Oman’s Ecofriendly Ambitions

Preview story from Breakbulk magazine's January-February 2022 Issue, available Friday, Jan 21

By Simon West

Oman's bid to become a global hub for green hydrogen and green ammonia production could hand breakbulk movers in the Gulf state a steady stream of cargo-carrying opportunities for years to come, with one mega-project in particular whipping up excitement.

The US$30 billion venture, unveiled in May by a consortium comprising state energy company OQ, global green fuels company InterContinental Energy and Kuwaiti clean tech investor EnerTech, would be – by some distance -– the largest renewable fuels production facility in the Middle East.

The group plans to deploy a massive 25 gigawatts, or GW, of renewable capacity – equivalent to thousands of wind turbines and solar panels – across a 6,500-square-kilometer tract of land in the sprawling, southernmost governorates of Al Wusta and Dhofar.

Those facilities would power water desalination and electrolysis plants to produce an estimated 1.8 million tonnes per year of zero-carbon green hydrogen, the consortium said. Production could be utilized locally, shipped abroad or used as feedstock to make up to 10 million tonnes per year of green ammonia for export.

The scale of the project and the hardware required would "support the development of Oman's renewable energy supply chain and expertise," the group said in a filing.

A spokesperson for InterContinental Energy told Breakbulk that construction could begin in 2026, with first-phase operations up and running a year later. Full capacity is expected to be reached by 2037. "Approximately two-thirds (of renewable capacity) will come from wind power and nearly one-third from solar power," the spokesperson said.


Hydrogen in Vogue

Global hydrogen demand is expected to rocket in the coming years, with international business group the Hydrogen Council estimating the market including fuel cell equipment could be worth US$2.5 trillion by 2050.

Most production still derives from energy-intensive industrial processes such as steam methane reforming to make so-called grey hydrogen, or SMR combined with carbon capture and storage to produce more climate-friendly blue hydrogen.

But as governments and industries worldwide amp up their efforts to decarbonize, global developers, with an eye on sectors such as shipping, refining, chemical manufacture and long-distance transportation, are sensing opportunity.

In addition to its Oman project, InterContinental Energy is planning to build two huge green hydrogen and ammonia plants in western Australia, while China is developing what is thought to be the world's largest green fuels initiative. Construction of the first phase comprising 100 GW of wind and solar has already begun, according to clean energy analyst BloombergNEF.

Gniewomir Flis, hydrogen project manager at energy think tank Agora Energiewende, said a pledge by more than 100 countries at the recent COP26 climate talks to cut methane emissions by at least 30 percent by 2030 should give clean hydrogen a further boost.

"There will be more pressure on methane, which means there will be more pressure on blue hydrogen and blue ammonia production. This favors producers of green hydrogen," Flis said.

Blessed with year-round sunshine and the strong winds ideal for developing world-scale solar and wind capacity, and strategically located between key European and Asian markets, oil- producing Gulf states are ready to capitalize on the soaring demand.

In Oman, a national hydrogen alliance consisting of government agencies, oil and gas operators, educational and research institutions and ports has already been set up to develop the nascent industry.

This follows last year's unveiling of Vision 2040, a strategy aimed at diversifying the economy away from fossil fuels towards more sustainable sectors, including renewables. Oman wants non-oil and gas sectors to account for more than 90 percent of total GDP by the end of the two- decade period, up from about 70 percent today.


Building Up Power

Projects in the sultanate are being announced thick and fast. OQ and Belgian contractor DEME Concessions are planning to build a green hydrogen and ammonia facility at the Special Economic Zone at Duqm, or SEZAD, located in Al Wusta.

Dubbed HYPORT Duqm, the first phase of the project will comprise a 250- to 500-megawatt, or MW, hydrogen electrolysis plant powered by wind and solar energy, with start-up slated for 2026. German-based energy firm Uniper was brought onboard in July to provide engineering services and negotiate an exclusive offtake agreement for green ammonia.

Also, in SEZAD, Indian renewables company ACME is expected to begin pre-construction activities on a US$3.5 billion clean fuels production plant following the signing in August of a land reservation agreement with Omani authorities. The facility will use 3 GW of solar and 500 MW of wind power to produce about 900,000 tonnes per year of green ammonia for export.

The plant will be developed in phases, with the first phase likely to be commissioned by the end of 2022, ACME said in an update.

