As Saudi Aramco flaunted bountiful returns from soaring crude oil prices in its first-quarter results in mid-May, the company’s embryonic plans to diversify into hydrogen were barely mentioned. Nonetheless, the proceeds of the oil windfall are indirectly fuelling the hydrogen sector’s development, with the government and affiliated local renewables company Acwa Power now making swift progress on Neom, the world’s largest green hydrogen and ammonia project.

Meanwhile, behind Aramco’s defiant public focus on upstream hydrocarbons, the firm is also preparing for a day when the cleaner fuel might be the more valuable.

Acwa and US industrial gases company Air Products met with considerable scepticism when they announced plans to develop the Neom complex in Saudi Arabia’s remote northwest in July 2020, not least among the doubts being its proposed location. Neom is a $500bn futuristic new city most of which exists only on paper.

Almost two years on, however, the scheme is one of the region’s most advanced, assisted by the US firm being on board as offtaker from the outset and by Riyadh’s commitment. The government and Acwa (which is 50pc owned by the Kingdom’s sovereign wealth fund) hold a combined two-thirds shareholding in Helios Green Fuels, the project company.

1.2mn t/yr – Neom green ammonia target capacity

Formal notice to proceed was issued in April to the engineering, procurement and construction contractors (both units of Air Products), while selection of a company to install the 4GW of renewable power facilities required for the project is expected later this month.

Financial close is anticipated by the end of the third quarter, with German export credit likely to play a role following the selection last year of Essen-based Thyssenkrupp to supply the plant’s 2GW electrolyser. Designed to produce 650t/d of hydrogen for conversion into 1.2mn t/yr of ammonia, it is due onstream in 2025.

The project aligns with the wider economic ambitions enshrined in the Kingdom’s Vision 2030 development blueprint—which entails diversifying away from dependence on hydrocarbons with a focus on technologically advanced new sectors. That Helios will produce 15,000bl/d oe, while national crude output stands at over 10mn bl/d, gives some idea of the mountain to be climbed.

Work in progress

Aramco’s hydrogen strategy gives the impression of being a work in progress, with plans and projects only vaguely described. However, the level of physical, financial, technological and personnel resources held by the company—coupled with international energy supply relationships built up over decades—makes it inconceivable that the firm will not play a major role in realising Riyadh’s typically grandiose ambition, espoused last year, to become the world’s largest supplier of hydrogen in both its blue and green forms.

The oil company’s annual report was marginally more forthcoming than its quarterly update, confirming plans to process some of the gas produced through the planned $110bn development of the 200tn ft³ (5.66tn m³) Jafurah unconventional gas field in the southeast into blue hydrogen.

Contracts were awarded in November to carry out the scheme’s first phase. But with output not due to reach its 2bn ft³/d target until 2030, and given the competing domestic demands for the Kingdom’s relatively scarce gas supplies, it remains unclear how far Aramco will ultimately go with these plans.

The company’s declared intentions for green hydrogen are even more nebulous, comprising only a memorandum of understanding signed at an investment conference last October with Hong Kong-based Intercontinental Energy to develop a renewables and hydrogen hub at an unspecified location in the Kingdom. Envisaged capacity was likewise undisclosed. Similar developments planned in Oman and Australia aim to produce around 1.8mn t/yr of hydrogen, but since neither is expected to reach FID before mid-decade, it can be deduced that the execution of the Saudi project is many years off, and the provisional agreement went unmentioned in Aramco’s annual report.

The firm’s plans for broader diversification into carbon-free energy are likewise ill-defined. It made its first investment in renewables only in August, acquiring a 30pc stake alongside Acwa and another parastatal in the project company formed to develop the 1.5GW Sudair solar power plant, the Kingdom’s largest to date.

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Author: Clare Dunkley