PotentialblueandgreenhydrogendevelopmentsintheArabregionVISIONESCWA,aninnovativecatalystforastable,justandflourishingArabregionMISSIONCommittedtothe2030Agenda,ESCWA’spassionateteamproducesinnovativeknowledge,fostersregionalconsensusanddeliverstransformationalpolicyadvice.Together,weworkforasustainablefutureforall.PotentialblueandgreenhydrogendevelopmentsintheArabregionE/ESCWA/CL1.CCS/2022/TP.1EconomicandSocialCommissionforWesternAsia©2022UnitedNationsAllrightsreservedworldwidePhotocopiesandreproductionsofexcerptsareallowedwithpropercredits.Allqueriesonrightsandlicenses,includingsubsidiaryrights,shouldbeaddressedtotheUnitedNationsEconomicandSocialCommissionforWesternAsia(ESCWA),email:publications-escwa@un.org.Thefindings,interpretationsandconclusionsexpressedinthispublicationarethoseoftheauthorsanddonotnecessarilyreflecttheviewsoftheUnitedNationsoritsofficialsorMemberStates.ThedesignationsemployedandthepresentationofmaterialinthispublicationdonotimplytheexpressionofanyopinionwhatsoeveronthepartoftheUnitedNationsconcerningthelegalstatusofanycountry,territory,cityorareaorofitsauthorities,orconcerningthedelimitationofitsfrontiersorboundaries.Linkscontainedinthispublicationareprovidedfortheconvenienceofthereaderandarecorrectatthetimeofissue.TheUnitedNationstakesnoresponsibilityforthecontinuedaccuracyofthatinformationorforthecontentofanyexternalwebsite.Referenceshave,whereverpossible,beenverified.MentionofcommercialnamesandproductsdoesnotimplytheendorsementoftheUnitedNations.Referencestodollars($)aretoUnitedStatesdollars,unlessotherwisestated.SymbolsofUnitedNationsdocumentsarecomposedofcapitalletterscombinedwithfigures.MentionofsuchasymbolindicatesareferencetoaUnitedNationsdocument.UnitedNationspublicationissuedbyESCWA,UnitedNationsHouse,RiadElSolhSquare,P.O.Box:11-8575,Beirut,Lebanon.Website:www.unescwa.org.AcknowledgementsThisreportwasdevelopedbytheEnergySectionintheClimateChangeandNaturalResourcesSustainabilityClusteroftheUnitedNationsEconomicandSocialCommissionforWesternAsia(ESCWA).TheleadauthorsareMs.RadiaSedaoui,ChiefEnergySection,ESCWA,andDr.MostefaOuki,EnergyExpert.InputsandsupportwereprovidedbySeanRatka,EconomicAffairsOfficer,ESCWA,MustafaAnsari,EconomicAffairsOfficer,ESCWAandMayaMansour,EconomicAffairsAssistant,ESCWA.ThisreportalsodrawsoninputsfromparticipantsattheESCWAwebinar:PotentialBlueandGreenHydrogenDevelopmentsintheArabCountrieson14December2021.ParticipantsincludedJoseM.Bermudez,EnergyTechnologyAnalyst,IEA;EmanueleTaibi,Lead,PowerSectorTransformationStrategies,IRENA;RamiShabaneh,SeniorResearchAssociate,KAPSARC;SuhailShatila,SeniorEnergySpecialist,Strategy,APICORP;andKhalilAlHanashi,EnergyTechnologyLead,PDO.34PotentialblueandgreenhydrogendevelopmentsintheArabregionContentsIntroduction........................................................................................................................................7Context..............................................................................................................................................................9Purposeandcontents....................................................................................................................................101.Hydrogenproduction,transportandstorage.........................................................................11A.Production...................................................................................................................................................13B.Hydrogencategories................................................................................................................................14C.Transportandstorage................................................................................................................................14D.RelevantaspectsfortheArabregion....................................................................................................152.Existingandpotentialhydrogenuses.....................................................................................17A.Currentstructureofhydrogenuses.......................................................................................................19B.Hydrocarbonandpetrochemicalindustries........................................................................................19C.Steelindustry.............................................................................................................................................20D.Transport.....................................................................................................................................................20E.Potentialsectorsforblueorgreenhydrogenuse...............................................................................213.HydrogenandinterlinkageswiththeSDGs...........................................................................23A.SDGinterlinkages.....................................................................