Saudi Arabia seeks to position NEOM as a leader in hydrogen
At the first-ever conference dedicated exclusively to decarbonized hydrogen in the Middle East and North Africa (MENA), attendees thoroughly explored the technical and financial complexities of initiating major projects.
They covered projects announced by various consortia around the world, all in the early development stage. An exception appeared in the $5 billion hydrogen-based ammonia plant in Saudi Arabia, a project of the NEOM Energy & Water Company.
Many conference attendees and panelists saw NEOM’s ambitious green hydrogen-in-ammonia project as the likeliest leader. They said they are confident that of the many major green hydrogen initiatives now making headlines, this one at least will reach actual production.
Discussions took place at the MENA Global Hydrogen Conference, held in Dubai last month. It brought together more than 200 participants for two days of panels and networking. Sponsored by the MENA Hydrogen Alliance, an initiative of Dii Desert Energy, the conference was organized by the UK-based Green Power Conferences World Hydrogen Leaders networking platform.
NEOM close to FID
NEOM, the clean energy city being developed in northwestern Saudi Arabia, was launched in 2019 with support from the country’s Public Investment Fund (PIF). In 2020, it announced a joint venture to develop a major green hydrogen and ammonia production facility in the new city’s industrial sector, owned equally by NEOM and two partners.
Acwa Power, a Riyadh-based power generation developer now half-owned by PIF, will lead the development of the wind and solar assets. The American company Air Products will develop a hydrogen-based ammonia plant. It will be the exclusive acquirer and will invest $2 billion in distribution.
The plant will produce 650 tonnes
Cornelius Matthes, CEO of Dii Desert Energy, says NEOM is a leader for several reasons. First, it highlights the players involved, with ACWA Power’s impressive track record as a renewable energy developer and Air Products’ substantial financial depth making it a credible guarantor of all levies. of the project.
He also says that the purely commercial nature of the project adds to its viability. Although the Saudi leadership is a key partner, they expect the project to succeed without direct subsidy.
“If you look at the announcements of major projects, they are often subject to special regulatory conditions and subsidies,” he says. “This is a bold project without any such support.”
Matthes’ organization, Dii (Desertec Industry Initiative), is a Dubai-based public-private sector association that promotes the development of renewable energy. Founded in 2009 with the support of the German government to explore the potential of renewable energy from the MENA region to supply European electricity markets, it is currently pursuing its Desertec 3.0 program which considers renewable energy as the basis of complete energy systems.
He sees, as the final piece of the puzzle of any major hydrogen project, a critical need to secure buyers. Again, he sees significant benefits for NEOM.
“It’s an Air Products bet on a market that starts in four years,” he says. “They are looking at options in Europe, especially in the mobility sector.”
Matthes refers to the growing range of hydrogen-based infrastructure in Germany, which already has more than 100 hydrogen filling stations (currently fueled with gray hydrogen). He sees building momentum for a hydrogen market for cars, buses, trains and trucks, appearing for example in Daimler Trucks’ advanced work on its GenH2 Truck.
Such private sector initiatives find support in Germany’s National Hydrogen Strategy, approved in 2020, accompanied by a stimulus package that supports more than 60 carbon-free hydrogen projects in the country.
According to Matthes, such developments in Germany and elsewhere in Europe are the necessary counterpart to supply projects in the MENA region.
“Today, we need clarity on the levies, without this we cannot finance any project,” he said. “That’s why Dii connects production and demand.”
He says that when buyers are identified, European buyers can decide the amounts and benefit from competition among producing countries in the MENA region.
The remarkable drop in the cost of renewable energy has surely enabled green hydrogen commercial ventures such as NEOM. It is also clear that low-cost renewable energy is not enough to launch them.
“It will take bold partnerships between government and industry,” says Matthes, “something like a ‘Marshall Plan’ for hydrogen.”
To really launch a hydrogen economy in the MENA region, Matthes points to a key infrastructure that could result from international collaboration. A gas pipeline linking the eastern Mediterranean to Europe would be the kind of “Marshall Plan” project he has in mind.
While gas pipelines in the western Mediterranean currently connect Algeria, Tunisia and Morocco to Spain, Portugal and Italy, there is no gas pipeline to the east. But a hydrogen-enabled pipeline could be a breakthrough for NEOM and others. Matthes says that within a radius of 300 kilometers from Sharm el-Sheikh (where the COP 27 conference will take place this fall) are places with a potential generation potential of more than 100 GW in Saudi Arabia, Egypt and Jordan.
He believes that if carriers of liquid organic hydrogen can help launch commercial hydrogen, pipelines will be a key piece of infrastructure. These alone will be able to meet the massive demand forecast for the so-called “hydrogen backbone” in Europe. A pipeline can easily transport the 2 GW capacity of NEOM and much more, as a large pipeline could have a capacity of up to 60 GW. This would dwarf the capacity of submarine power cables.
Its implementation would require bold commitments from governments in a long-term partnership for the import of green molecules. The European Investment Bank (EIB) would be the most logical entity to manage the project, thinks Matthes.
“Nord Stream 2 is now obsolete,” he says. “It’s 11 billion euros stuck under the Baltic Sea.”
“An Eastern Mediterranean pipeline of similar capacity could be built for 15 to 17 billion euros, or around 50% more”, than the now-suspended Nord Stream 2.
In search of a certification system
The MENA Hydrogen Alliance took advantage of the conference to launch a working group dedicated to hydrogen certification. This certification piece of the hydrogen puzzle was announced the same week on Friday, leading conference organizers to acclaim the first-ever conference in the Middle East devoted exclusively to carbon-free hydrogen as “Hydrogen Week”. of Dubai”.
By Alan Mammoser for Oilprice.com
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