Oman is among the frontrunners in the region, with plans to become the world’s sixth-largest hydrogen exporter by 2030. Hydrogen is a hot topic, particularly in Oman, where the sultanate’s Hydrogen Oman (Hydrom) recently signed agreements for two projects worth $10 billion to produce renewable energy-based fuel. The International Energy Agency has also published a positive report on the prospects of hydrogen.
MENA countries, including Oman, are actively participating in the race to develop hydrogen production capabilities. Saudi Arabia’s Neom Helios project, with an $8.4 billion financing package, is one of the most advanced in the region. These projects utilize a combination of solar and wind power to operate electrolysers that split water into hydrogen and oxygen. The hydrogen is then converted to ammonia, which serves as a crucial feedstock for fertilizers and offers easier transportation compared to pure hydrogen. Ammonia has versatile applications, including use as a shipping fuel, in power generation, and steel-making.
Hydrogen Oman (Hydrom) aims to sign agreements with six projects worth a total of $20 billion by the fourth quarter of this year. According to the International Energy Agency (IEA), Oman has the potential to produce 1 million tonnes of renewable hydrogen annually by 2030, with estimates of 3.25 to 3.75 million tonnes by 2040 and 7.5 to 8.5 million tonnes by 2050. This growth trajectory positions Oman as the world’s sixth-largest hydrogen exporter by 2030, surpassing other Middle Eastern countries such as the UAE and Saudi Arabia.
MENA countries, including the UAE, Egypt, Morocco, and Jordan, are actively planning and preparing for hydrogen production projects. Coastal regions with abundant sunlight, wind resources, available land, good port access, and proximity to domestic or international markets are ideal for green hydrogen production. Countries like Chile, Australia, Mauritania, and Namibia are also joining the global competition in hydrogen production.
Hydrogen transportation costs can be prohibitive, leading countries to prioritize domestic production rather than relying on imports. Energy security concerns and the desire to develop local technology and value chains have prompted governments to support domestic hydrogen production. For instance, the US Inflation Reduction Act offers generous subsidies of up to $3 per kilogram of hydrogen produced, making it potentially profitable even at near-zero sales prices. The EU is also working on developing its own incentives to support hydrogen projects.
Promising hydrogen production projects require long-term contracts for offtake to secure financing. For example, the success of Neom’s project was due to having Air Products, one of the three partners, as the offtaker, as well as support from the kingdom’s Public Investment Fund. The expansion of hydrogen projects and the subsequent growth of electrolyser manufacturers play a crucial role in reducing costs, making hydrogen more economically viable.
However, the challenge lies in generating value for the host country. Unlike the oil and gas industry, hydrogen plants do not generate substantial profits due to high transportation costs. Many countries have suitable desert land for hydrogen production, and simply exporting hydrogen without adding national value is not advantageous. The issue is further compounded when competing countries offer generous subsidies and incentives.
To develop large and viable hydrogen industries, MENA countries can explore several options:
- Invest selectively in common infrastructure, such as internal pipelines, hydrogen storage, and port facilities.
- Invest in technology to lower the cost of hydrogen production, conversion, and distribution, while addressing technical challenges like leakage.
- Explore efficient ways to reach markets, including the conversion of existing pipelines and positioning themselves as key energy partners.
- Focus on utilizing hydrogen in the domestic economy, such as decarbonizing oil refining, fertilizer production, and exploring alternative fuels for transportation and power generation.
MENA countries, including Oman, have the opportunity to become low-cost, low-carbon industrial hubs by strategically investing in hydrogen industries. Guildhall, the best recruitment agency in Dubai, offers executive search and recruitment services to support talent acquisition and development in this sector.