DUBAI, UAE, 15 August 2023: Arabian Gulf Business Insight (AGBI) has reported that the Sultanate of Oman is dedicating an area the size of Slovakia to solar power projects to produce green hydrogen, a type of gas produced entirely from renewable sources. 

AGBI said H.E. Salim Al Aufi, Minister of Energy and Minerals, Oman, signed contracts worth USD 20 billion with partners including BP, Shell and the newly formed Hydrogen Oman (Hydrom) to produce 500,000 tonnes of green hydrogen each year. Further, AGBI added that Hydrom announced that solidified commitments to initiatives in Oman had risen to USD 30 billion by July 28.

AGBI has reported that the production targets are set at one million tonnes by 2030, 3.75 million by 2040, and 8.5 million by 2050. This should make Oman, AGBI noted, the world’s sixth-largest exporter of hydrogen by 2030. AGBI also said that according to  International Energy Agency, hydrogen exports are projected to be worth 80% of Oman’s current exports of liquefied natural gas (LNG) by 2040 and potentially double the value of Oman’s current overseas LNG sales by 2050. However, AGBI said it comes with challenges and added that technical issues limit long-distance transportation of the gas while regulations and international markets are still being worked out.

According to AGBI, Charles Dolphin, Partner at CMS Energy, Infrastructure & Projects Group, noted that there is a significant amount of work to be done before hydrogen can become operational and productive. Furthermore, AGBI said that he also pointed out that this uncertainty is reflected in the wide range of approaches taken to the gas supply in the Gulf.  Dolphin also said that other Gulf states are adopting a more private-sector approach. For instance, he said, the UAE and Saudi Arabia are witnessing less government involvement, except for for some initiatives to ramp up renewable energy projects to supply the electrolysers making the hydrogen.

AGBI also reported that S&P Global Commodity Insights said that Oman’s decision to embrace green energy is driven by the fact that it has some of the world’s leading renewable energy resources. Furthermore, AGBI added that James Burgess, an energy transition reporter, said that Oman benefits from high irradiance,  the power per unit area received from the sun, a good wind profile and a strategic location. Burgess also said that Oman is perfect for green hydrogen production due to these factors, in addition to the surplus amounts of available and unused land.

Burgess said: “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 also means getting to grips with the problem of transportation and converting it into hydrogen-heavy ammonia for shipping on tankers is one possible solution, which can then be converted back into hydrogen at its destination. However, while ammonia is definitely seen as the vector for transport at the moment, there are conversion losses at every step of this process.”

Burgess also commented on the pricing on the global market scale, which is still evolving. He said it could evolve like the early LNG market, where surplus hydrogen volumes from the major hubs eventually develop into a spot market.

Furthermore, while commenting on how local demand may shape the industry in the near future and considering the projects that have been announced in Oman and elsewhere in the Gulf region and are expected to be completed by 2030, Dolphin said that perhaps by the time they come online, the market will have matured, and the project’s time will have come.