Eight years. This is the extraordinarily tight timetable that some Middle Eastern nations have set to become leading suppliers in a global clean hydrogen market which could be valued at $600bn by 2050. And this surge is almost from a standing start. By 2030, OPEC linchpin Saudi Arabia, the United Arab Emirates (UAE) and fellow oil producer Oman are particularly pushing to build supply to feed the significant demand projections emerging in Asia and Europe (rallied by the latter’s $517bn of hydrogen-related investments by 2050).

Seven projects are underway in the UAE as OPEC’s third biggest producer aims for a 25% share of the global market for clean hydrogen by 2030, while Oman’s capacity for clean hydrogen could reach 1 GW by 2025, 10 GW by 2030 and 30 GW by 2040. Regional hegemon Saudi Arabia has set production targets for 2.9mn t/y of clean hydrogen by 2030 and 4mn t/y by 2035.

‘We see ourselves seriously involved in hydrogen and we want to size up that market. We know for sure that we will be the most competitive producer,’ said Prince Abdulaziz bin Salman, the Kingdom’s Energy Minister in February.

Money is certainly flowing. Up to $44bn of investments to spur a clean hydrogen economy in the Middle East have been announced, with 77% being invested in projects that could be operational by 2030. There is $500bn in the global pipeline over the next eight years too. 

Overall, the transition to green hydrogen could provide $11tn of infrastructure investment opportunities over the next 30 years. All this, plus a competitively priced renewable energy and gas market for green and blue hydrogen, respectively, helped underpin the Middle East’s position as the world’s second cheapest producer of green hydrogen in November last year. 

This is an exceedingly bullish and speedy start for a green energy market not even fully on the region's energy radar several years ago. Comparatively, it took decades for the first commercialised solar photovoltaic (PV) in the 1960s to gain widespread political traction and financial support – and even longer for bold growth targets to follow. 

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New deals have busied news headlines almost weekly as Gulf countries particularly heighten their search for research, funding and import-export alliances. Europe’s import appetite leads the pack, with Germany being the most vocal, but Asia is close behind, notably Japan, South Korea and India. 

To fulfil its side of the bargain, hopeful exporters are ramping up momentum. Saudi Arabia, the planet’s biggest crude exporter, is building one of the world’s biggest green hydrogen projects in its $500bn new futuristic city, Neom. The project will produce 240,000mn t/y of green hydrogen, which will be processed into 1.2mn t/y of ammonia, by early 2026 if the schedule sticks. In January, Saudi Arabia’s Public Investment Fund (PIF) signed an agreement with South Korean steelmaker POSCO and contractor Samsung C&T to develop an export-oriented green hydrogen project in the Kingdom. 

Saudi Arabia also shipped the world’s first shipment of blue ammonia, sending it to Japan in September 2020. This was followed by the UAE’s state-owned Abu Dhabi National Oil Company’s (ADNOC) first such shipment a year later – a nod to the intensifying regional competition between the two.  

‘This is an exceedingly bullish and speedy start for a green energy market not even fully on the region’s energy radar several years ago.’

Equally ambitious, the UAE sees hydrogen as integral to meeting its net zero target by mid-century (Riyadh is aiming for 2060). Japan’s Ministry of Economy, Trade and Industry (METI) struck the first fuel ammonia cooperation deal with ADNOC last year and Tokyo wants to develop its supply chain of blue ammonia possibly in the Middle East by the late 2020s. TAQA, Mubadala and ADNOC are going to be shareholders of Abu Dhabi-based Masdar in a bid to position Masdar as one of the largest clean energy companies globally, with renewable energy capacity of more than 50 GW by 2030. 

This builds on the previous deal by Mubadala, ADNOC and ADQ to form the Abu Dhabi Hydrogen Alliance in January 2021 – a move which made waves in highlighting the UAE’s seriousness. ADNOC is advancing a 1mn t/y blue ammonia production facility in Ruwais, with start-up targeted for 2025. Plus, Masdar and France’s Engie are exploring the co-development of a UAE-based green hydrogen hub, with $5bn to develop projects with a capacity of at least 2 GW by 2030. 

