With more than 1000 projects – nearly 800 of which are set to be commissioned by 2030 – requiring $320bn in investment having been announced globally, the hydrogen market’s growth is aligned with ongoing decarbonisation endeavours. Saudi Arabia, where oil revenue contributed an average of 75% of total budget revenue between 2010 and 2022, is at the forefront of this process. Guided by Vision 2030, the Kingdom aims for renewables to account for 50% of its domestic energy mix by 2030 and to reach net-zero emissions by 2060, with hydrogen set to play an increasingly important role. Hydrogen takes on different forms, as the blue form of it originates from natural gas, while the green form – the most environmentally friendly option – is created from renewable energy sources via electrolysis. Leveraging its affordable solar energy, abundant wind resources and expansive land, Saudi Arabia is poised to reap the rewards of an early-mover advantage in green hydrogen production and exports.
NEOM
Saudi Arabia’s goal is to become the world’s largest hydrogen producer, targeting production of 2.9m tonnes per year by 2030 and 4m tonnes per year by 2035. Key to these targets is a large-scale project in NEOM, the $500bn giga-project. In May 2023 NEOM Green Hydrogen Company (NGHC) closed a deal with a consortium of 23 local, regional and international banks and financial institutions to fund $6.1bn of the estimated cost of $8.4bn to build the Helios carbon-free green hydrogen plant. This arrangement garnered recognition from ratings firm Standard & Poor’s (S&P) Global Ratings, which certified its alignment with green loan principles, making it one of the largest project-financing deals concluded under a green loan framework.
Operating as an equal joint venture involving Saudi Arabia’s ACWA Power, US-based Air Products and Chemicals, and NEOM, Helios is anticipated to be the world’s largest green hydrogen production facility once completed by the end of 2026, incorporating up to 4 GW of solar energy capacity to produce 600 tonnes of carbon-free hydrogen per day. The plant, which will be located in OXAGON, NEOM’s port and industrial centre, could reduce carbon dioxide emissions by an estimated 5m tonnes annually. The facility aims to produce 1.2m tonnes of green ammonia – equivalent to 600 tonnes of hydrogen – per day for export once in operation, with green ammonia expected to be particularly beneficial for decarbonising the heavy-duty transport sector since it is less expensive to store and transport.
Strategically, NGHC secured a 30-year off-take agreement with Air Products and Chemicals for all the green ammonia produced at the Helios plant, and the firm has been designated as the chosen engineering, procurement and construction contractor for a total value of $6.7bn. This has paved the way for substantial contracts to be awarded to various partners, including a $2.8bn contract to Indian conglomerate Larsen & Toubro (L&T) to build the necessary renewable energy infrastructure and another to China-based Envision Energy to supply 1.67-GW wind turbines within the NEOM giga-project.
Regional Potential
As the production of green hydrogen is linked to renewable energy, competition will intensify as adoption escalates. The GCC has a notable advantage in green hydrogen production, primarily due to its abundance of low-cost solar energy. Alongside Saudi Arabia, other Gulf nations like the UAE and Oman have formulated national hydrogen strategies. According to S&P Global Ratings, Saudi Arabia and the UAE accounted for 90% of the Gulf’s renewable energy output by the end of 2021, with 3 GW of combined installed solar capacity compared to 165 MW in 2016.
Global consultancy Deloitte projects the green hydrogen market to reach $1.4trn by 2050, while the International Renewable Energy Agency sees it satisfying up to 12% of the world’s energy demands by the same year. A May 2021 report from German consultancy Roland Berger and UAE-based non-profit Dii Desert Energy anticipates that the GCC could see annual revenue from green hydrogen reach $200bn by 2050.
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