Hydrogen, in recent years, has been increasingly looked to as a clean fuel with potential to decarbonize hard-to-decarbonize sectors, such as transportation (shipping and aviation) and industry (e.g., steel and chemicals). Such progress would contribute greatly to the ambitious international effort to meet the 2015 Paris Agreement goal of keeping global warming below 1.5 degrees Celsius (above pre-industrial levels) by the end of the century. Scenarios from organizations such as the International Energy Agency, International Renewable Energy Agency, and Hydrogen Council suggest that hydrogen could meet up to 22% of global energy demand and 25% of all oil demand by 2050, another sign that by mid-century fossil fuel assets could be devalued and revenue for fossil fuel exporters like the Gulf Arab states could be reduced. While not major contributors to global greenhouse gas emissions, except as exporters, oil- and gas-producing Gulf Arab states recognize that joining global forces to accelerate the development and deployment of clean fuels, such as hydrogen, is a way to hedge against some global energy transition risks.

The UAE, Oman, and Saudi Arabia Lead the Way on Hydrogen

Production of gray hydrogen, derived from natural gas without carbon capture and storage, is not new in the Gulf Arab states. Produced from hydrocarbon resources, gray hydrogen is used as feedstock in refineries, steel factories, and petrochemical facilities for making ammonia, fertilizer, and methanol as well as for oil refining and steel manufacturing. Only recently have the Gulf states started to develop clean hydrogen – both green (produced from splitting water using electrolysis, with electricity derived from renewables) and blue (produced from gas with carbon capture and storage). The Gulf Arab states are well positioned to produce clean hydrogen given the abundance and low costs of oil and gas resources as well as renewables. As with their development of other renewables, the Gulf Arab states vary in the pace and scale of hydrogen development. The United Arab Emirates, Oman, and Saudi Arabia have been the most active in exploring the development and deployment of clean hydrogen. While Bahrain, Kuwait, and Qatar have shown interest, they are yet to catch up with their neighbors in the hydrogen development race.

United Arab Emirates

The UAE was the first country in the region to produce clean hydrogen, using solar power through its “Green Hydrogen” project in a collaboration between Siemens Energy and the Dubai Electricity and Water Authority. The testing facility, at the Mohammed bin Rashid Al Maktoum Solar Park, was designed to showcase the UAE’s hydrogen potential at EXPO 2020 Dubai. Abu Dhabi’s renewable energy company Masdar, in partnership with Siemens Energy, the Abu Dhabi Department of Energy, Etihad Airways, Lufthansa, Marubeni Corporation, and Khalifa University, is leading a study for another electrolysis facility to produce hydrogen for the transportation industry. The consortium will initially test green hydrogen for road transportation, and it plans to construct a kerosene synthesis plant to convert the majority of the hydrogen into sustainable aviation fuel. The second phase of the program will explore producing hydrogen for maritime fuel. Also, in March 2021, Mubadala Investment Company and Snam signed a memorandum of understanding to collaborate on joint investment and development initiatives on hydrogen. Further, the Abu Dhabi National Oil Company is developing a large-scale low-carbon ammonia production facility in the TA’ZIZ Industrial Chemicals Zone and is exploring opportunities to commercialize this product.

Oman

Since 2020, Oman has announced several large-scale hydrogen-related projects, capitalizing on abundant solar and wind resources and taking advantage of the newly established Duqm port and its free economic zone as an exporting hub. The first initiative to develop a large-scale electrolysis plant in Oman, in the Special Economic Zone at Duqm, was announced in 2020. The green hydrogen project, “Hyport Duqm,” is a joint initiative between Concessions (DEME) of Belgium and Omani state-owned oil and gas company OQ Alternative Energy, in cooperation with the Public Authority for Special Economic Zones and Free Zones. The first phase is slated to be completed in 2026, and upon the full project’s completion, the plant’s production capacity is expected to reach 1 million metric tons per year of green ammonia.

In March 2021, the Oman Company for the Development of the Special Economic Zone at Duqm, or Tatweer, and ACME Group signed a memorandum of understanding to set up a large-scale facility to produce green hydrogen and green ammonia in the Special Economic Zone at Duqm. Using solar and wind energy, the facility will produce 2,400 tons per day of green ammonia. Also, OQ, Marubeni Corporation (a Japanese integrated trading and investment business conglomerate), multinational chemicals giant Linde, and Emirati construction company Dutco announced the “SalalaH2” project in October 2021 utilizing OQ’s existing ammonia plant in Salalah. The project is planned to begin operations in 2023, with a production target of up to 1,000 tons per day of green ammonia, which is easier to store and transport than hydrogen and can be converted into green hydrogen at a later stage. OQ plans to use green ammonia at its existing ammonia plant in Salalah. There is also discussion about the possibility to export green ammonia for uses such as co-firing coal-fired power plants in Asia; providing feedstock for fertilizer plants in Europe; and meeting the decarbonization needs of the global shipping industry.

