Opinion Renewable Energy Oman is on a steady path to a hydrogen-powered future The sultanate is off to a roaring start – now it needs to stay on course By Robin Mills July 17, 2024, 11:29 AM Unsplash/Julius Yls Oman's beautiful coastline is a major asset for its green hydrogen ambitions Saudi Arabia has the planned city of Neom, Egypt has the Suez Canal zone, and the UAE has clean energy company Masdar. But it is Oman that has emerged as the region’s surprise front-runner in the hydrogen race. Now the sultanate has to jump a few hurdles to carry its well-constructed plans towards the finishing line. Oman has enviable conditions for production of green (renewable-based) hydrogen: excellent solar and wind resources, open and largely unused land, and a long coastline with ready access to major potential markets. It also has extensive experience in the energy and chemicals sectors. NewsletterGet the Best of AGBI delivered straight to your inbox every week Numerous countries in the region can also boast the same conditions, but Oman stands out as having perhaps the most coordinated plans. Its specialist state company Hydrom has identified six major tracts of land from south to north, covering some 50,000 square kilometres, with potential for 500 gigawatts (GW) of renewable energy or 25 million tonnes per year of hydrogen production. This compares to the EU’s target to import 10 million tonnes of hydrogen by 2030, Japan’s aim to use 3 million tonnes by 2030 and 20 million tonnes by 2050, and South Korea’s plan for over 5 million tonnes by 2040. A study by Germany’s Potsdam Institute for Climate Research in February suggested that Europe would consume 15-54 million tonnes of hydrogen directly by 2050, with additional quantities to make synthetic fuels. Since Oman’s domestic peak demand is estimated at only 8.6GW by 2030, there should be plenty of surplus. By then Oman plans to have 1-1.5 million tonnes of hydrogen production, from 16-20GW of renewables, rising to 8.5 million tonnes by 2050. If it fully realises its potential, then by mid-century it would be a – possibly the – leading global hydrogen exporter. The difficulty of moving hydrogen around means that local use will always be preferable At the end of April Oman awarded its latest two blocks of land dedicated to hydrogen production and its solar and wind powered inputs. One went to a consortium of Japan’s J-Power, France’s EdF and UK startup Yamna, the other to Fortescue, the pro-hydrogen Australian mining group, and Actis, a UK sustainable investor. These take the total awarded portfolio to eight projects with almost 1.4 million tonnes of capacity, already close to the upper level of the 2030 target. But the gold dust for hydrogen projects is firm offtake commitments from buyers. After the initial rush of excitement in 2021, it has now dawned on customers that hydrogen will not be cheap, particularly after factoring in transport costs to market. A crucial data point comes from the auction from Germany’s state-backed vehicle H2Global this month. It secured a quarter of a million tonnes of hydrogen starting in 2027, in the form of green ammonia, to be made in Egypt by the fertiliser subsidiary of Abu Dhabi National Oil Company, for the equivalent of $4.9 per kilogram of hydrogen. That is almost $40 per million British thermal units, while the same amount of natural gas for 2027 delivery in Europe currently trades at about $9. Oman’s ‘enormous’ hydrogen potential hangs on project delivery Oman plans green-hydrogen corridor to Europe Oman to develop rules for carbon capture and green hydrogen The hope is that costs will fall as projects scale up, the supply chain matures, developers gain experience and technology improves. But for now, the nascent industry needs offtakers who are willing to pay substantial premiums to go green, or who receive support from their governments. Most of Oman’s projects, like the majority of export plans worldwide, will turn their hydrogen into ammonia. Ammonia is much easier to transport than hydrogen, as it can be readily liquefied and there is already international shipping experience. Ammonia is an important fertiliser, and can also be used directly in electricity generation and potentially as a shipping fuel. But Oman, wisely, is not focused solely on export. The difficulties of moving hydrogen around, or converting it to other forms, means that local use will always be preferable. Hydrom plans to build or convert a network of pipelines, first to serve industrial zones at Duqm and elsewhere in the south by 2030, then to connect Salalah and the northern industrial hub of Sohar by 2040, and finally to the capital Muscat by 2050. India’s Jindal Steel began last November to construct the Vulcan plant at Duqm, which will use hydrogen to make green steel. Volkswagen has signed a preliminary agreement with Vulcan to expand its use of low-carbon footprint steel. Brazilian mining giant Vale agreed in May 2023 to establish a green steel complex, also at Duqm. Hydrom signed a memorandum of understanding in December with Germany’s Siemens Energy to manufacture hydrogen electrolysers, thus localising part of the supply chain. The country may gradually switch over its industry and power generation to a mix of hydrogen and renewable energy, with its gas reserves being relatively much smaller and higher-cost to produce than for its Gulf neighbours. Even full success in its export ambitions would not be a panacea for Muscat. If green hydrogen production costs fall by 2050 to a forecast $1.5-2 per kilogram, Oman would receive revenues of $13-17 billion from its planned hydrogen production. Oil exports this year should bring in about $25 billion. So sustainable economic progress from hydrogen depends on channelling it to create large, sophisticated, low-carbon industries within Oman. That would limit dependence on foot-dragging export customers. Oman has made a fast start in the hydrogen race and it has a vision of the finishing line, but there are many miles still to run. 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. Robin M Mills is CEO of Qamar Energy and author of The Myth of the Oil Crisis