In-depth丨Middle Eastern countries are ushering in the hydrogen energy era

The Middle East is located at the intersection of two oceans , three continents and five seas . Historically, it has always been an important hub for transportation between the East and the West. Coupled with its abundant oil resources, the region's global strategic position is particularly important.

The Middle East has shown significant advantages in the field of hydrogen production from renewable energy, thanks to its unique natural resources, including abundant sunshine, wind energy resources and vast uninhabited land.

At the same time, its geographical location is unique. It is located at the intersection of the three continents of Asia, Europe and Africa. It is a hub connecting the Atlantic Ocean and the Indian Ocean. In addition, its developed port and pipeline infrastructure provides convenient conditions for the export and transportation of hydrogen and hydrogen-based products.

At present, the transportation method using ammonia as the medium is relatively mature, and the concept of the hydrogen corridor has opened up a new path for the Middle East to achieve large-scale and low-cost exports of hydrogen.

Through pipeline transportation, the transportation cost of each kilogram of hydrogen only increases by about US$0.4 to US$0.5, further improving the economy and feasibility of hydrogen energy.

Relying on the deep financial resources accumulated by these countries in the field of traditional fossil energy, they have sufficient funds to promote the vigorous development of the hydrogen energy industry.

On the one hand, the Middle East has the potential to produce green hydrogen on a large scale due to its abundant renewable resources.

At the same time, the region is well positioned to export hydrogen to major demand centers such as Western Europe and Northeast Asia.

From a long-term perspective, the overall goal of Middle Eastern countries is also to export low-carbon hydrogen.

According to data from the Hydrogen Council, the Middle East will account for 45% of global hydrogen infrastructure investment commitments in 2023, totaling approximately US$6.5 billion.

According to statistics, Egypt's initial investment amounted to $83.45 billion, Oman's was $55.41 billion, Morocco's was $16.85 billion, Saudi Arabia's was $13 billion, and the UAE's was $12.08 billion.

The total initial investment of these five countries has exceeded US$180 billion, which is equivalent to RMB 1.3 trillion at the current exchange rate.

Thanks to its advantageous geographical location, the hydrogen produced in the Middle East can be transported by sea to Asian countries such as Japan, and exported to Europe via a pipeline system.

The significant advantages of light resources have led to a significant reduction in the cost of photovoltaic power generation.

In the Middle East, photovoltaic LCOE (levelized cost of electricity) showed the largest decline, a change mainly attributed to a series of highly competitive photovoltaic projects put into operation, resulting in a 62% year-on-year cost reduction.

Specifically, the weighted average total installed cost of photovoltaics in the Middle East has dropped to US$578 per kilowatt in 2022, which is 10% lower than in India.

In order to promote the transformation of the energy structure and the in-depth development of economic diversification in the Middle East, Saudi Arabia, the United Arab Emirates, Egypt and other countries have successively released strategic plans for the development of hydrogen energy;

By 2030, the hydrogen production capacity of these countries is expected to reach 6.8 million tons, and project planning is as high as 19.41 million tons.

As of October 2022, a total of 37 projects have been launched in the region with a total production capacity of 4.2 million tons/year.

Among them, many large hydrogen energy projects in Saudi Arabia, the United Arab Emirates, Egypt, Oman and other countries are in the construction stage. The total number of projects has reached 71, the production capacity has climbed to 19.41 million tons, and the start-up rate is 9.4%.

At the financial level, the strong financial reserves accumulated from the development of traditional fossil energy in the Middle East, such as sovereign funds such as the Saudi Public Investment Fund and the Abu Dhabi Investment Authority, are becoming an important capital force to promote the development of hydrogen energy.

Oman: Focus on renewable energy and green hydrogen

Oman, with its superior natural conditions, exhibits rich complementary renewable resources of wind and solar power.

Specifically, Oman has high levels of solar radiation, which provides unique opportunities for large-scale development of solar energy, and its vast available land resources further enhance the development potential in this area.

Especially solar photovoltaic and onshore wind energy, as well as the excellent geographical location, facilitate the delivery of products to major import markets such as Europe and Japan.

Some offshore areas of Oman also show significant wind energy potential, especially at an altitude of 100 meters, where the average wind speed is close to 10 meters per second, which fully demonstrates the huge potential for wind energy development in the region.

