Oman takes green hydrogen gamble

August 14, 2023, 11:07 AM

green hydrogen oman — Oman is dedicating an area the size of Slovakia to solar power projects to produce green hydrogen

Solar projects to produce gas from renewables
Hydrom signs $20bn contract with BP and Shell
Other Gulf nations investing in pink and blue hydrogen

Sometimes it takes a country. Oman is dedicating an area the size of Slovakia to solar power projects to produce green hydrogen – gas produced entirely from renewable sources.

On June 1 Salim bin Nasser Al Aufi, minister of energy and minerals, signed $20 billion of contracts with partners including BP, Shell and the newly formed Hydrogen Oman (Hydrom) to produce 500,000 tonnes of green hydrogen each year.

By July 28 Hydrom announced that “solidified commitments” to initiatives in the sultanate had risen to $30 billion.

Production targets are 1 million tonnes by 2030, 3.75 million tonnes by 2040 and 8.5 million tonnes by 2050. This should make the sultanate the world’s sixth largest exporter of hydrogen by 2030.

By 2040, those exports are projected to be worth 80 percent of Oman’s current exports of liquefied natural gas (LNG), according to the International Energy Agency.

By 2050 they may be worth twice as much as the sultanate’s current overseas LNG sales.

Yet hydrogen is not without challenges. Technical issues limit long-distance transportation of the gas, while regulations and international markets are also still being worked out.

The newly formed Hydrogen Oman signs its first deals — Hydrom signs its first deals (left). Oman has set bold targets to develop green hydrogen facilities like this plant in Oberhausen, Germany (right)

Architecture, Building, Factory — Hydrom signs its first deals (left). Oman has set bold targets to develop green hydrogen facilities like this plant in Oberhausen, Germany (right)

“There’s a lot to do before hydrogen will be up and running and delivering,” Charles Dolphin, a partner in Muscat law firm CMS, told AGBI.

This uncertainty is reflected in the wide range of approaches that have been taken to the gas in the Gulf.

Other Gulf nations taking different path

While Oman is focusing on green, the UAE is supporting blue, pink and green hydrogen (see below).

Saudi Arabia has taken a similar approach. Both are also investing to develop domestic industrial uses of hydrogen – whatever colour – to produce commodities such as green steel, mitigating the challenge of exporting the gas.

Qatar is largely outsourcing hydrogen production, continuing to ship its LNG to destinations where – if the off-taker desires – it can be used to produce blue hydrogen.

The hydrogen rainbow

Green hydrogen is produced on a carbon-neutral basis through water electrolysis.
Turquoise hydrogen is created when natural gas is broken down into hydrogen and solid carbon with the help of methane pyrolysis.
Blue hydrogen is generated from the steam reduction of natural gas.
Grey hydrogen is obtained by steam reforming fossil fuels such as natural gas or coal.
Sometimes other colours are ascribed to hydrogen, based on how it is produced. For red, pink and violet hydrogen, the electrolysers are driven by nuclear power.
Yellow hydrogen is hydrogen produced from a mixture of renewable energies and fossil fuels.
White hydrogen is a waste product of other chemical processes, while the use of coal as a fuel produces brown hydrogen.

Bahrain has decided that its combination of depleted wells and small land area make it more suited to carbon capture, storage and utilisation than hydrogen.

Kuwait, meanwhile, has yet to announce a domestic hydrogen strategy, although it has invested in schemes abroad. EnerTech Holding, a Kuwaiti state-owned company, is a partner in one of the new Omani projects.

Oman is also pursuing its own path when it comes to industry organisation.

The sultanate has offered blocks of land on which companies can build renewable energy projects. The Omani state – via Hydrom – will also hold a stake in those schemes.

“Other Gulf states are taking a more private sector approach,” said Dolphin. “The UAE and Saudi Arabia aren’t seeing so much government involvement, except for some gearing up of renewable energy projects to supply the electrolysers making the hydrogen.”

An electrolyser unit at a proof-of-concept green hydrogen production facility in the Western Cape region of South Africa

Oman’s decision to go for green is partly explained by the fact that it has some of the world’s leading renewable energy resources, according to S&P.

The sultanate enjoys high irradiance – the power per unit area received from the sun – a good wind profile and a strategic location, according to global energy transition reporter James Burgess.

Combined with large amounts of available and unused land, it is therefore perfect for green hydrogen production.

The relatively high price of the gas compared to the huge quantities of cheap renewable energy that are set to become available – plus Oman’s relatively small population and economy – means the bulk of the hydrogen generated will be for export.

This means getting to grips with the problem of transportation. Converting it into hydrogen-heavy ammonia for shipping on tankers is one possible solution. It is then converted back into hydrogen at its destination.

Yet, “while ammonia is definitely seen as the vector for transport at the moment, there are conversion losses at every step of this process,” said Burgess.

Another challenge is market development. Hydrogen is currently a niche gas, traded and used in small quantities. Scaling it up to an industry the size of the LNG market is a major task.

Potential export markets in Europe and Asia-Pacific are currently developing rules on hydrogen, while independent certification standards are also being developed, but are not yet in place. Germany will be a test case for these, as it has recently sent out specifications to suppliers for ammonia produced from green hydrogen.

Pricing on a global market scale is also still evolving.

“It could evolve like the early LNG market,” said Burgess. “You might see some surplus hydrogen volumes from the big hubs eventually developing into a spot market.”

Local demand may well be the shape of the industry in the immediate future. Many of the projects being announced – in Oman and elsewhere – also have seven-year timelines, up to 2030.

Dolphin said: “Maybe, by the time they come online, the market will have matured and the project’s time will have come.”