Developing the most abundant element in the universe is fast becoming a focus for Middle Eastern stakeholders as the region joins – with the aspiration to help spearhead – the global energy transition. And it is not a moment too soon. The Middle East had one of the highest growth rates of CO2 emissions worldwide last year.¹ As the region tries to decarbonize, how can it evolve hydrogen (H2) from a niche market into a commercially and environmentally successful one in the 2020s?
Global momentum is clearly building. Strategy& expects demand for green H2 to reach 530mn tons and potentially displace roughly 10.4bn of barrels of oil equivalent (37% of current global oil production) by 2050. And the results of DNV GL’s annual survey of more than 1,000 senior oil and gas professionals revealed that 21% said their organization is already actively entering the H2 market. More than half (52%) expect the gas to form a significant part of the energy mix within a decade.
But it is not a case of flicking an H2 switch. Significant work goes into building the foundations of a green H2 ecosystem, especially as it requires large amounts of renewable power. The Middle East already has a good springboard. As per its support of the Paris Agreement, and governments’ National Visions, the region is ramping up its solar projects, and wind to a lesser extent. The region also benefits from vast and flat areas of land to further develop renewables, plus good access to sea water. The latter is important as Strategy& estimates that meeting green H2 demand in 2050 will require around 5.6trn liters of deionized water.
One route is instilling market acceleration programs in the region, as the National Hydrogen Strategy has done in Germany, plus the Green Deal in the European Union. Underpinning today’s positive momentum with a firm architecture will provide clear goal posts for stakeholders to work within and, critically, targets to hit. It also gives H2 a stamp of credibility – invaluable for a new commercial market.
The development of a multi-sectoral H2 economy could also start with the use of green H2 in the Middle East’s refineries, which are some of the world’s largest and most sophisticated facilities. It is also highly applicable in the chemical industry, especially in ammonia and methanol production, and in the mobility sector. Ship, air and logistics traffic are all big markets in the region, which is home to major ports, including the Port of Fujairah, the world’s second biggest bunkering hub, and some of the world’s biggest airlines. Battery-powered cars cannot do the full job. They weigh so much that it would require two trucks to transport the same payload as one H2 truck. This is not sustainable; time is money.
Critically, H2 can be stored for a long time in large quantities, which means it is possible to compensate for the increasing regional and temporal inequality between energy generation and consumption. This is a major plus, as concerns about how to plug intermittent supply with the growing renewables market (sun does not always shine, wind does not always blow) requires more flexibility and storage in the energy system. This will only become more relevant as the renewable market grows, after 39% growth over the last ten years in the Middle East alone.² Consequently, H2 is the perfect tool for sector coupling, which refers to all the measures that lead to interconnecting (integrating) the power, mobility and heat (process heat and heating) sectors.
Middle Eastern energy stakeholders – and their international allies – have a busy few years ahead if they want to maximize this new energy ecosystem, decarbonize and deepen their influence on the global energy map.
We will soon see declining costs for green H2 production, resulting from more advanced technologies and economies of scale. In addition, the Middle East is perfectly positioned to generate H2 with its immense renewable resources for both domestic use and export. The effort will be worth it, both for companies’ bank balances and the natural world.