In addition, Oman has vast land resources suitable for the development of large-scale projects, and its existing fossil fuel infrastructure has the potential to be converted to low-emission fuels;

At the same time, Oman’s rich experience in the processing and export of liquefied natural gas and ammonia will also provide strong support for its development in the field of renewable hydrogen and hydrogen-based fuels.

In February 2023, the Omani government officially promulgated the Land Law, which clearly disclosed the country's land planning layout for renewable energy and clean hydrogen energy projects;

It aims to actively attract foreign capital investment and vigorously promote the construction and development of energy infrastructure, especially focusing on renewable energy and green hydrogen energy.

Oman is expected to emerge as the largest hydrogen exporter in the Middle East and rank sixth in the world by 2030, according to a new official report by the International Energy Agency (IEA) titled “Renewable Hydrogen in Oman: A Producer Economy in Transition”.

By 2030, Oman plans to achieve a milestone of producing at least 1 million tonnes of hydrogen per year.

Subsequently, by 2040, this production will increase significantly to 3.75 million tons;

Looking ahead to 2050, Oman expects its annual hydrogen production to climb to a high level of about 8 million tons.

Recently, Haimer Technology and Henan Zhongke Qingneng Technology Co., Ltd. solemnly signed a strategic cooperation agreement on the hydrogen energy industry in June 2024.

The agreement is valid for one year, and both parties have agreed to work together in Oman to promote the implementation of the integrated liquid hydrogen production, storage and transportation project and deepen industrial cooperation.

The core areas for the development of Oman's hydrogen energy industry are mainly concentrated in Duqm, Dhofar and Al Jazir Free Zone, which cover a total area of ​​50,000 square kilometers.

The Omani government has earmarked renewable hydrogen production sites in the Duqm Dhofar and Jazr regions along the southwest coastline, totaling more than 19,000 square miles dedicated to hydrogen energy development.

The advancement of Oman’s hydrogen energy industry mainly relies on the strong support of two key companies.

The first is Hydrom Oman, a wholly-owned subsidiary of the Energy Development Oman (EDO). It has several hydrogen energy project cooperation agreements worth billions of dollars, making it an important partner of Chinese companies in the development of hydrogen energy projects in Oman.

The other is Oman Oil Company OQ Group, which is affiliated to the Oman Investment Authority and is a world-renowned comprehensive energy company focusing on the investment and development of renewable energy and green hydrogen energy.

At present, the Omani government has approved several large-scale wind, solar and green hydrogen projects, such as the HyPort Duqm project plan, which is expected to produce 60,000 tons of green hydrogen annually, mainly for the production of green ammonia and export to the international market;

Another project led by Worley plans to support 25GW of solar and wind power facilities, with an estimated annual output of up to 1.8 million tons of green hydrogen. It aims to produce green ammonia as a substitute for traditional energy in heavy industries such as steel and cement.

To achieve the milestone of 1 million tons of annual green hydrogen production capacity by 2030, Oman has planned a cumulative investment of approximately US$33 billion, and an additional US$4 billion is needed to increase the proportion of renewable energy in the national power structure to 20%.

Saudi Arabia: Building a landmark flagship project in the field of hydrogen energy in the Middle East

Saudi Arabia has abundant sunshine and wind resources , with an average of 8.9 hours of sunshine per day and an average solar radiation intensity of 5,600 watt-hours per square meter.

In addition, Saudi Arabia's average annual wind speed remains between 6 and 8 meters per second, demonstrating its significant wind energy potential.

As early as October 2020, Saudi Arabia successfully exported the world's first 40 tons of hydrogen-based blue ammonia to Japan. This milestone event demonstrated Saudi Arabia's leadership in the field of hydrogen energy.

In order to actively respond to the problem of over-dependence on oil, Saudi Arabia proposed the [Vision 2030] in 2016, which clearly places the development of natural gas and new energy such as solar energy, nuclear energy, and hydrogen energy in an important position.

Subsequently, in the Green Saudi Initiative, Saudi Arabia set an ambitious goal: to achieve a significant reduction of 278 million tons of carbon emissions per year by 2030, and to strive to achieve a blueprint for greenhouse gas [net zero emissions] by 2060.

