Oman’s Hydrom, the state entity in charge of managing auctions for green hydrogen projects, is planning to launch a third round in April or May and, unlike previous bids, is aiming for midscale projects to woo a wider pool of firms. It is approaching participants from regions such as China and North America, its managing director told Hydrogen Economist.

Under the two previous rounds, in 2022 and 2023, various international companies won green hydrogen projects that were large scale—targeting at least 150,000t/yr—which typically require more than 300km² of land, said Abdulaziz al-Shidhani. To provide more “flexibility” to investors, Hydrom’s third round may offer mid-scale projects, which are typically 40,000–70,000t/yr in size, with land requirements adjusted so that a 40,000t/yr development will need 80,000–100,000m², he added.

“This approach ensures that participants interested in smaller-scale developments can still engage, while those looking for larger capacities can combine multiple blocks to scale up their project,” said Shidhani. “Mid-scale projects offer a higher likelihood of securing offtake agreements compared to larger projects.”

“Mid-scale projects offer a higher likelihood of securing offtake agreements compared to larger projects” Shidhani, Hydrom

Hydrom, which is also tasked with developing a green hydrogen strategy and delineating land for developments, is eyeing smaller projects after noticing in the first two rounds that certain investors who expressed initial interest hesitated when they saw the scale on offer, he added.

Hydrom awarded eight projects in the first two rounds that will cumulatively produce about 1.4mt/yr of green hydrogen, starting in 2030, by building 35GW of solar and wind capacity and attracting $49b in investment. Five of the awarded projects are in Duqm, and the rest are in Salalah, two free zone and port locations overlooking the Arabian Sea in the northern India Ocean.

Oman, the biggest Middle Eastern oil producer outside of OPEC, is allocating 50,000km² of land for green hydrogen projects to help produce as much as 3.75mt/yr by 2040 and 8.5mt/yr by 2050.

Some of the companies involved in the eight projects are BP, Engie, Shell, EDF, Belgium’s DEME and Australia’s Fortescue.

Investor pool

Hydrom expects a more varied pool of investors in the third round and is assessing interest from parties in China and North America it approached through roadshows in previous auctions, but which had not formulated their green hydrogen strategies at the time, said Shidhani. “Investor sentiment has evolved significantly over the past two years,” he said.

“Initially, interest was extremely high, but as investors gained a clearer understanding of costs, complexities and scale, some reassessed their involvement. We have refined our qualification process, and for Round 3, we expect participants to have well-defined strategies and a deeper understanding of market realities.”

Market dynamics have changed from two years ago, with several countries and companies rethinking or changing their green hydrogen strategies.

BP, for example, announced in February a major strategic review, backtracking on clean energy investments and slashing annual capex on the energy transition businesses to $1.5–2b/yr from $7b/yr. In this decade, BP will focus on 5–7 hydrogen and CCS projects, including four that reached FID in 2024.

In 2023, BP was awarded a project to produce 150,000t/yr of green hydrogen to be exported as ammonia from 3.5GW of renewables and, last year, it bought a 49% stake in a joint venture with DEME and Oman’s OQ that is projected to produce 320,000t/yr of green ammonia.

BP did not respond to questions about the status of its involvement in both projects in Duqm. DEME, Shell, Fortescue and Engie declined to provide updates about their projects in Oman, and EDF did not reply to emails.

“Market conditions remain dynamic, and we continue to work closely with developers to navigate uncertainties,” said Shidhani. “Changes in corporate strategies and geopolitical factors, including election outcomes, can influence investment decisions. However, Oman remains highly competitive, and while some projects may progress at a slightly slower pace than initially expected, we are committed to supporting their success.”

Double-sided option

As another incentive for participants in the third round, Hydrom may offer a double-sided option to potential developers to produce green hydrogen for the domestic market rather than export the molecule. A double-sided option is built on a localised contract-for-difference (CfD) model “aimed at attracting industries that rely on green hydrogen to establish themselves”, Shidhani said.

