Taking the virtual stage at the World Economic Forum in late January, Saudi energy minister Abdelaziz bin Salman Al Saud toned down his defiance over continued upstream oil investment and instead spoke of his government’s intent to become the world’s leading supplier of hydrogen.

A day earlier, state oil giant Saudi Aramco signed a series of deals with energy firms from South Korea—a key potential importer of the fuel—to collaborate on developing the fledgling international market.

The nine memorandums of understanding (MoUs) inked during the visit to Riyadh by South Korean president Moon Jae-in are geared primarily towards the development of a blue hydrogen supply chain between the two nations.

Aramco’s rival, UAE state-owned Adnoc, has advanced its blue hydrogen plans further. The Emirati NOC has also teamed up with Seoul and, more extensively, Tokyo, with South Korean and Japanese corporates co-opted as shareholders in the firm’s debut blue hydrogen scheme.

Riyadh’s eyes are now primarily on the task of becoming a world leader in the renewables-based hydrogen sector

The Saudi giant lacks the depth of energy relationships with key Asian consumers, which Adnoc has developed by allocating them equity interests in some of Abu Dhabi’s largest oilfields.

However, Aramco is one of South Korea’s largest crude suppliers, and it has stakes in refiners Hyundai Oilbank and S-Oil, which are involved in the recent agreements.

The cumulative intent of separate MoUs with the two refiners and other Korean firms such as H2Korea, Korea Electric Power Company, Lotte Fine Chemical and Posco were summarised by Aramco as being intended “to explore potential collaboration in the supply, transportation, utilisation and certification of hydrogen and ammonia”. Aramco will also examine the feasibility of converting ammonia back into hydrogen at the South Korean end. The cooperation is envisaged as leading to the development of a large-scale hydrogen and ammonia production facility.

In October, Aramco for the first time mooted using output from the 200tn ft³ Jafurah unconventional gas field, which is in the early stages of development in the Eastern Province, to produce blue hydrogen. However, the price tag put on the 15-year Jafurah upstream programme is an eye-popping $110bn for a production plateau of 2.2bn ft³/d.

The Kingdom left its unconventional gas resources in the ground for many years due to the exorbitant cost of their exploitation—changing course mainly because of a growing domestic shortfall for use in power generation and petrochemicals, as well as a desire to free up crude oil for export.

As Abdelaziz bin Salman’s recent speech confirmed, Riyadh’s eyes are now primarily on the task of becoming a world leader in the renewables-based hydrogen sector—where existing infrastructure, relationships and expertise are less obviously transferrable.

Green hydrogen

The Kingdom’s first concrete hydrogen project is a green one. In mid-December, Germany’s Thyssenkrupp was awarded the contract to supply a 2GW electrolyser to the landmark $5bn Helios scheme launched by state-led Acwa Power and the US’ Air Products in mid-2020. Helios aims to develop a plant producing 650t/d of zero-carbon hydrogen and 1.2mn t/yr of green ammonia, using an as-yet-undeveloped 4GW of renewables. It will be located at the new city of Neom and is due onstream in 2025.

27.3GW – Targeted renewables capacity in 2024

Year-round sunshine and vast tracts of empty desert land make the Kingdom an ideal candidate for the development of renewables capacity well beyond that required for domestic power generation—far more so than the relatively land-poor UAE.

A report published this month by the Abu Dhabi-based International Renewable Energy Agency cited expert findings that Saudi Arabia, Australia, Chile, Morocco and the US were best-placed to emerge as major exporters of green hydrogen by 2050.

However, one source of scepticism around the scale of Riyadh’s ambitions is the slow pace of its renewables buildout thus far. Less than 1GW was online by the end of 2021, and while the pipeline is lengthening, it is not doing so with nearly the speed required to meet an improbable 27.3GW target by 2024.

Awards following a 1.2GW third solar auction by the government’s Renewable Energy Project Development Office remain pending over two years after the auction’s launch and three months since shortlists were announced for the each of the four projects. This delay has been blamed first on the pandemic and latterly on rising polysilicon prices, which have made prospective developers’ tariff offers considerably higher than those in the second round.

The government’s Public Investment Fund, which is due to procure 70pc of the 58.7GW of capacity envisioned by 2030, has contracted only a single, 1.2GW project from Acwa, in which it owns a 50pc stake. Aramco acquired a 30pc interest in the scheme in August—its first renewables investment.

Nuclear hydrogen

Even more at odds with the current power generation mix was Abdelaziz bin Salman’s suggestion that the Kingdom could also produce nuclear-based hydrogen. The government has had notional plans to develop large-scale nuclear reactors for many years, driven by gas scarcity and buoyed lately by the UAE’s successful commissioning of its first plant in 2020.

Some signs of progress emerged in late 2021 regarding the first 1.2-1.6GW reactor for a proposed two-unit facility, and the minister told a mining conference in mid-January that partners would be sought to exploit substantial uranium deposits for use in a civilian nuclear programme.

A typically extravagant figure of 17GW of capacity by 2040 has been floated. However, any such development would be controversial, especially since Riyadh has in the past refused to countenance the strict non-proliferation safeguards accepted by Abu Dhabi.

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Author: Clare Dunkley