The Middle East’s crown as the world’s historical epicentre of fossil fuels – notably gas and oil – was hard won through decades of building expertise in infrastructure, trade and talent. Now, in the global push for a greener future, all this knowledge is transferable to the infant market of clean hydrogen.
Fossil fuel stakeholders are keenly aware that their market’s dominance has an end date. There is no doubt that gas, considered the cleanest fossil fuel, is a critical “bridge” between fossil fuels and renewables, a glue within the modern energy basket. But that does not mean that gas players do not need to keep up with the rapidly evolving energy landscape. And for many, this means aiding the world in the supply of blue and green hydrogen – commonly referred collectively to as clean hydrogen. In many ways, it is a safe bet.
Hydrogen can provide the lowest cost decarbonisation solution for more than 20 per cent of final energy demand by 2050, contributing a cumulated reduction of 80 gigatonnes of CO2, according to the Hydrogen Council. What do these numbers boil down to? Simply put, building clean hydrogen economies is integral to reaching the 1.5°C climate scenario by 2050 – certainly no small feat.
So far, the industry is building a solid foundation. More than 520 large-scale projects and 90 gigawatts of electrolyser production capacity have been announced worldwide – equivalent to $160 billion of direct investments, the Hydrogen Council highlights. But there is still a very large mountain to climb: a four-fold increase is required by 2030 to put the world on the trajectory to net zero. And therein lies the pivotal support role of gas and other fossil fuel experts in the 2020s, acting as a guiding hand in what is still relatively uncharted territory.
Announced projects in Saudi Arabia, the UAE and Oman alone are set to produce three million tonnes per year of hydrogen in the 2030s – with Oman's 14 gigawatts Al Wusta and Saudi Arabia's four gigawatts Neom projects among the world's most ambitious to date, details S&P Global Platts. And there will be plenty more to come if the raft of partnerships being signed by the region’s leading fossil fuel companies comes to fruition.
Even when we just look at the UAE, a huge amount of work is under way. For one, the launch of the Abu Dhabi Powerhouse in December speaks volumes about the green intentions of a global gas producer. Taqa, Mubadala and Adnoc will be shareholders of Masdar, creating a global champion in renewables and green hydrogen. Adnoc is also exploring Abu Dhabi’s hydrogen potential with South Korea’s GS Energy, developing a decarbonisation road map for power generation in its downstream and industry operations with GE to include the potential use of hydrogen. It has also signed an agreement with three Japanese companies to explore hydrogen and blue ammonia.
These efforts – and many others by world-leading fossil fuel experts in the Middle East – not only share valuable knowledge for the hydrogen market, but it also highlights the industry’s progressive approach to supporting the ever-diversified energy basket to ensure three key goals are met: energy security, environmental security and economic security. For one, gas companies are not just managing their own market – one of the world’s most influential energy commodities – but they are becoming guardians of a greener future as well.
The clean hydrogen story will fall apart without any supportive regulations and policies. With even more supportive frameworks, it can thrive – a correlation we witnessed in the development of solar power. In this vein, governments worldwide, especially wealthier ones, must help with early temporary subsidies – a vital tool to achieving a competitive market by the early 2030s.
The fossil fuel market can share its errors and lessons learnt in this process, ensuring subsidies in clean hydrogen do not become an overly costly crutch in the long-term. Governments must also work alongside industry to introduce a carbon pricing mechanism – be it carbon taxes, permits or a cap-and-trade scheme – to dramatically spur momentum in green energy, including clean hydrogen.
It is also wise to tread carefully, for the industry and media’s talk of clean hydrogen often gives the impression it is already a fully-fledged, tradeable market. It most certainly is not. There are many building blocks needed to get this market of immense potential off the ground.
One of the first steps is education, ie, understanding that blue hydrogen carries great merit as a stepping stone until green hydrogen achieves greater scale and cost-competitiveness. All those in the value chain – from the media to the off-takers – must have fundamental knowledge in order to craft robust road maps and hasten overall action. Again, gas experts can support this effort.
Adopting an entire view of the supply chain lies at the heart of crafting a globally competitive clean hydrogen economy in the Middle East by the 2030s. This will help stakeholders pin down supply-demand balances much faster and more accurately, which, in turn, will bolster investors’ appetite to support the market.
Mismatched dynamics, where we have supply and no off-takers, acts as a red flag to even the keenest of financiers. Again, this is an area where gas operators can share intel from their decades of experience.
We are facing a global problem. It is not one country’s problem, nor one government’s or one industry’s challenge. It is very simple: without a cultural commitment to collaboration, we will not hit our clean hydrogen targets, and in turn, we will fail to reach our global climate goals.
As an optimist, I believe we can do it – but only if we do it right and we do it now.
Hatem Al Mosa is chief executive of Sharjah National Oil Corporation.