In January 2023, Guofu Hydrogen Energy and its Saudi partner TIJAN Petroleum Co., Ltd. officially signed a strategic cooperation agreement, aiming to work together to jointly explore the broad prospects of the Saudi hydrogen energy market.

The core of this agreement focuses on the in-depth implementation of Saudi Arabia's hydrogen energy strategy. The two parties decided to jointly establish a joint venture in Saudi Arabia as a platform to concentrate their efforts on promoting the development of Saudi Arabia's hydrogen energy projects.

According to the agreement, the two parties will implement the project in phases over the next three years, that is, before the end of 2025.

The entire project will be carried out in three phases, with an estimated total investment of US$500 million.

According to official sources, the Saudi Public Investment Fund (PIF) announced plans in October to spend billions of dollars in the field of hydrogen energy development;

A new company called Energy Solutions was officially established to promote the production and development of green hydrogen energy.

At present, the iconic flagship project in the field of hydrogen energy in the Middle East is the NEMO New City (also known as the New Future City) that Saudi Arabia has devoted its efforts to building on the coast of the Red Sea. The project is located in Tabuk Province in northwestern Saudi Arabia and is a planned cross-border city.

According to the established plan, the city is expected to be initially completed in 2040, and by 2045, its population will reach 9 million.

It is particularly worth mentioning that the development zone will fully adopt clean energy such as wind energy, solar energy and hydrogen energy as its main source of electricity, laying a solid foundation for Saudi Arabia to achieve near-zero emissions goals by 2060.

In terms of hydrogen energy development, Saudi Arabia's NEOM project will build the world's largest carbon-free green hydrogen plant. The plant is expected to be put into operation in 2026, when its daily output will reach an astonishing 600 tons of green hydrogen.

UAE: Establishing a mature channel for hydrogen energy transportation

The UAE is known for its abundant sunlight resources and is home to three of the world's largest solar power plants.

According to statistics, the UAE's annual average solar radiation reaches 2,285 kWh/m2. This advantage has prompted the country to vigorously develop the solar energy industry.

The UAE’s installed solar capacity is expected to reach 92,000 kW by the end of 2025, and is planned to further increase to 142,100 kW by 2031.

In addition, thanks to its low-cost natural gas resources and extensive experience in carbon capture technology, the UAE also demonstrates strong price competitiveness in the production of low-carbon hydrogen.

The UAE has a significant competitive advantage in the global trade sector due to its extensive and powerful port network and its strategic geographical location as an important crossroads of global shipping.

This unique position has prompted the UAE to adopt a completely different strategy for hydrogen energy development than Saudi Arabia, highlighting its unique thinking path and approach to action.

In its National Hydrogen Energy Strategy, the UAE solemnly declared that it will fully tap the potential advantages of wind and solar energy to create more favorable conditions for the vigorous development of the hydrogen energy industry.

In 2023, the UAE systematically updated the UAE Energy Strategy 2050, aiming to significantly increase the proportion of clean energy in the overall energy structure.

The strategy clearly sets goals for 2030: energy consumption efficiency will be increased to between 42% and 45%, and the share of renewable energy will double ;

The installed capacity of clean energy will increase from the current 14.2 GW to 19.8 GW, accounting for 30% of the energy structure.

In the same year, the UAE officially launched the National Hydrogen Strategy 2050, which aims to improve the hydrogen supply chain, build hydrogen oases, and establish a national professional research and development center through a series of measures;

Over the next eight years, it will further strengthen its global leadership in low-emission hydrogen production and exports.

In April 2022, Masdar officially signed a cooperation agreement with Egypt's Hassan Allam Utilities and other relevant institutions, planning to jointly develop green hydrogen energy projects in the Suez Canal Economic Zone and the Mediterranean coastal area.

According to the agreement, the two parties will first focus on the Suez Canal Economic Zone (SCZONE) and strive to build a green hydrogen energy project with a production capacity of 2 gigawatts.

The production capacity layout in Egypt this time marks that the UAE has taken the lead in the strategic advancement of the hydrogen energy field, successfully leading Saudi Arabia's NEOM project and occupying a key hub position in the hydrogen energy supply chain from the Middle East to Europe.

Masdar's ability to play a leading role in the field of hydrogen energy is due to the strong support of the UAE sovereign fund, Mubadala Investment Company.