In May 2021, an international consortium of companies, including OQ, Hong Kong-based renewable hydrogen developer InterContinental Energy, and Kuwait-based energy investor Enertech, announced plans to develop one of the largest hydrogen projects in the region – powered by 25 GW of wind and solar energy. While currently at the feasibility study phase, construction is planned to start in 2028, becoming fully operational by 2038.

Saudi Arabia

In July 2020, Saudi Arabia announced a $5 billion green hydrogen plant, to be powered by renewables and built in the futuristic city of Neom. Jointly owned by Saudi Arabia’s ACWA Power and Air Products, the plant is expected to produce 650 tons of hydrogen by 2025 for exportation. Further, in January, the Ministry of Energy signed eight memorandums of understanding with local authorities to implement pilot projects for sustainable aviation fuel and vehicles and buses that run on hydrogen fuel cells.

Current and Planned Gulf Hydrogen Projects

Project	Country	Date Online	Status	Type of Electricity (for electrolysis projects)	Product	Announced Size
Green hydrogen plant	BHR		Concept		H2	4 MW
Oman green H2 project, phase 1	OMN	2028	Concept	Others/Various	H2	4.7 GW
Oman green H2 project, phase 2	OMN	2038	Concept	Others/Various	H2	14 GW
Hyport@Duqm	OMN	2026	Feasibility study	Others/Various	Various	250-500 MW
Sumitomo Oman	OMN	2023	Feasibility study		H2	0.3-0.4 kt H2/y
Petroleum Development Oman’s solar-paneled car park	OMN		Feasibility study	Solar PV	H2
Amin Solar Renewable Energy Project	OMN		Feasibility study	Solar PV	H2
Port of Duqm NH3 plant	OMN	2023	Feasibility study	Unknown	Ammonia	2400 t NH3/d
SalalaH2 project	OMN	2023	Unknown	Wind and solar	Green Ammonia	400 MW 1,000 t NH3/d
Helios Green Fuels – Neom	SAU	2025	Final investment decision	Others/Various	Various	650t H2/d – 1.2Mt NH3/y
Dewa green hydrogen pilot project	UAE	2021	Implemented	Solar	H2	300 KW
Mubadala/Snam green hydrogen projects	UAE		Feasibility study	Solar	H2	Unknown
DoE/Masdar plus five firms pilot project	UAE	2022	Feasibility study	Solar	H2	1,000 mt/year 20 MW
ADNOC low-carbon ammonia plant	UAE	2025	Under construction	Natural gas	Blue Ammonia	1 mt NH3/yr

Source: IEA and other sources

No Signs of Regional Cooperation

The Gulf Arab states have been implementing national hydrogen strategies, but there has been a lack of regional cooperation. In 2020, Oman announced an attempt to launch a national hydrogen economy strategy, aiming to build a hydrogen-centric economy by 2040 with potential clean hydrogen production of around 1 GW by 2025, 10 GW by 2030, and 30 GW by 2040. And, in August 2021, the Ministry of Energy and Minerals signed an agreement to establish a national alliance for hydrogen consisting of 13 local authorities representing the public and private sectors, including the oil industry, research and academic institutions, and port operators. To oversee all the regulatory aspects of green energy and hydrogen, in March the Ministry of Energy and Minerals established a dedicated department in the ministry. The minister of energy and minerals is also leading a technical committee in efforts to establish a national hydrogen company, Hydrogen Development Oman, dedicated to green hydrogen projects. Energy Development Oman, OQ, the Oman Investment Authority, the Ministry of Commerce, Industry and Investment Promotion, and the Authority for Public Services Regulation are reportedly collaborating in the initiative.

Similarly in the UAE, in January 2021, Mubadala Investment Company, ADNOC, and Abu Dhabi holding company ADQ signed a memorandum of understanding to establish the Abu Dhabi Hydrogen Alliance for collaboration in advancing the country’s hydrogen industry, including the development of the UAE’s national blueprint Hydrogen Leadership Roadmap, which was released in November 2021, aiming to support the domestic hydrogen industry as well as enhance the country’s position in blue and green hydrogen exports, with aspiration to capture 25% of the global low-carbon hydrogen market by 2030.

