The two parties will also be exploring opportunities that will accelerate the energy transition in the kingdom in line with the objectives of Saudi Arabia’s Vision 2030 initiative, Engie said on Thursday.
The deal allows the PIF and Engie to evaluate the feasibility of co-development opportunities.
The two parties will also jointly formulate a strategy to “best approach the international market and secure offtake arrangements”, the energy company said.
The deal will “contribute to driving the energy transition in the kingdom and achieving its aspirations and goals in the green hydrogen sector”, said Frederic Claux, managing director for Flexible Generation and Retail, Amea at Engie.
“Our partnership with PIF will contribute to laying robust foundations for the green hydrogen industry, enabling the kingdom to be one of the top exporters of green hydrogen worldwide.”
The initial agreement, signed by Mr Claux and Yazeed Al Humied, Deputy Governor and head of Mena Investments at the PIF, is in line with the kingdom’s efforts to diversify its economy under Riyadh's Vision 2030 transformation agenda.
Saudi Arabia, Opec’s top oil producer, like its hydrocarbon-rich peers in the six-member economic bloc of the GCC, is looking to strengthen its global competitiveness in producing and supplying hydrogen and its derivatives.
The Emirates aims to turn the country into a “leading and reliable producer and supplier of low-carbon hydrogen by 2031“, Suhail Al Mazrouei, Minister of Energy and Infrastructure, said at the launch.
The UAE plans to produce 1.4 million metric tonnes of hydrogen annually by 2031 and increase production to 15 million metric tonnes per year by 2050. It is establishing two hydrogen oases by 2031, each producing clean electricity. The UAE will increase the number of oases to five by 2050, Mr Al Mazrouei said.
In June Oman's Hydrom signed agreements worth $10 billion to develop two new green hydrogen projects with a Posco-Engie consortium and the Hyport Duqm consortium.
The contracts are expected to yield a total production capacity of 250 kilotonnes per annum from more than 6.5 gigawatts of installed renewable energy capacity at the sites, state news agency ONA reported last month.
Hydrogen, which can be produced from renewable energy and natural gas, is expected to become a critical fuel as economies and industries transition to a low-carbon world.
It comes in various forms, including blue, green and grey. Blue and grey hydrogen are produced from natural gas, while green hydrogen is derived from splitting water molecules through electrolysis.
French investment bank Natixis estimates that investment in hydrogen will exceed $300 billion by 2030.