Middle East Hopes Hang on Hydrogen

Region’s Green Hydrogen Obsession Here to Stay

By Heba Hashem

The Middle East is perfectly positioned to capitalize on the global shift towards green hydrogen. Find out how your company can capture a piece of this exciting new business!

From Issue 1, 2024 of Breakbulk Magazine.

(6-minute read)

With record-low solar and wind power prices, established energy infrastructure and a strategic location for exports, the Middle East is well positioned to capitalize on the global shift towards clean hydrogen.

These advantages could enable the region to capture a sizable share of the global clean hydrogen demand while helping them to meet their decarbonization goals.

Globally, demand for clean hydrogen could grow to 660 million metric tons annually by 2050, according to research by McKinsey & Company. This capacity could potentially fulfill over 20 percent of global energy needs and help abate 20 percent of human-driven emissions.

Countries across the Middle East have mapped out ambitious agendas to gain a strong foothold in the new green hydrogen economy. The United Arab Emirates, or the UAE, aims to produce 1.4 million tons a year (t/yr) of green and blue hydrogen by 2031 and expects the figure to increase tenfold to 15 million t/ yr by 2050. The country previously said it was eyeing a 25 percent global market share of low-carbon hydrogen by 2030.

“We see the MENA region leading the development of green hydrogen. This is the energy hub of the world. There’s also the infrastructure to process energy molecules, the engineering capabilities, the shipping infrastructure - it’s all available and most of it can be utilized,” Dr. Nikunj Gupta, vice president of hydrogen studies at Abu Dhabi National Oil Company, or ADNOC, said during the Green Hydrogen Summit 2023 in January.

Last year, ADNOC announced it was taking the lead role with a 43 percent stake in Masdar’s green hydrogen business. The Abu Dhabi state-owned renewable energy firm is targeting up to one million tons of green hydrogen production per year by 2030.

Partnerships are key to developing the MENA region’s hydrogen economy, Gupta said. Other factors driving this market include the potential to sequester carbon due to the availability of port space and the potential to store hydrogen in salt caverns, he said.

Regulatory certainty is also essential for business to proceed with green and low-carbon hydrogen investment and Abu Dhabi is moving ahead with a regulatory framework policy. The UAE capital plans to roll out a carbon certification framework for the hydrogen industry in 2024 and plans to apply it to both its production and use of hydrogen, Carlos Travesedo, energy policy adviser and executive director at Abu Dhabi Department of Energy, said to Arabian Gulf Business Insight.

The regulatory authority has been drafting the certification and accompanying licensing schemes since 2022. With this framework, it will prepare the nascent hydrogen sector to become a tangible reality in Abu Dhabi to meet domestic demand and eventually to conquer some of the promising markets beyond the UAE.

Big Ambitions

Like the UAE, Saudi Arabia is targeting green and blue hydrogen production of 2.9 million t/yr by 2030 and 4 million t/ yr by 2035. Oman, too, aims to produce at least 1 million t/yr of renewable hydrogen by 2030, up to 3.75 million t/ yr by 2040 and 8.5 million t/yr by 2050. The country is on track to become the largest exporter of hydrogen in the Middle East by 2030, according to the International Energy Agency.

As for Qatar, there are plans to build the world’s largest blue ammonia plant and bring it online by 2026. The US$1 billion facility would produce up to 1.2 million t/yr of blue ammonia, a fuel that can be shipped and converted into hydrogen by countries looking to reduce their carbon emissions. QatarEnergy’s affiliate, Qatar Fertiliser Company, awarded the EPC contract to a consortium of thyssenkrupp and Consolidated Contractors Company in 2022.

Elsewhere in the region, Egypt aspires to produce 5.8 million t/yr of green hydrogen by 2040, capitalizing on an estimated 72 gigawatts, or GW, of solar and wind electricity, whereas Iraq has signed a deal with TotalEnergies to develop a pilot hydrogen project.

The cost of producing clean hydrogen will be driven by the cost of feedstock and therefore, the cost of renewable energy, which in the MENA region is one of the lowest.

“The Middle East has access to some of the highest availability of renewable energy in the world, which could mean costs are significantly lower than elsewhere. It is also ideally located geographically to supply expected import demand in Europe, South Korea and Japan,” Matthew Hodgkinson, hydrogen analyst at S&P Global Commodity Insights, told Breakbulk.

As of November 2023, close to 50 clean hydrogen projects were being planned in the Middle East, according to S&P Global. Of these, two had broken ground, both in Saudi Arabia: the US$8.4 billion NEOM green hydrogen production facility which is set to be the world’s largest once operational in 2026, and the US$12 billion Jazan IGCC Complex that will produce power, steam and hydrogen.

The gigawatt scale of hydrogen development in the region will require a substantial capacity of renewable power, electrolyzers and compressors, all which are fueling huge project cargo opportunities. In the UAE, Masdar announced in October the country’s first utility scale wind project, comprising four power plants that will together generate a total of 103.5 megawatts.

Electrolyzer Demand Outstrips Supply

Electrolyzers, which are powered by renewable electricity, are a key component of green hydrogen systems. Electrolyzer systems vary in size, but for industrial-scale green hydrogen projects such as those under planning in the Middle East, they will be large-scale, central production facilities that can be tied to renewable electricity production.

Rafael Vicens, head of global projects and industry solutions for the Middle East & Africa at DB Schenker, told Breakbulk that most of these systems will need to be shipped from outside the Middle East.

“Electrolyzers are still not produced locally. They come mostly from Europe. Now China is trying to develop their own electrolyzers. But the market is currently dominated by European electrolyzer manufacturers.

