Abu Dhabi and Britain sign deal to fuel global hydrogen push

• Adnoc, BP and renewables specialist Masdar announce partnership
• ‘Landmark agreement’ hailed by energy industry commentators
• Companies to explore sustainable aviation fuels too

Adnoc’s deal to develop clean hydrogen with British giant BP and renewable energy firm Masdar is a “landmark agreement” that will accelerate the global transition towards a sustainable future, industry experts have said. 

As part of the partnership announced on Tuesday, Adnoc (Abu Dhabi National Oil Company) and BP have advanced to the design phase of the H2Teesside low-carbon hydrogen plant, the largest blue hydrogen project in the UK. The deal is Adnoc’s first investment in Britain.

The agreement also includes a joint feasibility study for a low-carbon hydrogen project in Abu Dhabi and an expanded deal between the three companies to explore the production of sustainable aviation fuels. This would use solar-to-green hydrogen and municipal waste gasification, leveraging the capabilities of the Abu Dhabi Waste Management Centre, Tadweer, and Etihad Airways.

Clean power 

“Hydrogen could be the missing link in the global energy transition,” said a spokesperson for the International Renewable Energy Agency.

“Green hydrogen can help to decarbonise ‘hard-to-abate’ sectors such as heavy industry and transport. Hydrogen can also provide fossil-fuel exporters with an attractive way to diversify their economies by developing new export industries and leveraging established energy trade relations.”

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“Countries with an abundance of low-cost renewable power are almost predestined to become the producers of clean hydrogen and can expect to see a significant increase in bilateral trade deals,” the spokesperson added.

The hydrogen deal comes just a week after Adnoc said it had discovered 650 million barrels of crude at three new onshore sites.  

Sudharsan Sarathy, MENA lead analyst for oil and shipping research at Refinitiv, said Adnoc’s recent announcements suggested a focus on maintaining current supply while also looking to the future.

“Instead of looking at it as a dichotomy – on one side they seem to be investing in conventional resources and on the other side they’re looking at partnerships for new energy – I see it as a pragmatic approach and as ensuring a foothold for the future,” he said. 

“The world is going to require conventional energy sources like oil and natural gas while we also look towards to the future because, geopolitics aside, what we’re currently experiencing – the high levels of price volatility – [is] also partly due to the fact that there’s very little spare capacity of oil production in the world right now.”

This view was reflected by Saudi Aramco’s president and CEO, Amin Nasser, who said on Tuesday that the company could not expand production capacity any faster than promised, despite calls to do so.

Nasser told the World Economic Forum in Davos that the world is facing “a major oil supply crunch” and running with “less than 2 percent” of spare capacity, while most companies are afraid to invest in the sector as they face green energy pressures.

Sarathy said: “It is important for an oil company, especially a national oil company, to keep adding to its resources because there is a demand for these resources.

“BP has already shown an inclination to move away from conventional fossil fuels to look at new energy. Adnoc is a market leader and has been one of the pioneers in national oil companies.

“While other national oil companies have generally been conservative [and] focused only on fossil fuels, Adnoc has understood the importance of having a pivot and focused on new energy initiatives.”

Sarathy added that the Adnoc deal is not “just about hydrogen” but also the UAE’s potential to become a leader in sustainable aviation fuel.

Challenging hydrogen economics

Ruchir Punjabi, co-founder of Distributed Energy and renewables.org, believes industry costs need to come down for clean hydrogen to be adopted widely.

“Ideally, a decarbonised form of hydrogen that is economically feasible is fantastic for the world – but the economics are a challenge,” he said. 

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“This is an important potential source of energy for the future. They are investing in this space early to get a handle on different ways we can make the economics viable [and] to make this work meaningfully for the world,” Punjabi said.

“There is a wider realisation that energy around the world requires diversification. Our dependence on fossil fuels, although has fuelled our economic growth until now, is not sustainable long term.”