At Salalah, about 500 kilometers south of Duqm in Dhofar governorate, a consortium between OQ, Japan's Marubeni, Germany's Linde and Dubai's Dutco Group is carrying out studies for a green hydrogen and ammonia plant at the Salalah Free Zone, or SFZ. The SalalaH2 project would comprise a 400-MW electrolyzer and would use OQ's existing facilities to make ammonia. The buildout of those projects will demand significant logistics support.

Rajesh Vaidyanathan, general manager at Oman-based Khimji Ramdas Shipping, said his company was one of several local transport specialists capable of shifting the kind of extra- heavy equipment required for giant wind farms, such as ring generators, rotor blades and steel towers.

"Homegrown project logistics forwarders are now right in league with the multinational specialists. Clients in Oman are now spoilt for choice when it comes to the execution of complicated moves," Vaidyanathan said. "The focus on green energy such as hydrogen and wind in Al Wusta will bring in more specialized transport and handling requirements in the near future."


Routes for Receiving Cargo

Breakbulk movers can rely on several deepwater ports capable of receiving project cargo, such as Duqm and Salalah on the Arabian coast and Sohar on the northern coast. According to Vaidyanathan, a previous lack of port infrastructure meant Omani-bound heavy-lift pieces would arrive at terminals in neighboring countries, mainly in the United Arab Emirates.

"Cargo would be discharged onto multi-axle or conventional trailers and often operated by non- Omani entities, and then brought in via one of the road borders into Oman," Vaidyanathan said. "Oman has now developed multiple ports that are equipped to handle the heaviest of cargoes."

State-owned logistics group Asyad, headquartered in capital city Muscat, said expansions and new facilities would give specialist transport firms even more options.

At Sohar Port and Freezone, managed by Sohar Industrial Port Company, a 50:50 joint venture between Asyad and the Port of Rotterdam, feasibility studies are being carried out for an expansion project that could include a new container terminal capable of receiving mega- vessels.

Sohar is Oman's largest port and industrial complex, handling more than 300,000 tonnes of breakbulk cargo in the second quarter of 2021. In August, a deal was signed with Muscat-based Hormuz Marine to provide bunkering services at the port, a move designed to meet rising demand for offshore refueling and speed up global shipping times. A tanker stationed at the port is now capable of providing several grades of marine fuels to ships.

In another development, Asyad announced in November the start of operations at the 250,000 square-meter Khazaen Dry Port at Barka, northern Oman. The sultanate's first integrated inland port is designed to fast-track movement of containers and general cargo and cut storage costs.


Buildout Challenges

Challenges for large-scale green hydrogen and ammonia buildout remain. Hydrogen from renewable sources is still expensive to make, although a report this year by BloombergNEF said production costs should fall by up to 85 percent by 2050, driven mainly by lower prices for solar PV electricity.

Green hydrogen is on course to be more cost-competitive than its blue cousin by the end of this decade, even in countries with cheap supplies of natural gas such as the U.S., the report said.

Another potential sticking point is end-markets. According to Flis, Europe is likely to emerge as one of the largest hydrogen off-takers, but for its industrial sector to remain competitive internationally, it would need to access the cheapest hydrogen – a job best done through pipelines rather than ships.

Saudi Arabia has floated the idea of building a pipeline to transport its own green hydrogen production to Europe, an undertaking that Oman, whose northern border is hundreds of miles further south than Saudi's, would find significantly more challenging.

Saudi's hydrogen strategy includes a 4-GW production facility at NEOM a high-tech business and logistics zone being built on the Red Sea coast. Industrial gas supplier Air Products and Saudi ACWA Power are developing the US$5 billion clean fuels project, with construction slated to begin next year.

"Long term, I would not bank on European demand to come from ship-based imports of hydrogen," Flis said. "But if ammonia becomes the fuel of choice in the global shipping sector, that creates a new, alternative offtake market. A project of that size (in Oman) would be well placed to compete."

Colombia-based Simon West is a freelance journalist specializing in energy and biofuels news and market movements in the Americas.


Photo 1: Khimji Ramdas is capable of moving the extra-heavy equipment required for giant wind farms, such as ring generators, rotor blades and steel towers. CREDIT: KHIMJI RAMDAS

Photo 2: There are plans to build a green hydrogen and ammonia facility at the Special Economic Zone at Duqm. CREDIT: ASYAD

Photo 3: Khazaen Dry Port at Barka, northern Oman, is the sultanate's first integrated inland port designed to fast track movement of containers and general cargo. CREDIT: KHAZAEN, ATKINS