Saudi Arabia is viewing hydrogen production as both as a source of energy and export earnings in a low-carbon world.
Grahame NelsonPartner, Head of Office - Al Khobar
Hajar AlruwaliTrainee Lawyer,Corporate Commercial
May AlMahfouzTrainee Lawyer,Corporate Commercial
In its ambitious Vision 2030 programme, Saudi Arabia highlighted its plans to upscale its renewable energy production with a view to diversifying the energy mix in a country that has been reliant on hydrocarbons for both power generation and export earnings.
Hydrogen is also increasingly seen as an important mainstay of a low carbon world moving towards “Net-Zero”.
Consequently, Saudi Arabia is viewing hydrogen production as both as a source of energy and export earnings in a low-carbon world.
Currently hydrogen is mainly used as a feedstock in manufacturing processes, notably in the refining and chemicals industries rather than as a source of energy. Strategies being pursued around the world contemplate that Hydrogen will play a far more important role in energy production.
In its report “Future of Energy” the International Energy Authority note that technologies already available allow hydrogen to be used in different ways and that it can easily be converted into sources of energy such as methane and electricity.
Currently commercial hydrogen production processes are energy intensive and result in carbon emissions into the atmosphere (so-called “grey hydrogen”).
For hydrogen to be considered a low-carbon source of fuel, its production methods must themselves be de-carbonised.
There are 2 alternative methods of producing de-carbonised hydrogen in commercial qualities currently being actively pursued:
Production reliant on low carbon power generation, such as solar wind (so-called green hydrogen”)
Production involving carbon capture, utilisation, and storage (CCUS) based on steam methane reforming resulting in carbon capture (so-called "blue hydrogen”).
Saudi Arabia is actively pursuing both blue and green energy production strategies.
There are plans to build the world’s largest green energy plant in Neom. The partners in this project include Air Products, ACWA Power and Neom itself.
Separately, Saudi Aramco announced the first shipment of blue hydrogen to Japan.
By 2030, the cost of blue hydrogen production is projected to fall by 16% as CSS companies increase production. Increase in blue hydrogen will facilitate decarbonisation of domestic sectors such as steel and cement production, which have been carbon-intensive traditionally. Economically, blue hydrogen production is considered cheaper than green hydrogen but more expensive than grey energy. One of the approaches expected to lower the costs is increasing the production scales, which is achievable with the emerging technologies.
To carry forward its plans to become a major producer of blue hydrogen project, it is envisaged that the country will have to exploit significant portions of its natural gas resources such as the Jafurah field.
Recent analysis suggests that Saudi Arabia has certain advantages with the production of blue hydrogen over various other countries Saudi Arabia has the advantages of existing infrastructure for the production, storage, and transportation of blue hydrogen. Geographically, the country’s Eastern Province is regarded as a favourable location for blue hydrogen production where existing oil and gas production apparatus and access to resources such as saline aquifers (fundamental for carbon dioxide storage) offer important advantages.
To implement the blue hydrogen project, the country will have to exploit significant portions of its natural gas resources such as the Jafurah field.
Recent analysis suggests that Saudi Arabia has certain advantages with the production of blue hydrogen over various other countries They include the advantages flowing from an existing infrastructure for the production, storage, and transportation of the gas. Geographically, the country’s Eastern Province is regarded as an ideal location for blue hydrogen production where existing oil and gas production apparatus and access to resources such as saline aquifers (fundamental for carbon dioxide storage) offer important advantages.
No specific regulatory framework has yet been developed in Saudi Arabia for blue and green hydrogen. However, we understand the production of Blue and Green Hydrogen will require the following:
The production of Blue Hydrogen would need to be approved by Ministry of Energy and Water. The application would need to be supported by, amongst other things,
Preliminary information regarding the site or location of the hydrogen production factory.
A Feasibility Study on the hydrogen production project.
The amount of gas required for the hydrogen production project. After obtaining the Ministry of Energy’s approval the applicant will need to obtain an Environmental Permit and an Industrial Licence from the Ministry of Industry related to blue hydrogen production.
Green Hydrogen production will also require the approval of the Ministry of Energy and the Electricity and Water Regulatory Authority. After obtaining these approvals, applicant would need to obtain an Industrial License from the Ministry of Industry related to the green hydrogen production.
In a statement released in 2021, the energy minister, Abdulaziz bin Salman al-Saud, projected that Saudi Arabia would become the largest hydrogen producer globally.
In a statement released in 2021, the energy minister, Abdulaziz bin Salman al-Saud, projected that Saudi Arabia would become the largest hydrogen producer globally. Even though the country currently lacks a formalised hydrogen production strategy, the approach has been described as one of Crown Prince Mohammed bin Salman’s priority development projects. An official roadmap is reportedly being developed.
What is clear is that Saudi Arabia needs to minimize its dependence on crude oil production and in its shift towards renewable energy production, the has the prospect of becoming the leading hydrogen exporter. As an established oil and gas producer, the country is advantaged to spearhead hydrogen production globally. With the necessary policies in place and efficient regulation in the sector, Saudi Arabia will be poised to become a leader hydrogen production and go a long way to achieving its renewable energy production ambitions.
For further information, please contact Grahame Nelson.
Published in November 2022
Saudi Vision 2030, ‘Vision 2030’ <https://www.vision2030.gov.sa/v2030/vrps/nidlp/> accessed 26 October 2022
Shahid Hasan and Rami Shabaneh, ‘The Economics and Resource Potential of Hydrogen Production in Saudi Arabia’(KAPSARC, November 2021)< https://www.kapsarc.org/research/publications/the-economics-and-resource-potential-of-hydrogen-production-in-saudi-arabia/> accessed 27 October 2022
Dawud Ansari, ‘The Hydrogen Ambitions of the Gulf States: Achieving Economic Diversification while Maintaining Power’(German Center for International and Security Affairs, July 2022) <https://www.swp-berlin.org/publications/products/comments/2022C44_HydrogenAmbitiones_GulfStates_WEB.pdfhttps://www.swp-berlin.org/publications/products/comments/2022C44_HydrogenAmbitiones_GulfStates_WEB.pdf> accessed 26 October 2022
Jane Nakano, ‘Saudi Arabia’s Hydrogen Industrial Strategy’(Center for strategic and international studies, January 2022) <https://www.csis.org/analysis/saudi-arabias-hydrogen-industrial-strategy#:~:text=The%20country%27s%20blue%20hydrogen%20vision,its%20natural%20gas%20resource%20wealth.> accessed 27 October 2022
