) to develop an estimated $17b green hydrogen plant at El Tor in the southwest of the Sinai Peninsula—a remote and economically undeveloped region otherwise untouched by the hydrogen drive.

Recently listed as an ‘investment opportunity’ by the General Authority for Investment and Free Zones, the scheme envisages the installation of 15GW of solar capacity to produce 165,000t/yr of hydrogen by 2030, 320,000t/yr by 2033 and 400,000t/yr on full completion two years later. Sun-rich desert land bordering the Gulf of Suez offers the same natural and export advantages that have attracted investors to the opposite bank. However, the involvement of the army, the economic dominance of which has been bolstered under President Abdel Fateh el-Sisi, in a historically unstable region where overt military activity is strictly proscribed by the country’s peace treaty with Israel, will naturally arouse some suspicion around Cairo’s motives, while potential insecurity could deter foreign investors.

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Author: Clare Dunkley