Saudi Arabia is planning to emerge as the biggest exporter of hydrogen fuel – a projected replacement of fossil fuels – in the world with the construction of a hydrogen-producing plant in the country's northwest at the planned city of Neom, the Financial Times reported, citing an unnamed kingdom official. The construction has not been started yet, but the plant is reportedly expected to launch in 2026.
The projected output of the plant at its peak is 650 tonnes of so-called "green" hydrogen – fuel created from water with the use of only renewable energy sources. In Saudi Arabia's case, it will be solar and wind energy, available in abundance in the north-western region, allocated to the plant.
In addition to green hydrogen, Saudi Arabia will produce "blue hydrogen", Wood Mackenzie analyst Alexandre Araman told the FT, although details of the future production remain unclear. Unlike the green variant, blue hydrogen is produced by splitting methane molecules found in natural gas and subsequently capturing the released carbon molecules.
The decision to opt for the biggest piece of the nascent hydrogen fuel market was reportedly prompted by the kingdom's desire to diversify its economy, which relies heavily on gas and oil exports. The proceeds from the latter comprise as much as 60% of the state budget – which might prove unsustainable amid developed countries' push for greener energy sources.
"We see ourselves involved seriously in hydrogen and we want to size up that market. We know for sure that we will be the most competitive producer", Saudi Arabia's Energy Minister Prince Abdulaziz said earlier in February.
Fierce Competition Expected in Hydrogen Market?
Hydrogen fuel might grab as much as 12% of the global energy market by 2050, a recent study by International Renewable Energy Agency suggested. It can be used not only to power industries, but also to run cars and households. The only issue is the fuel's cost, especially for expensive transportation. Despite that, there have been successful test export runs, such as a September 2020 Saudi Arabia-Japan shipment of ammonia – a precursor that can be used as a means of transporting hydrogen relatively cheaply.
In addition to dealing with expensive transportation, Saudi Arabia's joint venture with US-based Air Products will have to compete with other countries that have already announced plans to enter the hydrogen energy market. Among them is Russia, which seeks to grab a 20% market share by 2030 and the kingdom's neighbour, the UAE, which seeks a 25% market share by the same time. Apart from them, Egypt, Oman, and Morocco have also announced their ambitions to develop hydrogen fuel production – a commodity available for a wider range of countries, unlike oil.
At the same time, not all of these countries possess the sources of renewable energy that Saudi Arabia has in abundance and plans to use in green hydrogen production. The FT cited several analysts as predicting that the competition will be "fierce" on the hydrogen fuel market by 2050, when it is expected to grow to $600 billion per year.