Four measures for the GCC to become a force in global green hydrogen

By James Thomas, and Susie Almasi

Article

As the world seeks to decarbonize, it can turn to green hydrogen—a versatile energy source produced by renewables, and that can be used to power passenger vehicles, industrial processes, commercial transport and residential heating. GCC countries can produce green hydrogen easily thanks to abundant, low-cost solar energy. However, transportation costs to serve the most attractive global markets are steep—up to twice the initial production expense. For that reason, the market will be won in the supply chain. If the GCC is to claim its rightful share of this fast-growing market, it must reduce the energy and cost intensity of supply-chain processes—and thus reduce the overall cost of getting green hydrogen to end users.

The potential growth is compelling. By 2050, according to Strategy& research, global green hydrogen demand is expected to exceed 530 million tons, equivalent to around 7 percent of global primary energy consumption. This would displace 10 billion of barrels of oil equivalent per year, around 37 percent of current global oil production.

Producers in the GCC can produce green hydrogen at lower costs than their competitors. However, hydrogen is very difficult to transport over long distances. The best way to serve large import market in Europe and East Asia from the GCC is to convert green hydrogen to green ammonia (an effective hydrogen-carrying compound), which can be delivered via cargo ship. Upon arrival, the ammonia is then converted back to gaseous hydrogen for end users through a chemical process known as “cracking.”

There are several reasons why this approach makes sense. Ammonia is already a globally traded commodity—produced through a century-old process that relies on extremely high temperature and pressure to fuse nitrogen and hydrogen. Existing international shipping routes for ammonia overlap with potential green hydrogen export flows, and a network of ports worldwide can handle ammonia at industrial scale. Also, there are ways to make the production process less complex and less energy-intensive—meaning that the ammonia production becomes greener.

After ammonia is delivered to a port, however it must be converted back to high-purity hydrogen and at scale, a process known as “cracking.” This technology is still at an early stage of development, making it the least mature component of the green ammonia supply chain. However, new technologies are emerging to make the process simpler and more efficient.

To catch up with other countries that are already investing heavily in green hydrogen, GCC countries should take rapid measures to become competitive along the supply chain through four priorities:

Establish green hydrogen production capability

The first is to establish lowest-cost, large-scale green hydrogen production capability. GCC countries should continue to invest in utility-scale solar farms to achieve low-cost renewable electricity input prices for hydrogen production. Simultaneously, GCC countries should deploy the technology most suited to large-scale green hydrogen production and capitalize on economies of scale.

Focus on green ammonia production

The second is to focus on green ammonia production as a hydrogen carrier and storage medium. GCC countries should build state-of-the-art green ammonia production plants that are closely integrated with hydrogen generation. They can reduce costs and create scale advantages through technological innovation in green ammonia production, such as by adapting established process in the short term, and dramatically improving them in the long term to rely exclusively on renewable energy. In particular, they can use this opportunity to bring to the GCC the cutting edge research capabilities that will support the new hydrogen economy.

Master ammonia cracking in key export destina- tions

The third is to master ammonia cracking in key export destinations. Producers in the GCC should establish vertically-integrated cracking operations in key export markets such as the EU, Japan, South Korea, and the U.K. Such vertical integration could reduce cracking costs by 15 to 20 percent through scale advantages.

Create green hydrogen hubs

The fourth is to create green hydrogen hubs. To achieve maximum cost efficiency, GCC exporters should establish integrated green hydrogen-ammonia infrastructure hubs focused on domestic production and centralized re-conversion activities in export destinations. In the GCC these hubs could be close to renewable electricity generation capacity. They should take advantage of current GCC port and industrial infrastructure and build on existing shipping capabilities, particularly in liquified natural gas. These hubs will attract investment in related industries that will further and accelerate mastery of the hydrogen supply chain, helping to achieve the lowest unit cost throughout.

Green hydrogen holds significant promise as a new, clean global power source and lucrative export for GCC countries, making it a significant part of the global decarbonization agenda. If GCC countries act decisively, they can become leaders of the new hydrogen economy.

This article originally appeared in Oil and Gas ME, October 2020.

About the authors

James Thomas are partners, and Susie Almasi is an executive advisor, with Strategy& Middle East, part of the PwC network.

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James Thomas

James Thomas

Partner, Strategy& Middle East

Susie Almasi

Susie Almasi

Principal, Strategy& Middle East

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