In Saudi Arabia, the Ministry of Energy has vowed to establish a national strategy for hydrogen. Also, hydrogen production has been an integral part of Saudi Arabia’s technology-focused circular carbon economy, which looks to take advantage of all available clean energy technologies to tackle emissions without giving preference to one technology over another or putting restrictions on specific sources of energy, like fossil fuels. The Ministry of Energy signed a memorandum of understanding with a number of local authorities to demonstrate the viability of hydrogen use in transportation and industry.

In a similar vein, in January 2021, the Kuwait Foundation for the Advancement of Sciences, in collaboration with the Kuwait Petroleum Corporation and its subsidiaries, released the white paper “Towards a Hydrogen Strategy for Kuwait” to help establish a strategy for Kuwait’s domestic hydrogen production and exportation.

International Alliances

Gulf governments have already forged bilateral deals and agreements with governments and companies to build and operate hydrogen infrastructure and facilitate cross-border hydrogen trade. These deals range from feasibility studies to letters of intent, memorandums of understanding, energy partnerships, and even trial shipments. Some involve countries that have an established energy trade relationship. For example, Japan already imports crude oil from Saudi Arabia and has been looking to expand the trade relationship to blue ammonia. In September 2020, Saudi Aramco announced the world’s first shipment of blue ammonia – produced from natural gas with carbon capture and storage in the hydrogen plant in Jubail – to Japan, where it has been used in power stations to produce emissions-free electricity.

However, Gulf states show more variance in their international hydrogen alliances than similarity. Oman, for instance, has bilateral deals with Belgium, Germany, the Netherlands, and the United States. Along with the bilateral trade agreement with Japan, in March 2021 Saudi Arabia and Germany signed a memorandum of understanding aiming to enhance bilateral cooperation on hydrogen. The German Federal Foreign Office set up a dedicated hydrogen diplomacy office linked to its embassy in Riyadh to support dialogue on the geopolitical implications of a global hydrogen market. Also that month, South Korea’s industry minister and Saudi Arabia’s energy minister held a bilateral energy policy dialogue and vowed to expand bilateral cooperation in nuclear power, renewable energy, and hydrogen. The UAE’s ADNOC has partnerships with Japan, Malaysia, and South Korea to explore options for hydrogen trade, and it has already sold four test cargoes of blue ammonia to Japan. The UAE and Germany entered into an energy partnership in 2017 to promote dialogue and research on the transition to renewables and provide a framework for collaboration on individual elements of sustainable energy. In January 2021, the two countries released the study “The Role of Hydrogen for the Energy Transition in the UAE and Germany.” More recently, Masdar and Indian conglomerate firm Reliance Industries have explored opportunities for collaboration in green hydrogen development. Qatar, while investing abroad, has signed an agreement with Shell to partner in blue and green hydrogen projects in the United Kingdom. In the wake of the Russia-Ukraine crisis, on May 20, Qatar and Germany signed a joint declaration of intent to further promote cooperation in liquefied natural gas trade and hydrogen development.

The Way Forward

The Gulf Arab states are well positioned to produce competitive blue and green hydrogen because they are among the world’s lowest-cost producers of oil, natural gas, and renewables. Also, the facilities and resources needed to produce and export hydrogen are well established. Existing industrial ports (e.g., Oman’s Duqm, Salalah, and Sohar; the UAE’s Jebel Ali; and Saudi Arabia’s Jeddah ports) and free economic zones, where energy-intensive clusters are located, including petrochemical industries, steel companies, and refineries, are ideal centers to produce hydrogen because they have access to renewable energy resources, can capitalize on scaling up the use of carbon capture and storage technology to produce hydrogen, and represent locations from which hydrogen can be easily exported. Also, Gulf countries have well-established natural gas grids that can be potentially used for hydrogen transmission. Given the region’s long history and experience with gray hydrogen production, there will be availability and relative ease in transferability of skills from the oil and gas industry.

Yet, blue and green hydrogen production require large-scale investments in carbon capture and storage and other renewable energy technologies, like solar and wind. The scale of and investment in these technologies in the region have increased quickly over the last two decades (the total renewable energy installed capacity increased from 17 megawatts in 2011 to 3,271 MW in 2020), however, capacity remains relatively small, nonetheless. The Gulf Arab states will have to cautiously address institutional, technical, cultural, and market barriers that stand against the expansion of both renewables and carbon capture and storage before being able to fully unlock the hydrogen market.