– Gulf NOCs are expanding their carbon capture and hydrogen capacity
– Partnerships with foreign companies are creating new trade opportunities
– Middle East could capture up to 50m tonnes per annum of carbon by 2030
– Saudi Arabia aims to become a world leader in hydrogen production and export
As hydrocarbons producers reap sustained revenue from high global prices, national oil companies (NOCs) in the Gulf are accelerating investment in carbon capture, utilisation and storage (CCUS); hydrogen; and other green energies to make their activities less carbon-intensive and support the energy transition.
Last week Saudi Aramco reached a deal with China’s Sinopec to develop CCUS and hydrogen while building a manufacturing complex at the King Salman Energy Park in eastern Saudi Arabia.
In July Abu Dhabi National Oil Company (ADNOC) signed a deal with France’s TotalEnergies to collaborate on CCUS and hydrogen. The deal will help ADNOC meet its goal of capturing 5m tonnes per annum (tpa) of carbon by 2030, a six-fold increase from its current capacity of 800,000 tpa from its gas plants.
These deals are the latest of numerous others in recent months by Gulf NOCs, which could position them as global leaders in both CCUS and hydrogen.
Gulf NOCs’ low-cost production advantages and massive hydrocarbons resources mean that CCUS can reduce emissions for the coming decades as the world continues to rely on oil and gas amid the energy transition.
Aramco, ADNOC and the Kuwait National Petroleum Company produced 19.3% of global oil and held 28.7% of global proven oil reserves in 2021, while QatarEnergy produced 4.4% of the world’s gas and held 13.1% of global proven gas reserves.
Moreover, with the cheapest solar energy in the world, an abundance of wind energy and ample land on which to build green energy generation projects, Gulf NOCs could establish an early-mover advantage in green hydrogen production and export, potentially bringing in $200bn in revenue by 2050, according to a report published last year by consultancy Roland Berger and Dii Desert Energy, a public-private network focused on the energy transition.
CCUS allows hydrocarbons companies to remove carbon from production processes, which can either be stored, redeployed in enhanced oil recovery techniques or transformed into other consumer goods.
Many companies have been slow to embrace CCUS due to its high upfront costs and the lack of a market for carbon offsets and credits. However, the sector is gaining momentum as user end-markets, particularly in Europe, demand cleaner energy sources and carbon-trading markets.
The number of new CCUS projects announced globally increased from 18 in 2019 to 38 in 2020 and 97 in 2021, according to the International Energy Agency. However, this pipeline of projects falls far short of meaningfully affecting global climate goals according to the agency, which says that 1.7bn tpa of CCUS capacity is needed by 2030 to reach net-zero emissions by 2050.
Since many of these ventures are being undertaken by Gulf NOCs, they present a test case for the global uptake of CCUS technology. According to Mitsubishi Heavy Industries, which is involved in numerous power generation projects in the region, the Middle East could generate 50m tpa by 2030 – forecasts for the global total in 2030 vary from 80m to 89m tpa.
According to the Global CCS Institute, Qatar, the UAE and Saudi Arabia captured 3.7m tpa of carbon in 2020, or 10% of the global total, but the think tank estimated that the GCC could reach 60m tpa by 2035.
While figures for Aramco’s deal with Sinopec are unknown, the investment will help Saudi Arabia meet its target of 11m tpa of CCUS capacity by 2035, part of its broader goal to achieve net-zero emissions by 2060. The Kingdom currently captures 800,000 tpa of carbon from its gas liquefaction plant in Hawiyah.
Meanwhile, QatarEnergy leads the region in capturing 2.1m tpa of carbon from its Ras Laffan gas liquefaction plant and plans to expand its North Field gas field, with production slated to start in 2025.
In a boost to the uptake of CCUS, last year Saudi Arabia launched a platform for MENA nations to trade carbon offsets and credits. Aramco is among the first members of the platform.
These ambitions aside, there is some concern from international stakeholders about the overreliance on CCUS to meet its net-zero plans due to the need for major technological advancements in this area and because CCUS potentially provides cover for the continued production of oil for decades to come rather than encouraging the shift to clean energy sources.
Gulf NOCs are also making significant investment in hydrogen, a clean fuel and energy source that can be generated from hydrocarbons or green energy resources and used locally or exported.
Like CCUS, hydrogen has gained significant momentum in recent years. The number of countries to have developed hydrogen strategies increased from three – France, South Korea and Japan – to 17 in 2021, with another 20 countries reportedly in the process of developing their strategies.
Saudi Arabia already has functioning hydrogen projects as well as ambitious plans for expansion. In March it started construction on the $5bn wind- and solar-powered hydrogen plant at its NEOM mega-project, which will be the largest hydrogen plant in the world upon completion, producing 650 tonnes per day.
Last year Prince Abdulaziz bin Salman Al Saud, minister of energy of Saudi Arabia, announced that the Kingdom aims to become the world’s largest hydrogen producer and is targeting 2.9m toa by 2030 and 4m tpa by 2035.
Other Gulf countries, such as the UAE, Kuwait and Oman, are developing national hydrogen strategies, though Qatar does not plan to produce hydrogen itself, as its gas will be used to power electrolysers abroad.
In May ADNOC announced a new energy partnership with BP to develop hydrogen hubs in both the UAE and the UK. ADNOC is set to acquire a stake in BP’s H2Teesside hydrogen project, while BP will invest in ADNOC’s green hydrogen plant at Abu Dhabi’s Masdar. ADNOC is also looking at developing a green hydrogen supply chain with Japan.
Smart energy nexus
By adopting CCUS and growing their hydrogen production and export capabilities, Gulf NOCs are also looking to tap into emerging digital technologies and artificial intelligence (AI) to diversify their economies and enable sustainable growth.
Both Aramco and ADNOC are already deploying AI to make their operations more efficient, monitor and reduce CO2 emissions, and integrate green energy resources.
Investment in digital technologies can also create synergies that can lead to the development of new manufacturing sectors.
For example, Aramco announced a deal in January with French carmaker Gaussin to explore the manufacturing of hydrogen-powered vehicles, which came on the heels of deals with France’s Air Liquide, Alteia and Axens to develop AI, carbon capture, low-carbon hydrogen, and ammonium and manufacturing.