Steel manufacturers and other downstream investors are already evaluating the potential of Omani facilities, mainly for green steel and fertilisers, he added.

“Beyond industrial growth, we believe Hydrom can support projects in achieving a positive FID,” said Shidhani. “With global hydrogen markets still evolving, some projects face challenges in securing offtake commitments. This approach supports economic diversification, job creation and technical advancements in green hydrogen and its derivatives.”

None of the eight projects awarded in the first two auction rounds have reached FID because they have yet to secure offtake agreements, and some are eyeing subsidy schemes and incentives in markets where they wish their exports to end up—mainly Europe, Japan and South Korea.

$49b – Value of projects

Developers, who are responsible for securing financing and offtake agreements for their projects, are attracted to schemes such as Germany’s H2 Global, the Hydrogen Bank Initiative in Europe and CfD subsidy programmes in South Korea and Japan.

“Developers are closely monitoring subsidy schemes and CfD opportunities, which could influence FID timelines,” said Shidhani. “Given that some agreements from Rounds 1 and 2 were only signed recently, it is still too early to determine final investment outcomes. However, Hydrom continues to support developers through government-to-government engagements and partnerships with market aggregators.”

Hydrom has signed an agreement with Germany’s VNG, an aggregator that buys molecules and then distributes them to local consumers, and is pursuing similar deals in Singapore and the Netherlands to help secure market access.

Hydrom, which also sees “strong potential” for financing through export credit agencies, expects developers to focus on securing offtake agreements once they conclude feasibility studies and the pre-FEED stage in order to approach lenders. In the previous two rounds, developers were given a timeline of 3.5 years to reach FID by 2027 and another 3.5 years for construction in order to start production by 2030–31 as part of a 47-year contract structure.

Although details for Round 3 have yet to be finalised, it is likely to follow a similar structure.

“Offtake agreements are critical—without them, financing is not viable,” said Shidhani. “While discussions can begin early, finalising them requires a clear cost structure and a completed FEED. Once developers establish the precise cost of producing one kilogram of hydrogen, they can finalise pricing, secure offtake commitments and proceed to FID.”

Export markets

So far, seven developers and/or consortiums that have been awarded projects have initially indicated they would like to export green hydrogen as ammonia, particularly to Europe, South Korea and Japan. One developer is interested in catering to the domestic market, mainly in green steel and hot briquetted iron. However, these strategies remain “fluid” and may evolve depending on market conditions, said Shidhani.

Oman is also mulling the potential export of green hydrogen in liquid form and has signed a joint study agreement with the Port of Amsterdam and other international partners to explore the corridor between Duqm and Amsterdam for its transport and to complement ammonia exports.

However, exporting liquid hydrogen is more technologically difficult because it needs to be stored at –253C, similar to LNG, and requires specific facilities for transport.

Oman is nevertheless forging ahead with the third round because hydrogen is still viewed as “a key future energy source” and the country has important attributes to develop such an industry, said Shidhani.

Oman is designing infrastructure for shared use, including water desalination, hydrogen pipelines and electricity, to help reduce costs and create economies of scale, he said.

Competing on cost

Oman’s levelised cost of hydrogen is “highly competitive”, he added, declining to give exact figures.

The country's cost of producing renewable hydrogen could be as low as $1.6/kg, which would be lower than prices in the US and Australia, and it is projected to have a levelised cost of green ammonia of $400/t by 2030, the IEA said in a 2023 report. It may even become the largest exporter of green hydrogen in the Middle East this decade, and its allocation of 50,000km² of land for such developments, which is equal to the size of Slovakia, is enough to produce almost three times the targeted volumes by 2050, the IEA added.

Oman is capitalising on its abundant wind and solar resources, its vast available land, and the proximity of its ports to markets in South Korea, Japan, Germany and the Netherlands as well as their location outside the strategic chokepoint of the Strait of Hormuz.

“Beyond geography, Oman has built strong diplomatic relationships globally and established a robust regulatory framework for green hydrogen, further solidifying our position as a competitive market,” said Shidhani.

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Author: Dania Saadi