The UAE is fast climbing the competitive list of global green energy centres and is home to some of the planet’s largest and lowest-priced renewable energy projects. But what is the next step?
Establishing a mega-green hydrogen project on home soil would establish the region as a future exporter of clean energy.
The local bunker market for seagoing vessels would also benefit from that as such exported green energy products would be available as bunker fuels. This would help a market that is increasingly referred to as the “new oil” – propelling it even further and faster.
This marries naturally into the evolution of the shipping market: a substantial part of the economy in the UAE thanks to its sizeable ports and worldwide status as a hub.
Shippers and others in the value chain face intensifying pressure to decarbonise operations, most notably via new fuel choices.
For one, the International Maritime Organisation’s GHG strategy aims to reduce total annual greenhouse gas emissions from international shipping by at least half by 2050, compared with 2008.
This is a big undertaking for a large market: shipping enables 90 per cent of global trade. This volume will only climb as the world’s population approaches 10 billion by 2050, coinciding with the finish line for shippers’ environmental targets.
Having Opec’s third-largest oil member proactively pushing itself to the forefront of what is the most abundant element in the universe reinforces the UAE’s national narrative to increase its influence on the global energy stage while bolstering its environmental credentials.
The UAE has said it wants to be a market-leading exporter of hydrogen, and a developed hydrogen-based bunker fuel market coupled with the supporting port infrastructure plays strongly into this ambition.
The timing is certainly right. Many expect hydrogen demand centres – such as Europe, Japan, South Korea and parts of China, the world’s largest energy consumer – to import hydrogen as the emergence of international distribution is driven by production cost differences, according to the Hydrogen Council’s 2021 report.
This stems from a variety of factors, for example, renewables endowment, the availability of natural gas, carbon storage sites, existing infrastructure and available land.
The UAE has already ticked many of these boxes or is actively working on them.
Taking the next step for a mega-hydrogen project would build on the country's impressive groundwork, such as the deal by Mubadala Investment Company, Adnoc and ADQ to create the Abu Dhabi Hydrogen Alliance – and establish the UAE's capital as a leader in low-carbon green and blue hydrogen.
Yes, there are still research, cost, safety and scale implications when it comes to the production and transport of hydrogen-based products.
However, the market is at an embryonic stage, so such hurdles are normal until economies of scale start to tip in investors’ favour.
A strategic location to be considered for large-scale hydrogen-based exports would be the Port of Fujairah – one of the world’s largest bunkering centres that is positioned at the crux of global crossroads.
Fujairah’s ambitious track record suggests it can again push ahead of the crowd to ensure that the infrastructure to support these markets is there.
This includes looking at how to connect the port with the production sites of hydrogen-based renewable energy – such as inland production plants in the UAE.
Companies already established in Fujairah can support the mega-project by becoming major off-takers, helping to propel both domestic and international distribution.
While there is much work to be done, we also know that the UAE, the Port of Fujairah and the bunker fuel market can evolve dramatically in a relatively short amount of time.
Just look at the high compliance levels related to the 0.5 per cent sulphur limit on bunker fuel since January 2020 – a seamless adoption of the biggest shift in shipping markets in a century.
In the early 1900s, business owners questioned the viability of commercially scaling up a new market called oil. And as we know, black gold has truly lived up to its name, transforming the global economy and civilisation on its way.
Why can’t we do that again, but with a cleaner product for a greener 21st century? The UAE has a pioneering approach to energy – now let us leverage it to stay well ahead of the global curve.
Lars Liebig is managing director of Uniper Energy Dubai