................................................................24B.Low-carbonhydrogenandnationallydeterminedcontributions....................................................264.Renewableandnon-renewableenergypotentialintheArabregion..............................27A.Overview.....................................................................................................................................................29B.Renewableenergypotential...................................................................................................................29C.Naturalgasendowment...........................................................................................................................325.ExistingandplannedhydrogendevelopmentsintheArabregion....................................35A.Changingscene.........................................................................................................................................37B.Low-carbonhydrogendevelopments....................................................................................................37C.Plannedhydrogenexports.......................................................................................................................44123455FiguresFigure1.Sharesofglobalhydrogenmainusesbysector–2020..................................................................................19Figure2.Arabregion:installedrenewableenergycapacity–2020(MW).................................................................30Figure3.Arabregion:mainprovednaturalgasreserves(bcm)...................................................................................33Figure4.Arabregion–2020naturalgasproductionandconsumption(bcm)...........................................................34Figure5.Indicativehydrogenproductioncosts:2019($/kg)..........................................................................................51Figure6.Indicativehydrogenproductioncosts:2025–2030($/kg).............................................................................51Figure7.Estimatedbluehydrogenproductioncosts–2018($/kg)..............................................................................52Figure8.Plannedelectrolysercapacityby2030(GW)...................................................................................................53Figure9.PlannedNorthAfricaelectrolysercapacityasperEurope’sroadmap(MW)...........................................54TablesTable1.RelevantaspectsbycategoryofArabcountry................................................................................................16Table2.Low-carbonhydrogenandSDGlinkages..........................................................................................................25Table3.Arabregion:targetfuturerenewableenergycapacityandpowermixshare...........................................316.Challengesandopportunities...................................................................................................47A.Technicalandcommercialbarriers.......................................................................................................49B.Evolvingeconomics..................................................................................................................................50C.Financingconstraints...............................................................................................................................54D.Legalandregulatoryframework............................................................................................................56E.OpportunitiesforArabcountries............................................................................................................577.Conclusionsandrecommendations.......................................................................................59A.Conclusions................................................................................................................................................61B.Recommendations.....................................................................................................................................62References........................................................................................................................................64Endnotes............................................................................................................................................6967IntroductionKeymessagesTheArabregion’seconomyishighlydependentonfossilfuelsassourcesofenergyandfeedstock,employmentandexportrevenues.Developingandintroducinglow-carbonhydrogen,whetherblueorgreen,intheArabregionwouldplayanimportantroleaspartofatoolboxofcleanenergysolutionsandwouldleveragetheregion’snaturalgasresourcesandexpansiverenewableenergypotential.Diversifyingtheenergymixisakeyaspectoftheenergytransition.Beyondacceleratingtheuptakeofrenewableenergyandelectrifyingrelevantsectors,alternativeenergycarriersincludinghydrogenandhydrogenderivativesshouldbeexploredinordertoensureajustandsustainableenergytransition.Low-carbonhydrogendevelopmentcanchangetheenergymixintheArabregionwhilealsodiversifyingexportrevenuesandreducingenergy-relatedemissionsinlinewiththe2030AgendaforSustainableDevelopment.9ContextWithintheframeworkoftheUnitedNations2030AgendaforSustainableDevelopmentandtheParisAgreement(COP21)onclimatechange,ArabStatesareworkingonthedevelopmentofimplementationprogrammestoachieveajustandinclusivetransitioninlinewiththeSustainableDevelopmentGoals(SDGs),includinggoal7to“ensureaccesstoaffordable,reliable,sustainableandmodernenergyforall”andgoal13to“takeurgentactiontocombatclimatechangeanditsimpacts”.Diversifyingtheenergymixisakeyaspectoftheenergytransition.Inadditiontoacceleratingtheuptakeofrenewableenergyandelectrifyingrelevantsectors,alternativeenergycarriersneedtobeexplored,includinghydrogenandhydrogenderivativesinordertoensureajustandsustainableenergytransition.Toreachourtargetswithoutleavinganyonebehind,wemustsupportStatesandcommunitiestoadapttoagreeneconomythroughsocialprotectionandnewskills,ensuringthateveryoneinneedispreparedtotakeadvantageofthe30millionnewgreenjobsexpectedby2030.Inthelongrun,thetransitiontoahydrogeneconomycanalsoensurethatStatesintheArabregionarenotoverlydependentonaselectfewenergysourcesandarethereforelessexposedtosupplyshocks,thusbecomingcruciallymoreresilient.Globally,thereisarapidlygrowingnumberofStates,institutionsandcorporationsthathaveintroducedorwillbesoonintroducingtargetstoreducegreenhousegasemissions(GHGs)andachievecarbonneutralityby2050.TheArabregion’seconomyishighlydependentonfossilfuelsassourcesofenergyandfeedstock,employmentandexportrevenues.ThishasresultedinanunsustainableincreaseinGHG10PotentialblueandgreenhydrogendevelopmentsintheArabregionemissionsintheArabregionwithsomeArabStatesrankingamongthehighestpercapitaemittersofCO2.1Thissituationnotonlyhasdirect,adverseimplicationsontheclimatebutalsoseriouslyaffectstheregion’seconomy.Itisthereforevitalthattheregionaddressitsenvironmentalandeconomicvulnerability,andthesituationcouldworsenifenergytransitionmeasuresarenoturgentlyaccelerated.Theseincludearangeofsustainableenergysolutionsandmeasures,suchasanincreaseintheuseofrenewablesourcesofenergyandtheimplementationofeffectiveenergyefficiencymeasurestoreachthecrucialobjectiveofcarbonneutrality.Thedevelopmentandintroductionoflow-carbonhydrogen,2whetherblueorgreen,intheArabregionwouldplayanimportantroleaspartofatoolboxofcleanenergysolutionsandwouldleveragetheregion’snaturalgasresourcesandexpansiverenewableenergypotential.EffortsarealreadybeingdeployedinsomeArabStatestodevelopproductioncapacitiesofblueandgreenhydrogen.TheyarestillhoweverintheirearlydevelopmentphaseandtheeffortsarelimitedtoonlyafewStates.PurposeandcontentsThisreportfocusesonexistingandplannedhydrogendevelopmentsintheArabregionandexploresanddiscussesthemajorchallengesandopportunitiesofhydrogenproductionandusetosupporttheregion’senergytransitionwithinthecontextofthe2030AgendaforSustainableDevelopment.ThereportalsoconsidersrecentdecisionsbyseveralStatestointroducenet-zeroGHGtargetsby2050anddiscussestheimplicationsforsustainablehydrogenproduction.Hydrogenproduction,transportandstorage112PotentialblueandgreenhydrogendevelopmentsintheArabregionOver75%ofallpurehydrogenproducedgloballycomesfromnaturalgasusingsteamreforming.Totransformgreyhydrogenintomoresustainablebluehydrogen,carboncaptureandstorage(CCS)orcarboncaptureutilizationandstorage(CCUS)isrequired.Thevastmajorityofhydrogenproductiontodayisnon-sustainablegreyhydrogen.Thehydrogenproducedthroughelectrolysiswithelectricitysuppliedfullyfromrenewablesourcesofenergyiscalled“greenhydrogen”andiswidelyconsideredthemostfavourableoptionforlong-termdecarbonizationmeasures.renewablegreenhydrogenaccountsforfarlessthan1percentoftheglobalproductionofpurehydrogenandistwotothreetimesmoreexpensivethanbluehydrogen.About85%ofthehydrogenproducedisconsumedwhereitisproducedornearby.Thismaychangeinafutureglobalhydrogeneconomywhereexportsandlow-cost,long-distancetransportarekey.75%1%85%Keymessages13A.ProductionHydrogeninitsnaturalformhasbeenidentifiedindifferentlocationsonshoreandoffshore.Atpresent,thereisonlyonelocationintheworldwherenaturalhydrogenisproduced,3intheBourakébougoubasininMali,WestAfrica,wheretheCanadiancompanyHydromaoperatesapilotproject.4Currently,allhydrogenconsumedworldwideisproducedusingtechnologicalprocesses.Overthepastfewdecades,severalStateshavebeenproducinghydrogenatfacilitiesmainlylocatednearconsumptionareas.Forthemostpart,hydrogenisproducedusingnaturalgasasaprimarysourceandusedprimarilyinoilrefiningandtheproductionofammonia.Inadditiontothededicatedhydrogenproductiontechnologiestoproducepurehydrogen,hydrogencanalsobeobtainedasaby-productfromotherprocesses,alongwithothergases.In2020,atotalof90milliontonsofhydrogenwereproducedglobally.5About80percentofthistotalwaspurehydrogenproducedbydedicatedhydrogenplantsandjustover20percentwashydrogenmixedwithothergases.6Therearedifferentwaystoproducepurehydrogen,threeofwhicharelistedbelow:7•Reformingofhydrocarbons.