Posted inEnergy Transition

Can GCC countries become major green hydrogen producers?

Just as GCC countries hold a key position in the oil industry, they could also become leaders in the hydrogen era, according to Deloitte

by Bart Cornelissen, Energy, Resources & Industrials Leader, Deloitte Middle East and Yousef Iskandarani, Senior Strategy Manager, Monitor Deloitte Middle East
hydrogen-economy

The hydrogen market’s global production is expected to increase significantly to support the net-zero agenda. From 90 million tons (MT) in 2021 with a total market value of about $315 billion, global hydrogen production is anticipated to increase to 532 MT by 2050 with green hydrogen dominant among the different forms, and with a market value of approximately $798 billion.

The turning point in terms of widespread adoption is forecast to occur in the year 2030, when production is estimated to reach 390 MT, as shown in Figure 1.

GCC countries have a viable opportunity to become key players in the new hydrogen economy as they can rely on several competitive advantages:

  1. The abundance of high-yield solar energy
  2. Unlimited flat land to further develop energy-related infrastructure
  3. Solid availability of funding and alignment with diversification strategies
  4. Potential to retrofit current fossil infrastructure for hydrogen operations and shipping that builds on
    existing routes
  5. Central location vis a vis key energy demand markets.
Figure 1

What type of investment is required to achieve leadership in the hydrogen era?

Just as GCC countries hold a key position in the oil industry, they could also become leaders in the hydrogen era. To fully seize the opportunity related to the hydrogen market and its potential, three different scenarios have been modelled for the GCC nations.

There is a significant market opportunity for GCC countries in each of the considered scenarios, with the potential to capture a market size that ranges between $79.5 billion (under the conservative scenario) and $239.4 billion (under the aggressive scenario) in 2050.

Although there are leading projects in the region, when compared to the top five countries active within green hydrogen development, the GCC region is still forecast to have a significant gap in terms of green hydrogen capacity development by 2025.

To offset the risk of being left behind, GCC countries need to consolidate a common green hydrogen strategy and leverage their net-zero commitment as well as their leadership position in the energy markets internationally, which is set to be enhanced by milestones such as COP27 and COP28 due to take place in the region.

Where should the hydrogen value chain focus to ensure long-term cost leadership?

There are three key areas of focus in order of priority across the green hydrogen value chains:

  1. Conversion and reconversion of hydrogen: Although there are different methods to supply green hydrogen, conversion to liquid ammonia is the most preferable. This is due to three main reasons:
    -Synthesis know-how: Ammonia synthesis is a widely known process
    -Infrastructure maturity: The infrastructure to store and supply ammonia already exists and is widespread
    -Quantity of hydrogen carried: Liquid ammonia can contain more hydrogen by volume compared to other hydrogen transportation method
  2. Electrolysis: There are three key opportunities for GCC countries listed below:
    -Reducing the cost of production: GCC countries could capitalise on the existing supply of electrolysis components (e.g., compressors, pumps, gas analytics) to further decrease production costs.
    -Leveraging the oil and gas legacy: Gulf countries could leverage expertise gained from the oil and gas sector to build and improve efficiency.
    -Investment attraction: Nations in the region can seize this opportunity by setting up new companies or localising promising ones to attract early on the foreign direct and local investments required to become a supplier for hydrogen technologies.
  3. Renewables Energy: Leveraging photovoltaics and wind potential, GCC countries would be able to generate high volumes of renewable energy at a relatively low cost. Moreover, engineering and design activities related to renewables generation could be localised in the long term.

The road ahead

To expedite closing the investment gap, the GCC needs to consider crafting policy programmes required to facilitate adopting green hydrogen across
the entire energy system. These programmes should focus on three dimensions.
In addition to the policy-making dimensions, GCC governments should also leverage investment tactical measures.

When the GCC successfully manages to unlock investments essential to increase the production of renewables to localise hydrogen research and technologies and to focus on excelling the solid midstream value proposition, it will have the possibility to become the undisputed champion of both fossil and hydrogen markets and the trusted supplier to energy importers across the world.