Adnoc to work with GS Energy of South Korea
Abu Dhabi National Oil Company signed an agreement with South Korea’s GS Energy to explore opportunities to grow the UAE’s hydrogen economy and carrier fuel export position.
GS Energy, which operates an onshore concession in Abu Dhabi, is interested in Adnoc’s planned increase in the production of blue hydrogen.
The clean fuel is being increasingly prioritised by Gulf oil companies as an alternative energy source. The blue variant refers to hydrogen produced when natural gas is split using steam methane reforming.
The partnership identifies “possible areas of investment in Abu Dhabi’s emerging blue hydrogen ecosystem” as well in the refining and petrochemicals hub in Ruwais, said Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and Adnoc Group chief executive.
The UAE, which accounts for nearly 4.2 per cent of global crude output, meets 10 per cent of South Korean oil imports.
Gulf oil producers, such as the UAE and Saudi Arabia, have looked to increasingly benefit from their existing fossil fuel-based relationships to trade in newer forms of energy.
On Thursday, Saudi Arabia agreed to ship natural gas to South Korea for the production of hydrogen in return for carbon dioxide. The CO2 gas will then be used in Saudi Arabian oil production.
Last year, Aramco, the world’s largest exporter of crude, shipped blue hydrogen produced in the kingdom to Japan.
Aramco made the shipment in the form of the more easily transportable ammonia for use in zero-carbon power generation in Japan, one of its top importers of crude.
Dr Al Jaber also discussed new opportunities with the South Korean Minister of Trade, Industry and Energy, Sung Yun-mo, during an online meeting.
The two sides will explore partnerships in tackling climate change, the development of hydrogen and deepening industrial co-operation between Abu Dhabi and Seoul.
“As a stakeholder and a partner of the Adnoc upstream concessions, we are excited to strengthen this partnership by jointly seeking opportunities within the blue hydrogen ecosystem,” said Yongsoo Huh, president and chief executive at GS Energy.
Clean hydrogen can cut greenhouse gas emissions from the hydrocarbons sector by 34 per cent, according to Bloomberg.
McKinsey estimates that the development of a hydrogen economy could generate $140bn in annual revenue by 2030 in the US alone.
Astaggeringly fast rise in energy stakeholders’ appetite for hydrogen – potentially the world’s “new oil” – means blueprints in the Gulf countries are transforming into real progress.
In Saudi Arabia, Air Products, Acwa Power and Neom’s deal for a $5 billion green hydrogen-based ammonia production plant powered by renewable energy is a momentous step in a greener direction for the world’s biggest oil exporter. The project, which could be the world’s largest green hydrogen unit, will supply 650 tonnes per day of carbon-free hydrogen for global transport and reduce 3 million tonnes of carbon dioxide a year.
The kingdom’s blue ammonia shipment to Japan in late 2020, intended to co-fire coal power generation plants, was significant in bolstering sustainable hydrogen use and a circular carbon economy.
Hydrogen development is also high on the UAE’s agenda as Opec’s third-largest member accelerates its decarbonisation plan.
One of the several recent initiatives is Mubadala, Adnoc and ADQ’s deal to create the Abu Dhabi Hydrogen Alliance, which aims to establish the UAE’s capital as a leader in low-carbon green and blue hydrogen in emerging and international markets.
Building a national green hydrogen economy is also on the cards. To the east, Deme Concessions and OQ Alternative Energy plan to team up in a major green hydrogen plant in the Special Economic Zone at Duqm in Oman.
Putting its stamp on this burgeoning market is a clever move for Gulf leaders. Home to some of the world’s largest oil and gas producing companies, the region wants to remain relevant and be a significant stakeholder in the 21st century’s energy transition.
Blessed with high levels of solar irradiation and significant wind resources, the region has all the ingredients to deliver renewable electricity, which can enable it to become a global exporter of green hydrogen and its carrier products.
Still, more must be achieved quickly for the Gulf countries to emerge as one of the world’s leading hydrogen markets by the 2030s. This is especially true when considering the lead time of research and development, pilots, project construction, and sourcing finance and talent resources.
More than 30 countries have unveiled hydrogen roadmaps, with 228 large-scale hydrogen projects announced across the value chain. Of those, 85 per cent are in Europe, Asia, and Australia, according to the Hydrogen Insights 2021 report.
If all the projects come to fruition, total investments will exceed $300bn in spending to the end of 2030 – prosperity that the Gulf countries could benefit from. Of the $300bn, only 26 per cent can be considered mature, which means the projects are in the planning stage, have passed a final investment decision or are under construction, already commissioned or operational.
A natural two-way hydrogen relationship is potentially developing between Europe and the Gulf countries. On one side is Europe’s Hydrogen Strategy, the world’s most developed roadmap to produce the clean fuel.
On the other side of the relationship is the Gulf countries’ vast production potential and deep-rooted government support for hydrogen growth – and critically, its export ambitions.
Germany’s needs may trigger a natural marriage of this international supply-demand dynamic. For example, Europe’s biggest economy expects up to 110TWh of hydrogen will be needed by 2030. To cover part of this demand, Germany plans to establish up to 5 gigawatts of generation capacity, including offshore and onshore energy generation facilities.
This corresponds to 14TWh of green hydrogen production and will require 20TWh of renewables-based electricity. Still, even with further additions up to 2040, Germany’s domestic generation of green hydrogen will not be sufficient to cover all new demand, which is why most of the hydrogen will have to be imported.
As such, the Middle East could become the long-term partner of choice for Germany and Europe if it responds in a timely manner to these international needs.
Transport also needs consideration. For longer distances, ammonia ships are the most economically viable solution. But using pipelines for shorter distances – ie about 1,800 kilometres – is the lowest-cost option, according to Strategy&.
A potential import-export pathway between the UAE and Germany, for example, stretches more than 6,000km. So shipping to Europe, followed by a land-based route, needs choreographing.
Still, many questions must be answered for all regions to successfully use the clean fuel. How to cut the cost of green hydrogen and make it financially comparative to other renewable energy types? How to bolster the scale of blue and green hydrogen? How to build the necessary infrastructure affordably and quickly, for both national use and export plans?
The sooner the Gulf countries can answer these questions, the greater its competitive stake in hydrogen – potentially the 21st century’s biggest energy market.
A natural two-way hydrogen relationship is potentially developing between Europe and the Gulf countries