Mubadala Investment Company, Abu Dhabi National Oil Company and Abu Dhabi Holding Company together constitute the three pillars of the UAE's hydrogen energy industry.

Among them, Masdar focuses on the research and development and production of green hydrogen energy, Abu Dhabi National Oil Company leads the development of blue hydrogen energy, and Abu Dhabi Holding Company is responsible for providing the necessary financial support.

This cooperation model has laid a solid foundation for the UAE to explore feasible paths for hydrogen export and transportation in the Middle East.

This cooperation has built a mature and efficient hydrogen energy transportation channel. The specific route is planned as follows: Hydrogen/ammonia products originating from the UAE and the entire northeastern Middle East will be safely transported to Abu Dhabi Port for storage via pipeline or land transportation.

These products will then be transported westwards through the Gulf of Aden via sea routes, and then northwards through the Suez Canal and smoothly into the Mediterranean region.

Further, they will cross the Bosphorus and the English Channel, and eventually reach the most developed core areas of Europe.

The establishment of this channel marks a major step forward in the field of hydrogen energy transportation and provides strong support for regional energy cooperation and economic development.

In December 2023, Dubai welcomed its first hydrogen refueling station, which was designed, manufactured and provided with overall EPC services by Hydelight. This marked Hydelight's successful entry into the Middle East market and further expansion of its overseas business territory.

Subsequently, in April 2024, the Zhongguancun Hydrogen Energy and Fuel Cell Technology Innovation Industry Alliance, together with the Dubai Chamber of Commerce China Innovation Center represented by Hamdan Dule, and the Daxing International Hydrogen Energy Demonstration Zone, signed a cooperation agreement.

The cooperation aims to build a China-Arab hydrogen energy industry innovation cooperation platform, which is located in Daxing District, Beijing. It aims to provide comprehensive scientific and technological support and services for Chinese companies to go to the UAE to carry out multi-dimensional cooperation in technology, projects and capital.

Qatar: Plans to vigorously develop blue hydrogen economy

Qatar established the "Qatar National Vision 2030" in 2008, which aims to gradually reduce the economic dependence on traditional resources and achieve the goal of photovoltaic power generation accounting for more than 20% of the national energy structure through the implementation of sustainable development and economic diversification strategies.

By April 2024, the Qatari government officially announced the launch of a national renewable energy strategy, with clear plans that by 2030, its large-scale renewable energy facilities will be expanded to a capacity of approximately 4 million kilowatts, and approximately 200 megawatts of distributed solar power generation systems will be deployed simultaneously.

Although Qatar has not yet issued a top-level strategic plan for the hydrogen energy field, the country has expressed a positive willingness and plans to use its abundant natural gas resources and complete industrial chain foundation to vigorously develop the blue hydrogen economy.

Qatar's hydrogen energy project focuses on the development of the blue hydrogen and blue ammonia industry chain, and its natural gas resource advantages are significant.

Specifically, the Ammonia-7 blue ammonia plant project is invested and constructed by Qatar Energy Company, with a total investment estimated to be approximately US$1 billion.

The project fully relies on Qatar's abundant natural gas resources and complete natural gas infrastructure, and adopts mature and efficient natural gas reforming technology and advanced carbon capture technology.

By capturing and properly storing the carbon dioxide produced during the production process, the project is expected to achieve emission reductions of approximately 1.5 million tons per year.

Looking ahead, the Ammonia-7 blue ammonia plant project is expected to become the world's largest blue ammonia production base and a key component of Qatar's energy transformation strategy.

The project is expected to be officially put into operation in the first quarter of 2026, mainly for production in the fields of fertilizers and fuels. By then, the annual production capacity will reach 1.2 million tons of blue ammonia.

With the successful implementation of this project, Qatar is expected to further promote the domestic production and export of hydrogen energy and its related derivative products, and contribute to the country's energy structure optimization and sustainable development.

The Middle East is expected to be the first market to be developed

Currently, the hydrogen energy market in the Middle East is in a stage to be developed, which is quite similar to the situation of the Chinese market 3-5 years ago.

If the international situation remains stable, the Middle East is expected to become the second important battlefield for Chinese hydrogen energy companies besides the Chinese market, forming a new pattern of [Chinese equipment-Middle East scenario-world application].

