Abu Dhabi has defied the global sustainable energy trend over the past year, but recent actions by the emirate’s leadership and parastatal companies signal an abrupt change of strategy.

State-owned giant Adnoc responded counterintuitively to the pandemic-triggered collapse in fossil fuel demand by committing to a 25pc hike in long-term oil production capacity and to a $122bn five-year investment plan heavily focused on hydrocarbons. A vague corollary pledge to “explore opportunities in hydrogen” had the look of a tokenistic afterthought.

Yet for over a decade, both the capital emirate and neighbouring Dubai have paradoxically also styled themselves as clean energy pioneers. Indeed, the two emirates have been driving the federal UAE government’s declared ambition to generate 50pc of its energy from renewables and reduce the carbon footprint of power generation by 70pc by mid-century—a tall order for one of the world’s most profligate per capita fossil fuel consumers.

The two strategies were belatedly married on 17 January. Adnoc, sovereign wealth vehicle Mubadala and government holding company ADQ inked a memorandum of understanding (MoU) pledging collaboration on the production and usage of both blue and green hydrogen, promoting the creation of a domestic hydrogen economy and supplying the burgeoning international market.

Green vs blue

Details about the MoU are scarce, bar an associated bilateral agreement between Mubadala and Germany’s Siemens to build a pilot green hydrogen production facility at the emirate’s Masdar City clean energy hub. The German firm commissioned a solar-powered hydrogen electrolysis demonstration plant for Dubai Electricity and Water Authority last year.

“Specific hydrogen projects will be announced in the near future,” Adnoc

Abu Dhabi also has some history with green hydrogen. The Abu Dhabi Future Energy Company (Masdar), now a wholly owned subsidiary of Mubadala, considered but shelved plans to develop a $2.2bn hydrogen and carbon capture project in a joint venture with BP a decade ago.

While pledging collaboration with its parastatal partners on green hydrogen and promoting the wider hydrogen economy, Adnoc confirmed the company would separately and inevitably focus on increasing the manufacture and marketing of blue hydrogen from its vast oil and gas operations.

Some 300,000t/yr are already produced at the firm’s refining and petrochemicals complexes at Ruwais and output is reportedly envisaged to rise to more than 500,000t/yr over an unspecified timeframe.

The wider circular economy concept is not new territory—CO₂ captured from the emirate's industrial facilities has been used in oilfield gas injection on a small scale for several years. 

International partnerships

Corporate history implies that hydrogen projects will take the form of international partnerships.

The oil giant unveiled its ‘expanded partnership’ strategy just over three years ago, which calls for its numerous existing international partnerships, long concentrated in upstream oil, to be extended along the energy value chain and leveraged to facilitate expansion into new areas.

“Specific hydrogen projects will be announced in the near future,” confirms an Adnoc official without being drawn on potential partners.

BP, Eni and Total are all stakeholders in the emirate’s main oil and gas fields—and each of these IOCs has announced major hydrogen investment plans over the past six months.

The latest tie-up with Mubadala also coheres with a longer-running trend towards energy-sector collaboration between the government’s two corporate bedrocks. This is manifested in the increasing involvement of members of the investment vehicle’s stable—namely Austria-based OMV, compatriot Borealis and Madrid-headquartered Cepsa—in Adnoc’s upstream and downstream operations. All three firms have experience of hydrogen development in the European market.

Tokyo connection

Leveraging existing energy relationships to realise long-term strategic plans also applies at country-level—with Adnoc’s ties with key Asian crude oil consumers now extending well beyond the simple buy/sell dynamic.

Adnoc confirmed it would separately and inevitably focus on increasing the manufacture and marketing of blue hydrogen from its vast oil and gas operations

Ties with Tokyo have long been the closest. Abu Dhabi supplies around a quarter of Japan’s oil while the latter’s parastatals have had equity interests in the emirate’s oilfields since the 1970s.

Meanwhile, the energy-poor Asian economic powerhouse announced plans last year to start replacing fossil fuels in power generation with imported ammonia. The coincidence of interests manifested on 14 January in an MoU between the Emirati oil titan and Japan's Ministry of Economy, Trade and Industry to collaborate on developing ammonia fuel and carbon recycling technology.

Given Tokyo’s declared intent to develop an international blue ammonia supply chain by the late 2020s, the partnership has the potential to become pivotal for both parties.

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Author: Clare Dunkley