To the east, investments for clean hydrogen in Oman could reach $34bn by 2040 – a very meaningful volume for a nation that lacks the deep pockets of most its Gulf neighbours. The Sultanate is also drawing up plans to build one of the world’s largest green hydrogen plants, with construction of the $21bn project starting in 2028. Also recently, Oman and BP plan to drive significant renewable energy and hydrogen development, while Oman’s strategic green hydrogen project HYPORT Duqm is advancing with energy giant Uniper.

‘I expect any conversations about the future of clean hydrogen in Germany, and indeed Europe, will incorporate the Middle East due to its vast renewable potential and existing business ties in the LNG space. Many steps still need to be taken obviously, notably the harmonisation of renewable and hydrogen product certification and flexibility to aim at our main goal – to decarbonise as much as we can and as quickly as we can,’ highlights John Roper, CEO Middle East at Uniper Global Commodities SE. 

State-owned Qatar Energy (QE) has agreed to work with Shell on blue and green hydrogen projects in the UK. Doha could particularly spearhead blue hydrogen growth, as Qatar is the world’s biggest LNG exporter and home to the world’s third biggest natural gas reserves. But the scale of potential remains theoretical, as the region generally lacks carbon capture, storage and utilisation (CCUS) infrastructure. 

This major hurdle needs greater attention if even one Middle Eastern country is to become a world-leading hydrogen producer and exporter by 2030, especially as construction per CCUS project can take a minimum of three years. Progress has been made; ADNOC’s Al Reyadah became the region’s first CCUS facility and the world’s first to capture CO₂ from steel when it was launched in 2016. But much, much more is needed. 

Meanwhile, Kuwait is examining its role in a hydrogen economy, with the appeal perhaps hastened by the fact it has long strained to reach its 4mn b/d oil production target.

Red flags 

Four Gulf nations made it into the top 40 of the Hydrogen Investability Index in late-2021: Saudi Arabia (17th), the UAE (20th), Oman (25th) and Qatar (38th). While a good start, the rankings do not equal the rhetoric of ambition of some to be world leaders in under a decade. So, boosting investors’ confidence needs more attention. 

‘Positive momentum to finance clean hydrogen is undoubtedly underway, but there is still a long way to go. Some investors, especially those new to environmentally friendly markets, need more confidence to embrace it. Right now, many are dipping their toes in. Greater regulatory certainty and tangible indicators from governments and leading energy organisations in the Middle East will encourage them to fully embrace it – that is what we need to see this year,’ shares Badar Munir Chaudhry, Sector Head of Energy at Dubai-based Mashreq Bank. 

There is also the issue of transport – notably infrastructure and cost. There are 5,000 km of hydrogen transmission pipelines around the world, versus 3mn km for natural gas. And there are 470 hydrogen refuelling stations worldwide, compared with 200,000-plus gasoline and diesel refuelling stations in the US and the EU alone. You get the idea; there is still a very long way to go. 

Gas infrastructure can be repurposed for hydrogen use; Europe aims to do this with 40,000 km of gas pipelines by 2040. But the Middle East does not have a well-established, cross-border pipeline network, it has earmarked many pipelines for its large gas market, and shipping hydrogen remains very expensive. 

Storage is another major question mark, which could grind plans to a halt if it is unresolved as supply swells – echoing the issue in other renewable markets. The Middle East also needs to hugely scale up its electrolyser market to keep pace, with the global market forecast to mushroom 1,000-fold by 2040. Plus, more focus is needed on end users within the region. 

Magnifying the importance of being leading exporters – aimed at inevitably replacing its role as the world’s biggest oil exporting region – risks creating a gap in policy, regulation and preparedness for how the region’s sizeable steel, chemical, aviation and shipping sectors can benefit. 

Some challenges are faced by green hydrogen alone, such as energy losses, with a hefty 35% from producing hydrogen through electrolysis. Additional losses are made when converting hydrogen to other carriers (such as ammonia), transporting hydrogen and using it in fuel cells. The higher the energy loss, the greater the renewable demand on the grid for the same hydrogen result – an imbalance that needs resolving. These are just some of the challenges that lie ahead; many others need significant attention too. 

Against this backdrop, it is tempting to say the greatest risk to the Middle East’s plans is overconfidence – believing it can hit overly-zealous targets squeezed into unrealistic timetables. Equally, recent history shows us that Gulf nations especially can deliver on big promises. With a tailwind of peak oil nearing fast and tough climate pledges, some bold growth ambitions have a chance of ringing true.