Scaling up green hydrogen development in the MENA region

The MENA region is pushing ahead with big hydrogen plans, and investment interest is growing, says Sania Aziz.

Over the last few years, hydrogen has gained support from governments across the world, and is being hailed as the next breakthrough in alternative fuels.

Globally, momentum behind low-emissions hydrogen has continued to grow despite the slow roll-out of financial incentives and stubborn cost pressures, the International Energy Agency (IEA) said last year. 

The global hydrogen generation market size was valued at US$158.8bn in 2023, according to research agency MarketsandMarkets. The firm added that this is expected to reach US$257.9bn in 2028, growing at a compound annual growth rate (CAGR) of 10.2% from 2023 to 2028. By 2030, this number is expected to reach US$410.6bn.

Green hydrogen

Currently, there are seven different ways to produce this element, which are colour coded to indicate the method used. Blue hydrogen, for example, uses mainly natural gas, and includes the use of carbon capture and storage (CCS) to trap and store the carbon that is released during the process.  When produced through clean energy from surplus renewable energy sources it is referred to as green hydrogen. Electrolysers use an electrochemical reaction to split water into its components of hydrogen and oxygen, emitting zero-carbon dioxide in the process. This is one of the most expensive ways of producing hydrogen, and makes up less than 1% of global hydrogen production

Efforts ramp up in MENA

Despite it being the most expensive, efforts are underway to make produce green hydrogen on a larger scale. Currently being built at Oxagon at Neom in Saudi Arabia, the Neom Green Hydrogen Company (NGHC) is constructing the world’s largest commercial-scale green hydrogen facility. The project plans to use 4GW of solar and wind energy to produce up to 600 tonnes of green hydrogen in the form of liquid ammonia per day by 2026. The site has received US$6.1bn in investments from 23 domestic, regional, and international banks and investment firms.

NGHC has also signed a 30-year green offtake agreement for all green ammonia produced at the plant.

A report from the International Energy Agency (IEA) showed that rich renewable resources and vast land expanses could make Oman a competitive low-emissions hydrogen supplier by 2030.

Oman aims to produce at least one million tons of renewable hydrogen a year by 2030, up to 3.75mn tonnes by 2040 – and up to 8.5mn tonnes by 2050, which would be greater than total hydrogen demand in Europe today.

“Oman is an oil and gas producer country that is taking an enlightened approach to its energy future, with a clear long-term vision and strong net zero ambitions,” the IEA said, quoting its Executive Director Fatih Birol. “Thanks to its huge potential for low-cost solar and wind, renewable hydrogen is set to bring multiple benefits to Oman.”

Public-private Partnerships

Meanwhile, the UAE has also set ambitious goals towards producing and exporting green hydrogen. The country aims to produce 1.4mn tonnes of hydrogen annually by 2031 and expects the figure to increase tenfold to 15mn by 2050. The UAE is also incentivising the private sector to focus on hydrogen. For example, DEWA and Siemens Energy partnered for a green hydrogen pilot project in Dubai, which is the first in the MENA region to produce hydrogen through solar power generation.

The plant has been operational since May 2021. In 2022, TAQA, ADNOC and Mubadala invested in Masdar for clean energy fuels. Masdar is also rapidly scaling up its green hydrogen business, by upping production capacity to one million tonnes by 2030. The company is also partnering with Emirates Steel Arkan to produce steel using green hydrogen as a power source.

With Daimler Trucks, Masdar is exploring the feasibility of liquid green hydrogen exports from Abu Dhabi to Europe by 2030. For OMV, Masdar is helping the company’s refineries decarbonise using hydrogen. Meanwhile, Hyundai Motor Company and BEEAH Group are testing fuel cell electric trucks in the UAE, and how they can be used for logistical purposes.

“Benefits accrue for the UAE not only through hydrogen export earnings, but the ability to link the hydrogen sector to the UAE’s technology ecosystem and, vitally, its financial services sector, creating an exchange for hydrogen-linked financial assets and derivatives,” stated the Dubai Future Foundation in a report showing the outlook for the hydrogen industry in the UAE and the wider MENA region.

The foundation, which assesses the role of hydrogen in the UAE’s growing economy, added, “This strategy requires an assertive approach to maximise production in the near term in order to out-compete other early entrants and create a durable market advantage.”

Momentum builds in Egypt

Egypt too is looking to become a leading global player in the industry, capitalising on the advantages of its strategic location, sizable domestic market, and plentiful solar energy resources. Egypt is progressing green hydrogen development with the introduction of incentives for hydrogen production and agreements to develop green hydrogen projects, with a view to providing 5-8% of the world’s hydrogen by 2040.

Earlier this year, Egypt’s House of Representatives approved a draft bill which mandates incentives for green hydrogen production, including tax credits of 33-55% of the tax payable on revenues generated from the production of green hydrogen, exemption from VAT for equipment and materials used for green hydrogen products, and various waivers on taxes, contracts and land registration fees. Momentum is building for hydrogen projects, with an agreement with Saudi-based ACWA Power for the development of a green hydrogen project with a production capacity of 600,000 tonnes green ammonia per year, with the prospect of expanding capacity to 2mn tonnes per year in the second phase. The agreement was signed between ACWA Power and The Sovereign Fund of Egypt (TSFE), the Suez Canal Economic Zone (SCZone), the Egyptian Electricity Transmission Company (EETC), and the New and Renewable Energy Authority (NREA).

Egypt has signed seven memoranda of understanding with international developers in the fields of green hydrogen and renewable energy in the Suez Canal Economic Zone that could lead to total investment worth around US$40bn, according to a recent cabinet statement.

While UAE-based Fertiglobe, a leading nitrogen fertilizer and ammonia producer and distributer, has signed an MoU with AD Ports Group to store and ship urea and ammonia in Egypt and the UAE.

Egypt is also reported to be looking at possible cooperation opportunities with the European Union in the field of green hydrogen.

For the MENA region to develop its full potential as a green hydrogen hub, progress needs to be made on issues such as standardisation and certification to facilitate cross-border trade. Progress was made in this area at COP28, with initiatives launched to accelerate commercialisation of hydrogen and the development of cross-border value chains for hydrogen and its derivatives.