Oman has unveiled plans to launch its third auction of green hydrogen concessions in the first quarter of 2025, defying the recent cooling of global industry sentiment.

Auctioned blocks of land are expected to be allocated to prospective project developers in late 2025 or early 2026, state developer Hydrom said at an investor day in Muscat in early December.

However, the design of the auction mechanism is expected to differ from the first two rounds as the government takes into account the challenges faced by developers globally in progressing projects to FID.

Revisions to the block allocation process could include the use of novel mechanisms such as the double auction structure pioneered by Germanys’ state-backed H2Global platform, Hydrom officials said. Here, the state commits to buying projects’ output at a price and for a duration sufficient to ensure their economic viability.

$49b – Proposed investment

The product is then sold onward under short-term contracts at a rate acceptable to buyers, bridging the gap between real production costs and achievable market prices. However, this approach would be likely to cover only a small proportion of total planned production, given the financial risks involved and Muscat’s strained budgetary resources.

A simpler innovation mooted by officials would entail offering blocks for smaller projects than the multi-billion-dollar ventures emerging from the first two auctions, and seeking to tie proposed projects more closely to domestic industrial abatement needs—an intensifying imperative as international carbon border taxes take root.

Locations

Locations to be offered via the third auctions were unspecified, but the prospect of smaller projects tailored to local industrial needs suggests Sohar or Sur (respectively the sultanate’s heavy industrial hub and home to its LNG production complex) could be included.

Localising the benefits of the sector’s development beyond a mere boost to export revenues, and replacement of those currently derived from crude oil, is a wider priority. One of the few deals signed during the December event comprised a memorandum of understanding between the Omani state firm and Germany’s Thyssenkrupp to study the possibility of manufacturing electrolysers in the sultanate. A similar agreement was inked with Siemens, also German, a year earlier.

Oman has aspirations to become a major producer of green steel and one of the first-round green hydrogen concessions went to a 200,000t/yr Danish/local project geared towards supplying the sector at Duqm, where construction of a $3b ‘hydrogen-ready’ steel plant started in late 2023. A sizeable fertiliser industry requires decarbonisation for the same reason to ensure exports remain competitive.

Early optimism

Oman’s first two auctions proved hugely successful, riding a wave of international optimism around green hydrogen’s potential, while also reflecting the sultanate’s superior climatic and land resources, as well as its geographical advantages as an exporter.

Nine projects—six around Duqm, on the east-central coast, and three in Dhofar, near the southern port of Salalah—were awarded concessions, envisaging combined production of just under 1.4mt/yr of hydrogen by 2030 and combined investment of some $49b. Heavyweight consortium participants included the likes of BP, which acquired a 49% interest in a second project in August, Shell, French renewables giant EDF and South Korean steelmaking colossus Posco.

Australia’s Fortescue Future Industries won a Dhofar plot in April on the basis of a proposed 200,000t/yr green ammonia facility. However, in July it put project on the back burner, along with several other schemes, as it reviewed its global green hydrogen strategy.

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Author: Clare Dunkley