Oman Takes Green Hydrogen Gamble
Oman is dedicating an area the size of Slovakia to solar power projects to produce green hydrogen – gas produced entirely from renewable sources, according to a report by AGBI.
On June 1 Salim bin Nasser Al Aufi, minister of energy and minerals, signed $20 billion of contracts with partners including BP, Shell and the newly formed Hydrogen Oman (Hydrom) to produce 500,000 tonnes of green hydrogen each year.
By July 28, Hydrom announced that “solidified commitments” to initiatives in the sultanate had risen to $30 billion.
Production targets are 1 million tonnes by 2030, 3.75 million tonnes by 2040 and 8.5 million tonnes by 2050. This should make the sultanate the world’s sixth largest exporter of hydrogen by 2030.
By 2040, those exports are projected to be worth 80 percent of Oman’s current exports of liquefied natural gas (LNG), according to the International Energy Agency.
By 2050 they may be worth twice as much as the sultanate’s current overseas LNG sales.
Yet hydrogen is not without challenges. Technical issues limit long-distance transportation of the gas, while regulations and international markets are also still being worked out.
“There’s a lot to do before hydrogen will be up and running and delivering,” Charles Dolphin, a partner in Muscat law firm CMS, told AGBI.
This uncertainty is reflected in the wide range of approaches that have been taken to the gas in the Gulf.
“Other Gulf states are taking a more private sector approach,” said Dolphin. “The UAE and Saudi Arabia aren’t seeing so much government involvement, except for some gearing up of renewable energy projects to supply the electrolysers making the hydrogen.”
Oman’s decision to go for green is partly explained by the fact that it has some of the world’s leading renewable energy resources, according to S&P.
The sultanate enjoys high irradiance – the power per unit area received from the sun – a good wind profile and a strategic location, according to global energy transition reporter James Burgess.
Combined with large amounts of available and unused land, it is therefore perfect for green hydrogen production.
The relatively high price of the gas compared to the huge quantities of cheap renewable energy that are set to become available – plus Oman’s relatively small population and economy – means the bulk of the hydrogen generated will be for export.
This means getting to grips with the problem of transportation. Converting it into hydrogen-heavy ammonia for shipping on tankers is one possible solution. It is then converted back into hydrogen at its destination.
Yet, “while ammonia is definitely seen as the vector for transport at the moment, there are conversion losses at every step of this process,” said Burgess.
Plus, pricing on a global market scale is also still evolving.
“It could evolve like the early LNG market,” said Burgess. “You might see some surplus hydrogen volumes from the big hubs eventually developing into a spot market.”
Local demand may well be the shape of the industry in the immediate future. Many of the projects being announced – in Oman and elsewhere – also have seven-year timelines, up to 2030.
Dolphin said: “Maybe, by the time they come online, the market will have matured and the project’s time will have come.”
Read More: SMEs & Oman’s Green Transition