“Electrolyzers [can be] oversized and overweight but it depends on the manufacturer. We cannot standardize electrolyzers because each manufacturer builds them in different dimensions and weight. The challenge with these electrolyzers is that there is more demand than supply. There aren’t even enough electrolyzers for all the green hydrogen projects in the Middle East; there is a waiting list.”

The region’s first solar-driven hydrogen electrolyzer has been deployed at the testing facilities within the Mohammed Bin Rashid Al Maktoum Solar Park in Dubai and was supplied by Siemens Energy. Another German company, thyssenkrupp, is supplying an electrolysis plant with a capacity of more than 2 GW for the NEOM green hydrogen project, the logistics package for which has yet to be awarded.

By 2040, the Middle East and North Africa region’s hydrogen electrolyzer capacity is expected to be the second largest worldwide, accounting for 20 percent, or 59.8 GW of the 300 GW projected installed global capacity, according to data from Norwegian consultancy Rystad Energy.

It remains unclear whether project developers will source electrolyzers from further away markets to try and take advantage of lower costs.

“For the time being, a lot of developers are using more localized original equipment manufacturers, but the emergence of China as an electrolyzer manufacturer may mean project developers seek equipment from further afield,” Hodgkinson said.

At the same time, there hasn’t been a lot of development when it comes to local electrolyzer manufacturing in the Middle East. “The only announcement we’ve seen here is John Cockerill considering opening an electrolyzer factory in the UAE in partnership with ADNOC and Strata,” Hodgkinson said.

Lack of Fleets, Warehouses

While many announcements have been made, most of the region’s clean hydrogen projects are still at an early stage and deals are only expected to start happening from 2027.

DB Schenker has already quoted for clean hydrogen projects in Saudi Arabia, UAE, Oman, Qatar and Iraq. “We are in discussions with the EPCs who are going to quote for the developers, so we’re helping them to quote for their clients,” Vicens said. “From the moment the government announces a project to the time we can start quoting, it can be easily two years.”

Moreover, because hydrogen and wind projects are new territory for most Middle East countries, there are logistical challenges that need to be dealt with.

For example, in Saudi Arabia where NEOM is driving a lot of logistics activity, there is not enough fleet to cope with the demand. “When you come with the equipment, you might not find fleet available for you to move. Or maybe you quoted US$1,000 last year, but now because there is a scarcity in fleet, the price has gone up to US$3,000 so you’re out of the budget. Because there’s not enough fleet in the Saudi market, prices of existing ones are going up,” said Vicens.

Additionally, the Saudi market lacks trucking trailers to transport wind turbine blades, nacelles and other vital components required for the upcoming projects, he said. “What we’re doing as a contingency plan is that, in the event we are awarded, we’re bringing the equipment from outside.”

The lack of warehouses to store inbound cargo is another challenge at NEOM. With limited space at the city’s port, cargo arrivals may end up blocking the port or incurring unanticipated storage fees. “This must be well planned because there aren’t enough warehouses. Usually, it is the logistics providers who build these warehouses and there are also companies specializing in warehousing. We have warehouses in the UAE, Egypt, Saudi Arabia and Qatar and we’re expanding to have them in Oman,” Vicens said.

On the flip side, apart from sensitive equipment and tools, most large components including wind turbine blades and nacelles, as well as hydrogen tanks, steel modules and electrolyzers, can be stored in open yards that are fenced and equipped with security, according to Vicens.

In the UAE, the main challenge with developing large-scale projects is the limited land availability. Dubai, for example, has already expanded all around the coast and can now only expand inland into the desert. “They will reach a point when they won’t be able to do those mega solar projects because they will not have sufficient land. So, I think in the UAE, the solution will be to go offshore and create islands for the wind and solar farms, in the same way they are creating islands for oil and gas extraction,” Vicens said.

Meanwhile, in Iraq, challenges of clean hydrogen development range from damaged power infrastructure to a longstanding electricity crisis. “There are still deep issues to fix in Iraq and that makes us cautious. The country is not stable enough to carry out the developments they want. We’re talking about renewable energies here and there are parts of Basra that still don’t have water or electricity,” Vicens said.

Port Expansions

Across the GCC region, seaports are undergoing major expansions to meet their countries’ future requirements. NEOM for instance has invested more than US$2 billion to date in developing its port and anticipates the first container terminal to be open in 2025. The redevelopment of the port spans terminals, warehouses, rail delivery, infrastructure and a sustainable energy network.

In the UAE, the Port of Fujairah on the Gulf of Oman underwent a US$272 million expansion that was completed in 2021. As the world’s third-biggest bunkering hub and the UAE’s only multipurpose port on the eastern coast, the Port of Fujairah is strategically important and enables the UAE to bypass the Strait of Hormuz.

AD Ports Group’s Fujairah Terminals, which operates the port, handles some of the most complicated shipments. It recently accepted 80-meter-long blades for windmills and delivery of three 528-ton gas turbines. The company has connections to China and is looking at increasing its ties with Asia to enhance cargo traffic.

With the availability of low-cost renewable energy and the development of port infrastructure, the Middle East has the best of both worlds to kickstart a green hydrogen economy.

“The Middle East’s green hydrogen ambitions are very important for the transition and energy independence,” Vicens said. “For me the most exciting aspect will be to see how governments in the region transform their economies to depend on green hydrogen and renewables rather than fossil fuels, because that will be very challenging.”

The challenges of achieving zero-carbon shipping will be the focus of a main stage panel session at Breakbulk Middle East 2024. “Industry Decarbonization: Progress, Challenges and Opportunities”, moderated by Esgian’s Stian Omli, will take place on Monday, 12 February from 15:30-16:15.

Breakbulk Middle East 2024 is happening on 12-13 February at the Dubai World Trade Center.

TOP PHOTO: Mock-up of 27-MW wind farm on Delma Island, Abu Dhabi. CREDIT: Masdar