The budget of Saudi Arabia’s NEOM hydrogen project that is expected to tap massive green power capacity, has soared by 70% to a whopping $8.5 billion from its original budget of $5 billion, according to a recent financial update from co-developer Air Products.
Inflation, spare parts, upfront fees for land and $1 billion of interest on loans have all contributed to the $3.5 billion budget increase, said the US industrial gases company, which is developing the project in the desert of northwest Saudi Arabia with partners ACWA Power, the Saudi renewables developer, and NEOM.
While the green hydrogen project – which would use 4GW of wind, solar and battery storage to produce 1.2 million tonnes of green ammonia per year from 2.2GW of electrolysers – is seeing “great progress”, with construction under way, its total capital needs have risen to $8.5 billion.
Breaking down the $3.5 billion price hike, Air Products attributes $500 million to inflation, $1.8 billion to “project financing costs, upfront fees, interest during construction, additional joint venture costs, spares, land, etc”, and $1.2 billion to “additional scope to make project more self-sufficient and lower operating costs”. This means services that the project partners now want to provide themselves, such as transmission lines and other infrastructure costs, according to an Air Products’ call with analysts.