Is hydrogen the key to the Gulf’s energy transition?

With hydrocarbons-rich countries in the Gulf increasingly looking to reduce their carbon emissions, some in the region are turning towards multi-coloured hydrogen as a more environmentally sustainable solution.

Along with renewable sources like solar and wind, hydrogen is seen as a potential low-carbon or zero-carbon fuel that is key to the transition away from fossil fuels.

However, it is important to note that there are different types of hydrogen with different impacts on the environment.

For example, blue hydrogen is created when natural gas undergoes a steam reforming process. Although this process also produces CO2, the vast majority of it is captured and stored, subsequently producing a low-carbon fuel.

The most environmentally friendly form is green hydrogen, which is created by splitting water through a process called electrolysis, producing only hydrogen and oxygen. Powered by renewable sources such as solar and wind, green hydrogen is considered the most effective fuel for the future, although at present it accounts for just 0.1% of hydrogen produced globally.

With hydrocarbons-rich countries in the Gulf increasingly looking to reduce their carbon emissions, some in the region are turning towards multi-coloured hydrogen as a more environmentally sustainable solution.

Along with renewable sources like solar and wind, hydrogen is seen as a potential low-carbon or zero-carbon fuel that is key to the transition away from fossil fuels.

However, it is important to note that there are different types of hydrogen with different impacts on the environment.

For example, blue hydrogen is created when natural gas undergoes a steam reforming process. Although this process also produces CO2, the vast majority of it is captured and stored, subsequently producing a low-carbon fuel.

The most environmentally friendly form is green hydrogen, which is created by splitting water through a process called electrolysis, producing only hydrogen and oxygen. Powered by renewable sources such as solar and wind, green hydrogen is considered the most effective fuel for the future, although at present it accounts for just 0.1% of hydrogen produced globally.
 

With hydrocarbons-rich countries in the Gulf increasingly looking to reduce their carbon emissions, some in the region are turning towards multi-coloured hydrogen as a more environmentally sustainable solution.

Along with renewable sources like solar and wind, hydrogen is seen as a potential low-carbon or zero-carbon fuel that is key to the transition away from fossil fuels.
However, it is important to note that there are different types of hydrogen with different impacts on the environment.

For example, blue hydrogen is created when natural gas undergoes a steam reforming process. Although this process also produces CO2, the vast majority of it is captured and stored, subsequently producing a low-carbon fuel.

The most environmentally friendly form is green hydrogen, which is created by splitting water through a process called electrolysis, producing only hydrogen and oxygen. Powered by renewable sources such as solar and wind, green hydrogen is considered the most effective fuel for the future, although at present it accounts for just 0.1% of hydrogen produced globally.

Highlighting scope for further export deals in the future, in July ADNOC released a joint study with a number of Japanese companies that explored the possibility of exporting 1m tonnes of blue ammonia to Japan annually, while in March it signed an agreement with South Korea’s GS Energy to explore hydrogen export opportunities.

Saudi Aramco delivered the world’s first blue hydrogen shipment to Japan last year, with the company noting that it was actively exploring potential export markets in Asia.
For its part, Helios Industry’s green ammonia project will target imports mainly to the US and Europe once production begins in the second quarter of 2024.

While hydrogen fuel offers significant benefits in the transition away from fossil fuels, the industry has some hurdles to overcome to fulfil its potential.
Despite its promise, many analysts see hydrogen playing only a minor role in the Middle East’s energy mix over the coming decades.
One of the major barriers to expansion is cost.

“Hydrogen has a critical role to play in delivering energy while lowering carbon dioxide emissions. If research and development is to contribute to both corporate success and broader socio-economic development goals, a sizeable investment is required at the early stages of any given technology, well before there is any certainty of a breakthrough,” Ali Al Janabi, country chairman for Shell in Iraq and the UAE, told OBG.

“Hydrogen-based fuels are no exception to this, with Shell working on the idea as early as the 1990s. Shell is part of several initiatives aimed at encouraging the adoption of hydrogen in transport, and we are exploring solutions to provide hydrogen to homes and businesses, as well as refineries and factories.”
 

Although there is significant appetite for alternative fuels to help cut carbon emissions, hydrogen production and export projects are likely to cost billions of dollars, requiring significant commitment from would-be investors.

“Irrespective of the colour, the key obstacle to developing the hydrogen economy is logistics. Hydrogen must be stored and transferred to the consumer in a cost-efficient manner. However, setting up the necessary infrastructure will be relatively expensive,” Oussama El Jerbi, area managing director for Qatar at Consolidated Contractors Company, told OBG.

“For the investment to be economically viable and generate a timely and adequate return on investment, the hydrogen volumes to be transferred should be large enough. Therefore, in the early days of the hydrogen industry, the challenge is to scale production up and make the process commercially sustainable.”

Underlining these concerns, earlier this year international media reported that hydrogen-producing countries in the Gulf were seeking investors to purchase equity stakes in hydrogen export facilities as well as sign long-term supply contracts before moving ahead with the projects.