In November 2023, Saudi Arabia and China formally reached a three-year currency swap agreement with a total amount of RMB 50 billion.

Subsequently, in August 2024, the Saudi Arabian Public Investment Fund (PIF) signed a memorandum of understanding worth up to US$50 billion with six major financial institutions including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank.

Similarly, in November 2023, the United Arab Emirates (UAE) also signed a five-year currency swap agreement with China worth RMB 35 billion.

Furthermore, during the UAE President's visit to China in May 2024, the two governments signed a total of 19 cooperation agreements and memorandums of understanding, and issued a joint statement, which particularly emphasized the deepening of cooperation in the field of clean energy.

These in-depth cooperation initiatives at the national level have created a more favorable external environment for Chinese companies' trade and investment activities in the Middle East.

From the perspective of electrolytic cell production capacity, Chinese companies account for more than half of the market share, and their expansion speed and development momentum are very rapid.

In contrast, the equipment production capacity of other countries is not yet sufficient to support their established goals of hydrogen energy development.

Given the rapid growth of China's hydrogen production equipment capacity and the strong growth of overseas green hydrogen demand but the current situation of insufficient equipment capacity supply, China's hydrogen energy equipment industry will usher in a large amount of export demand.

Considering that Europe already has its own hydrogen energy manufacturers, the Middle East is expected to become the first market to be developed.

Chinese companies have successfully entered the Middle East market through cooperation with large central state-owned enterprises such as China Energy Engineering Group and with the help of EPC manufacturers' bidding for hydrogen energy equipment.

As of the first half of 2024, about 28 Chinese companies have participated in cooperation on hydrogen energy projects in the Middle East.

These enterprises include infrastructure enterprises with the ability to undertake international projects, such as China Energy Engineering, China Power Construction, and China Construction; comprehensive new energy enterprises, such as Sungrow Power Supply, Envision Energy, and Shuangliang Energy Saving;

Hydrogen production equipment suppliers, such as LONGi Hydrogen Energy, Perry Hydrogen Energy, Guofu Hydrogen Energy, etc.; fuel cell companies, such as Hydrogen Blue Era, Vichiteng, etc.; and financial institutions, such as Bank of China, Shanshui Capital, etc.

The rich experience of domestic photovoltaic companies in the field of large-scale ground power stations makes it easier for them to obtain entry qualifications among owners and EPC companies in the large storage field that highly overlaps with photovoltaic projects.

Some domestic photovoltaic companies, relying on their successful experience in implementing large-scale power station projects in the Middle East, are expected to enter the energy storage market through existing channels.

For example, JinkoSolar established a joint venture with Saudi Arabia in July 2024 to jointly build a 10GW battery and module project, and as early as December 2023 it had already won a large energy storage order of 515MWh in the Middle East market.

Ending:

In contrast, overseas energy storage manufacturers, such as Tesla, Fluence and other internationally renowned brands, have performed outstandingly in both technical capabilities and brand reputation.

But high product prices could be a barrier to entering the cost-sensitive Middle Eastern market.

In contrast, domestic energy storage integrators such as Sungrow and Huawei have a number of advantages, including project experience, financial stability, technical capabilities, cost advantages, and being on the shortlist.

It has demonstrated strong competitiveness in the market, and its ability to obtain orders is significantly better than other types of manufacturers.

Some reference materials: Going Global: "The Golden Age of Hydrogen Energy in the Middle East: Oman and Saudi Arabia Lead the 1.3 Trillion New Energy Storm", Foreseeing Energy: "Investing 1 billion! Why do the Middle East's [tycoons] prefer hydrogen energy?", Orange Club Research Institute: "The Three Horsemen of Hydrogen Energy in the Middle East", Guojin Securities Research: "Overseas Hydrogen Energy Special Issue: The Middle East: Significant Resource and Location Advantages, Expected to Become a Hydrogen Energy Export Center", Emerging Industry Observer: "The Middle East has significant resource and location advantages and is expected to become a hydrogen energy export center", Huatai Ruisi: "Global Observation of Energy Storage-Middle East: Energy Transformation Drives Large Storage Demand", Zhongguancun Energy Storage Industry Technology Alliance: "A Brief Analysis of the Development Opportunities of Energy Storage in the Middle East"

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