•Coalandbiomassgasification.•Electrolysis.SteamMethaneReforming(SMR)ispresentlythedominanthydrogenproductiontechnology.SMRusesnaturalgas(methane)asaprimarysourcewithsteamtoproducehydrogen.In2018,naturalgas-basedreformingtechnologyaccountedforover75percentofallpurehydrogenproducedglobally.Hydrogencanalsobeproducedthroughgasification,usingcoalorbiomassasprimarysources.Coalgasificationisatechnologythatcametoprominenceinthe1800sinEuropeandremainspopularespeciallyincoalproducingcountriessuchasChinaandSouthAfrica.Biomasscanalsobeusedtoproducehydrogenthroughthegasificationprocess.Electrolysisisdifferentfromtheabovetwocategoriesthatrelyonfossilfuelsasprimarysources(exceptforbiomassgasification).Incontrast,electrolysisuseselectricitytosplitwaterintohydrogenandoxygen,withtheelectricityultimatelycomingfromfossilfuelsorrenewablesources.Thisisanimportantfactorinthetypeofhydrogenproduced,asexplainedbelow.Today,electrolysisusingrenewablesaccountsforfarlessthan1percentoftheglobalproductionofpurehydrogen.Thefollowingarethethreemainelectrolysistechnologies:Alkalinewaterelectrolysis(AWE).Protonexchangemembrane(PEM)electrolysis.Solidoxideelectrolysiscell(SOEC).ofhydrogenwereproducedgloballyin202090milliontons14PotentialblueandgreenhydrogendevelopmentsintheArabregionB.HydrogencategoriesExceptforbiomassgasification,reformingandgasificationtechnologiesusefossilfuelsasprimarysourcestoproducehydrogen.Consequently,theseprocessesgeneratecarbondioxide(CO2)thatisreleasedintotheatmosphere.Thehydrogenproducedthroughthesetechnologiesiscalled“greyhydrogen”,“brownhydrogen”,or“blackhydrogen.”In2020,thededicatedproductionofhydrogenresultedinthetotalemissionofabout900milliontonsofCO2.8Someoftheabovetechnologies,especiallySMR,canbecoupledwithCCSorCCUSfacilitiesthatcapturetheCO2andstoreitoruseitandstoreit.Inthiscase,thehydrogenproducedislabelled“bluehydrogen.”Hydrogenproducedusingthemethanepyrolysistechnologyiscategorizedas“turquoisehydrogen”.Hydrogenproducedthroughelectrolysiswithelectricitysuppliedfullyfromrenewablesourcesofenergyiscalled“greenhydrogen”andisconsideredthemostfavourableoptionfordecarbonizationmeasures.However,asdiscussedlaterinthispaper,itispresentlyfacingchallengesduetohighproductioncosts.Finally,thereisnointernationallyagreedcolourcategoryclassificationforthehydrogenproducedbydifferenttechnologiesandfromdifferentprimarysources.Othercolourshavebeenusedtodescribehydrogenproduced,forexample,withanuclearsourceofenergy;coalorlignite;orasaby-productofindustrialprocesses.Nevertheless,thecategoriesofblueandgreenarewidelyusedtorefertohydrogenproducedfromfossilfuels(mainlynaturalgas)withCCSorCCUSandhydrogenproducedusingrenewableenergysources.C.TransportandstoragePresently,about85percentofthehydrogenproducedisconsumedwhereitisproducedornearby.Trucksorpipelinestransporttheremaining15percent.9Overthenext10or15years,thiscouldchangeashydrogenistradedandshippedacrossregionsandcountries.Thehydrogentransportationmodechosenwilldependontransportationcosts,whichareessentiallydrivenbythevolumeofhydrogentobetransported,theproductioncost,thetransportationdistance,theinterveninggeographyandtherelevantlawsandregulations.Therearevariousoptionstotransporthydrogen:•Blendingthehydrogenwithnaturalgasingastransmissionpipelines,10orthroughdedicatedhydrogenpipelines.•Shippingofliquidhydrogenaspurehydrogen.•Shippinginammoniaform.•Shippinginliquidorganichydrogencarriers(LOHCs).Pipelinesarethecheapestmodeofhydrogentransportationacrossmedium-tolong-termdistances(between1,000kmand4,000km)11Forlonger-distanceshipmentsoflargevolumesofhydrogenbetweencountries,conversionintoammoniaorliquidorganicformsispreferred.However,thecostsofconversiontoliquidformsandthenreconversiontogasincreasethetotalcosts,withameaningfulhittoenergyefficiency.Asindicatedabove,thecostcompetitivenessofthemodeoftransportationwilldependontheproductioncostofhydrogen,butalsoonwhethertheenduseispurehydrogenorammonia.Safety15considerationsareanotherkeydriverinthechoiceofsuitabletransportationmodes.Inadditiontotransportationthroughpipelines,trucks(ortrainsdependingonroutes)candistributesmall-scalevolumesofhydrogenoverrelativelyshortdistances,withhydrogenstoredinliquidorcompressedgaseousformsorasammonia.Thestorageofhydrogenwilldependmainlyonthevolumestobestored;thestorageduration;movementsinandoutofstorageandgeologicalconditions.Forsmallvolumesovershortperiods,storageinpressurizedtanksisusuallythepreferredoption.Forlarge-scalevolumesoverlongerperiods,storageingeologicalformationsisabetteroption,includingsaltcavernsanddepletedhydrocarbonreservoirs.However,oilandgasreservoirscouldpresentcontaminationissuesthatwouldlimitorprohibittheiruse.Aquifershavealsobeenconsideredasapotentialstorageoption,buttheirsuitabilityremainstobefullyinvestigatedasnopurehydrogenstoragehastakenplaceyet.Infact,thecommercialviabilityofhydrogenstorageinbothdepletedhydrocarbonreservoirsandaquifersremainstobeproven.12D.RelevantaspectsfortheArabregionTheproduction,transportationandstorageofhydrogenwilldifferfromcountrytocountryintermsoftechnologiesandprimarysourcesusedforhydrogenproduction.DifferentArabStatesmayfollowdifferentpathwaystointroducehydrogenintotheirrespectiveeconomies.Thechoiceoftechnologyisdrivenbycostsandnon-costfactors.Withtheincreasingconcernsaboutachievingourclimatetargetsbymid-centuryandtheSDG7targetsby2030,especiallyinthetransportsectorwheretheArabregionremainsthemostenergy-intensiveamongallregions,thechoiceoftechnologywillbehighlyinfluencedbythesedriversandrelatedpolicies,lawsandregulations.ThevastArabregionstretchesfromtheAtlantictotheIndianOceanandisfarfromhomogenous.Itischaracterizedbydifferentpoliticalandeconomicsystems;financialandnaturalresourceendowments;populationsizes;geography;geologicalconditionsandclimates.Thefollowingtableoutlinessomeofthefeaturesthatcouldberelevanttotheuse,transportationandstorageofblueandgreenhydrogenintheArabregionbycategoryofcountry.Theaspectsintable1,whichdonotnecessarilyconstituteacomprehensivelistoffactorsrelevanttotheproduction,transportationandstorageofhydrogen,showthatArabhydrocarbon-producingcountriescouldpotentiallyaccountforthelargestshareoftheArabregion’sfuturelow-carbonhydrogenoutput.16PotentialblueandgreenhydrogendevelopmentsintheArabregionTable1.RelevantaspectsbycategoryofArabcountryHydrocarbon-producingcountriesFuel-importingcountriesAmplelow-costnaturalgassuppliesofsomegas-exportingcountriescouldbeusedforbluehydrogenproductionthroughhydrocarbonreformingwithCCSorCCUS(e.g.Qatar).Rapidandlargedeploymentofrenewableelectricitygenerationcapacitywithlowgenerationcostsinsomecountriescouldbeleveragedtoproducegreenhydrogenusingelectrolysis(e.g.Egyptpotentially,SaudiArabiaandtheUnitedArabEmirates).Somefuel-importingcountriescouldleveragetheirexistingandfast-growingrenewableenergycapacity,underdevelopmentandplanning,toproducegreenhydrogenusingelectrolysistechnology(e.g.Morocco).Asindicatedintheoppositecolumn,hydrocarbon-producingcountriescouldalsotakeadvantageoftheirexpandingrenewableenergycapacitytoproducegreenhydrogen.However,bluehydrogenproductionislikelytobedevelopedmainlybyState-ownednationaloilandgascompanies,whilegreenhydrogenprojectsareexecutedmainlybyutilities,inpartnershipwithprivatelocaland/orinternationalcompanies.Existinghydrogenplantsandrelatedinfrastructureinoilrefineriesandammoniasitescouldbeusedtoproducelow-carbonhydrogen.Leveragingexistingindustrialparks(e.g.JubailinSaudiArabiaandRuwaisintheUnitedArabEmirates)providesasignificantadvantageinthecreationofnewhydrogenhubsorclusters.ExistingCCSfacilitiesinsomehydrocarbon-producingcountriescouldbeused.Naturalgaspipelineinfrastructurealreadyexistsinkeygas-producingcountriesthatcouldpotentiallybeusedforlow-carbonhydrogenblendingandretrofittingorre-purposingprojects.DepletedhydrocarbonreservoirscouldbeusedforundergroundstorageofCO2andhydrogeninsomecountries,dependingontheirsuitabilityandcommercialviability.CapturedCO2couldbeusedinenhancedoilrecovery(EOR)projects.TheexperienceofArabliquefiednaturalgasandliquefiedpetroleumgas(LNG/LPG)exportersintheshippingofcryogenicproductscouldbeleveragedforthelong-distancetradeoflow-carbonhydrogenandammonia.17Existingandpotentialhydrogenuses218PotentialblueandgreenhydrogendevelopmentsintheArabregionHydrogenisversatileandcanbeusedtohelptacklevariouscriticalenergychallenges.Currently,oilrefiningandammoniaproductionaccountforover80percentofallhydrogenusedglobally.Whereverpossible,bluehydrogenproductioncouldbeaquickeroptiontoreduceGHGemissionsandsupportthelonger-termscalingupofgreenhydrogenproductioncapacity.IntheArabregion,thebulkofhydrogenisusedinoilrefiningandpetrochemicals.Theroleoflow-carbonhydrogeninsteelmaking,transportandhydrogen-basedfuelsintheregionissettogrow.Theintroductionoflow-carbonhydrogenintheworld’seconomiesisakeypieceintheportfolioofsustainableenergysolutionsandactionsneededtoachievecarbonneutralityby2050.1%205080%Keymessages19A.CurrentstructureofhydrogenusesAtpresent,hydrogenismainlyusedinthehydrocarbonandpetrochemicalindustries(includingammoniaproductionforfertilizer).Hydrogenisalsousedinthesteelindustry,especiallyinthedirectreducediron(DRI)process.In2020,oilrefiningandammoniaproductionaccountedforover80percentofallhydrogenusedglobally.TheseindustrieshavebeendevelopedandcontinuetobedevelopedinArabhydrocarbon-producingcountries.Figure1.Sharesofglobalhydrogenmainusesbysector–202013%6%43%38%OilrefiningAmmoniaMethanolSteel(DRI)Source:IEA,2021b.B.HydrocarbonandpetrochemicalindustriesHydrogenhasbeenusedintheoilrefiningindustryforalongtime.Hydrogenconsumedbyoilrefineriesissuppliedbydifferentsources,includingintegratedfacilitieslocatedattherefinerysiteandhydrogenproducedasaby-productbytherefineryandindustrialgascompanies.80%In2020,oilrefiningandammoniaproductionaccountedofallhydrogenusedglobally20PotentialblueandgreenhydrogendevelopmentsintheArabregionInrefineries,hydrogenisusedmainlytoremovesulfurfrompetroleumproductsinthede-sulfurizationprocessandinhydrocrackingtocracklargehydrocarbonmoleculestoproducesmallermoleculessuchasdieselorgasoline.13Inthepetrochemicalindustry,hydrogenisusedtoproduceammoniafornitrogenousfertiliserandotheruses.Anotherapplicationofhydrogeninpetrochemicalsisthemanufactureofsynthesisgasorsyngasfortheproductionofmethanol.Hydrogenisalsoemployedintheproductionofsyngasinthegas-to-liquids(GTL)process.However,thisapplicationislimitedtoGTLproductioncentres,whichintheArabregionarelimitedtoQatar.C.SteelindustryTheglobalshareofhydrogenuseinthesteelindustryremainsminorcomparedtotheuseinhydrocarbonandpetrochemicalindustries,asshowninthefigureabove.Thebulkofglobalsteeloutputisproducedthroughtheblastfurnace-basicoxygenfurnace(BF-BOF)processusingcoalasareducingagent.Theprocessproduceshydrogenasaby-productwithothergasesandhydrogenisconsumedon-siteorsoldtootherconsumers.Hydrogenisusedalsoasareducingagentinthedirectironreduction-electricarcfurnace(DRI-EAF)steel-makingprocess.Inthisprocess,hydrogenisproducedfromdedicatednaturalgas-basedhydrogenunits.Presently,theproductionofsteelinvolvestheuseoffossilfuels,mainlycoal.Asaresult,thesteelindustryisamajoremitterofCO2andfacesmajordecarbonizationchallenges,especiallyinEurope.14Inordertoaddressthisissue,oneoptionistousegreenhydrogenproducedfromrenewableenergysourcesinsteadoffossilfuels.Thebluehydrogenrouteisanotheralternativewhereregulationsmaypermitduringatransitionphase.D.TransportGlobally,thetransportsector,akeyconsumerofrefinedproducts,isundergoingastructuralchangeinthetypeandqualityoffuelsitneedstouseorcanusetoreduceitsGHGemissionsanditsincreasingurbanpollution,especiallyindevelopingeconomies.In2018,thissectorrepresentedwellbelow1percentofallthehydrogenconsumedintheworld.Presently,hydrogenfuelcellelectricvehicles(FCEV)accountforthebulkofallhydrogenusesbythetransportsector.Over50percentofallhydrogenfuellingstationsareintheAsiaPacificregion,mainlyinJapan21andKorea.Regionsprojectedtorecordhighgrowthofhydrogen-fuellingstationsoverthenexttenyearsincludeChina,Europe,JapanandtheUnitedStates.However,thehighcostofhydrogeninpassengervehiclesanditslimitedcompetitivenessagainstbatteryelectricvehiclesremainsaconstrainingissue.Long-haulandheavy-dutyroadtransportcouldfavourtheuseofhydrogen-basedfuelsolutions.Inthelongterm,theuseofhydrogen-basedfuelsintheshippingandpossiblyaviationindustriescouldalsopresentbetteropportunitiestodecarbonizethesetransportationsegments.15E.PotentialsectorsforblueorgreenhydrogenuseExceptforveryfewbluehydrogenprojectsintheGulfCooperationCouncil(GCC)area,allofthehydrogenconsumedintheArabregionisgreyhydrogenproducedfromfossilfuelsourceswithoutCCSorCCUS.ThebulkofthehydrogenusedintheArabregionisinoilrefining,petrochemicals(ammoniaandmethanol),thesteelindustryandGTLproduction.AspartofasustainableenergytransitionandtheachievementoftheSDGs,theabatementofthecarbonfootprintsofthesesectorsorindustriesisachallengingobjectivethatneedstobeaddressed.However,theArabregion’soilrefiningcapacityhasinfactincreasedsignificantlyinrecentyears,especiallyintheGCCcountriesandIraq,whereaboutadozennewprojectsandupgradesareunderdevelopmentorinplanning.Thisistakingplaceatamoment22PotentialblueandgreenhydrogendevelopmentsintheArabregionwhenthepetroleumproductsindustryisfacingmountinguncertaintiesduetoexcesscapacity,theglobaldecarbonizationpushandtheCOVID-19healthcrisis,whichcouldhavelong-termimplications.Internationalregulationsforacontinuousloweringofthesulfurcontentintransportfuelswillrequireanincreaseinhydrogenvolumesforde-sulfurizationunits,whichcouldbeaddressedusingblueorgreenhydrogen.However,thisisachallengingpropositionsincetheselow-carbonformsofhydrogenaremuchmoreexpensivethanthegreyhydrogensuppliescurrentlyused.Largegas-basedchemicalplants,suchasammoniaandmethanolplants,locatedmainlyingasproducingcountries(e.g.,Algeria,Egypt,SaudiArabiaandtheUnitedArabEmirates),useexclusivelyhydrogenfromgreyhydrogensources.Thecarbonfootprintofthehydrogenproductionsegmentisapotentialbarrierforinternationalammoniaandmethanoltrade,especiallyforexportstoEuropeandsomepartsofAsia.Thus,theblueand/orgreenhydrogendevelopmentpathwaysfortheseindustrieswillhavetobeconsidered.AllsteelplantsintheArabregionusefossilfuelsandproducegreyhydrogen,exceptinonecountry.IntheUnitedArabEmirates,thehydrogenusedintheEmiratesSteelDRIplantisproducedfromnaturalgas.ItishowevercategorizedasbluehydrogensinceCO2producedaspartoftheprocessiscapturedthroughtheADNOCAlReyadahCCUSfacilityandtransportedtooilwellswhereitisusedforEOR.16ThereareseveralsteelplantsinArabhydrocarbon-producingcountriesthatusetheDRIprocess,leveragingtheavailabilityoflow-costnaturalgassuppliestoproducehydrogen.However,exceptfortheUnitedArabEmirates,allthehydrogenproducedisgreyhydrogen.Therefore,greenorbluehydrogenproductiontargetingtheArabsteelindustryisanotherpotentialcandidateforcarbonfootprintreduction.Still,thiswilldependonanumberofkeyfactors,includingthecountries’strategicpolicyobjectives;theavailabilityofadditionalsourcesoflow-costrenewableelectricity;17thepossiblyrequiredprocessmodifications;theoverallcost-competitivenessofsteelandtheavailabilityofcommerciallyviablepremiummarketsforsteelproductswithlowcarbonfootprints,ortheapplicationofcarbonbordertaxesthatcouldbeimposedonunabatedindustrialproducts.ThisisalikelypossibilityforexportstoEuropeastheEuropeanCommissionhasadoptedanewCarbonBorderAdjustmentMechanism(CBAM)whichwillputacarbonpriceonimportsofatargetedselectionofproductssothatclimateactioninEuropedoesnotleadto‘carbonleakage’.ThechallengesfacedbyArabStatestointroduceblueorgreenhydrogeninthehard-to-abatesectorsorindustriesidentifiedinthissectionareexploredfurtherinthesectionChallengesandOpportunities.3HydrogenandinterlinkageswiththeSDGs24PotentialblueandgreenhydrogendevelopmentsintheArabregionA.SDGinterlinkages•Theintroductionoflow-carbonhydrogenintheworld’seconomiesisakeypieceintheportfolioofsustainableenergysolutionsandactionsneededtoachievecarbonneutralityby2050,along-termtargetadoptedbynumerousStates,institutionsandcorporateentities.TheUnitedNationsSDGsprovideaframeworktoidentifyandcategorizethedifferentsustainabledevelopmentadvantagesoflow-carbonhydrogenthroughitslinkageswiththeseSDGs,asoutlinedintable2.•Wecandrawfromthistablethefollowingobservations.First,theimpactoflow-carbonhydrogenislikelytobefullyrealizedoveralongperiod,asthecostoflow-carbonhydrogenisreducedsignificantlyoverthecomingdecades.Thecontributionofgreenhydrogenproductionwilldifferfromonecountrytoanother.Thisisnotonlyduetothelimitedavailabilityoflow-costrenewableenergypotentialandrelatedinfrastructure,butalsobecausetherewilllikelybeaneedtoprioritizetheuseofrenewableenergysourcesforcleanelectrificationpurposesinsomecountries.Whereverpossible,bluehydrogenproductioncouldbeaquickeroptiontoreduceGHGemissionsandsupportthelongertermscalingupofgreenhydrogenproductioncapacity.Evenso,thebluehydrogenproductionpathwaywillbecostly,butrelativelylesscostlythangreenhydrogenproduction.25Table2.Low-carbonhydrogenandSDGlinkagesSustainableDevelopmentGoalLow-carbonhydrogenimpactSDG3:GoodHealthandWell-beingTheintroductionofcleansourcesofhydrogen,especiallyinhard-to-abatesectorsoftheeconomy,hasaclearpositiveimpactonthehealthandwell-beingofcommunities.SDG6:CleanWaterandSanitationInsomeregionsoftheworldthatareseverelyaffectedbywaterscarcityproblems,theuseoffreshwatertoproducegreenhydrogencouldbeacriticalissue.However,thedevelopmentofcommerciallyviableandsustainablesourcesofadditionalseawaterdesalinationcapacitiesforhydrogenproductioncouldalsoprovidewatersuppliesforlocalcommunities.SDG7:AffordableandCleanEnergyThelong-termproductionanduseoflow-carbonhydrogenwillprovideanewsourceofstorageforcleanenergy.Thechallengewillbetoscaleuplow-carbonhydrogenproductioncapacityovertimeandcreateviablemarketstomakeitwidelyaffordable.SDG8:DecentWorkandEconomicGrowthThedevelopmentofamultibillion-dollarlow-carbonindustryinpotentiallow-carbonhydrogenproducingandconsumingcountrieswillinthelongtermprovideeconomicgrowthandemploymentopportunities.SDG9:Industry,InnovationandInfrastructureThedevelopmentoflow-carbonhydrogenisalreadypromotinginnovationalongthelow-carbonhydrogenchainandinthelongterm,aresilientlow-carbonhydrogeninfrastructureislikelytobedeveloped,atleastintheleadinghydrogenproducingandconsumingcentres.SDG11:SustainableCitiesandCommunitiesThelong-termlarge-scaleuseoflow-carbonhydrogeninthemobilityortransportsectorwouldcontributetothereductionofroadtrafficpollutionandhelpimprovelocalenvironmentsincitiesandcommunities.However,low-carbonhydrogenusewouldbemainlyforlong-distanceheavyloadtransport.SDG13:ClimateActionLow-carbonhydrogenispartofamixofcleansolutionsandmeasurestoaddresstheissueofclimatechangemitigation,especiallyinhard-to-abatesectors.However,whenconsideringtheoptionofrenewableenergyuseforgreenhydrogenproduction,thereisaneedtofindanacceptablebalancebetweencleanelectrificationandlow-carbonhydrogenproduction.26PotentialblueandgreenhydrogendevelopmentsintheArabregionB.Low-carbonhydrogenandnationallydeterminedcontributionsBasedonpubliclyavailabledataandinformationatthetimeofwriting,low-carbonhydrogendevelopmentfordomesticandexportmarketshasnotbeenincludedbyArabStatesintheirnationallydeterminedcontributions(NDCs).TheonlynotableexceptionistheUnitedArabEmirates,whichhighlighteditinitssecondNDCsubmittedinDecember2020.However,fiveArabStateshavereferredtoCCStechnologyintheirexistingNDCs.ThiscouldbeanindicationthatCCScouldbeusedtoproducebluehydrogen,specificallyinnaturalgasproducingcountries.CCStechnologyislikelytoincludeusesotherthantheproductionoflow-carbonhydrogen,oritcouldonlybepartofalistof“long-term‘decarbonizationambitions”.18ItshouldhoweverbementionedthatonlyfourArabStates(Algeria,Qatar,SaudiArabiaandtheUnitedArabEmirates)haveanduse(orhaveused)commercialCCSfacilities.19274Renewableandnon-renewableenergypotentialintheArabregion28PotentialblueandgreenhydrogendevelopmentsintheArabregionArabStateswillpursueeitherblueorgreenhydrogenorboth,dependingontheirfossilandrenewableresources.AfewStates(Egypt,Morocco,Oman,SaudiArabiaandtheUnitedArabEmirates)couldemergeassourcesofgreenhydrogenproductioncapacities.Theregion’srenewableenergygenerationcapacityrosefrom1GWin2010toover12GWin2020andisprojectedtogrowto180GWby2030,openingthedoorforincreasedgreenhydrogenproduction.Theroleofnaturalgasintheproductionofbluehydrogeniscriticalforthetransitiontothegreenhydrogenphase.InselectArabcountrieswithnaturalgassurpluses,naturalgascouldalsobeusedtoproducebluehydrogenforexportaftermeetingdomesticmarketneeds.180GWby2030Keymessages29A.OverviewTheArabregion’sexistingandfuturerenewableenergycapacities,aswellasitsendowmentofnaturalgasresources,isimportanttothedevelopmentofblueandgreenhydrogencapacities.EachArabStateorgroupofArabStatesislikelytofollowadifferentpathwaytopotentiallydeveloplow-carbonhydrogenandintroduceitintheireconomy.Hydrocarbonproducerswithlargenaturalgasresourcesmayinitiallychoosetofocusonbluehydrogentodeveloprelativelycost-competitivelow-carbonhydrogencapacities.However,Statesnotendowedorpoorlyendowedwithhydrocarbonresourceswillfocusonthedevelopmentofgreenhydrogen.Infact,someStateswellendowedwithhydrocarbonresourcesmaydecidetodoboth.Thus,thissectionofthereportwillcovertheaboveaspectsandidentifytheArabcountriesthatmaybepotentialcandidatesforhydrogenproduction.B.RenewableenergypotentialOverthelasttenyears,therehasbeenasignificantincreaseintheArabregion’sinstalledrenewableenergycapacity(excludinghydroelectricity),from1GWin2010toover12GWin2020.20However,thebulkofthistotalinstalledrenewableenergycapacityremainsconcentratedinafewcountries,asshowninthefigurebelow.In2020,fourcountries(Egypt,Jordan,MoroccoandtheUnitedArabEmirates)accountedforabout80percentoftheregion’stotalvariablerenewablegenerationcapacity.AccordingtothelatestArabFutureEnergyIndex(AFEX),producedbytheRegionalCenterforRenewableEnergyandEnergyEfficiency(RCREEE)incollaborationwiththeUnitedNationsDevelopmentProgram(UNDP),installedrenewableenergycapacityintheArabregionisprojectedtoreachabout180GWby2030.21ThisestimateisbasedontargetsannouncedbyvariousArabStatesfortheirplannedinstalledrenewableenergycapacityandthetargetedfutureshareofrenewableenergyoutofthetotalpowercapacitymix.22Forthemostpart,thesetargetslookveryambitiouswhencontrastedwithexistinginstalledrenewablecapacityanditsshareofeachcountry’spowercapacitymix(table3).Nevertheless,onekeymessagethatemergesfromthetablebelowisthefactthatevenunderanambitiousdevelopmentscenario,by2030,renewableenergyisunlikelytoexceed30percentoftheinstalledpowermixinmostArabcountries.Egypt,MoroccoandSaudiArabiaaretheexception,withannouncedtargetsof52percentby2030,50percentby2030and42percentby2035,respectively.TheSudan,whichaccountsfortheArabregion’slargestshareofinstalledbioenergycapacity,istargetinga50percentrenewableenergycapacityby2031.Therefore,overthenextfifteenyears,fossilfuels,especiallynaturalgas,areexpectedtocontinuetoplayadominantroleintheArabregion’stotalelectricitygenerationcapacity.23,24Furthermore,thereisanadditionalkeyobservationtomakeregardingtheprojectedlimitedshareofrenewableenergycapacityinsomeArabStates.TheseStateshavealreadycommittedthemselvestolargegasorcoal-firedplants,resultinginalimitedremainingspaceforexpansionofrenewableenergy.Infact,insomecasesthiswilllead(orhasalreadyled)toatotalsurplusofelectricitygenerationcapacityoveracceptablereservemarginthresholds.30PotentialblueandgreenhydrogendevelopmentsintheArabregionFigure2.Arabregion:installedrenewableenergycapacity–2020(MW)050010001500200025003000AlgeriaBahrainEgyptIraqJordanKuwaitLebanonLibyaMauritaniaMoroccoOmanQatarSaudiArabiaStateofPalestineSudanSyriaArabRepublicTunisiaUnitedArabEmiratesYemenWindSolarBioenergySource:IRENA,2021b.Tointroducenewlow-carbonhydrogencapacitiesintheireconomiesfordomesticand/orexportpurposes,policymakerswouldhavetotakesomefundamentalenergypolicydecisions.ThisincludesthecriticalquestionofwhetherArabeconomiesshoulddedicateapart(orratheralargepart)oftheirfuturerenewableenergycapacitytoproducegreenhydrogenorfocusintheneartermontheproductionofbluehydrogenusingnaturalgaswithCCSasatransitionfuel,whereverresourcesandgeologicalconditionsallow.ThiswouldenableArabStatestocontinuewiththecleanelectrificationoftheirpowermixesandadoptpoliciesconsistentwiththe“principleofrenewableenergyadditionality”whichindicates,“ifthereareotherproductiveusesfortheelectricitybeinggeneratedfromrenewablesources,thatelectricityshouldnotbedivertedfromthoseusestoproducegreenhydrogen.”25ForArabStatesnotendowedornotwellendowedwithnaturalgasresources,thesameissueapplies.Still,thechoicewillbebetweenfurthergreenorcleanelectrificationandproductionofgreenhydrogen.31Hydrogenproduction,transportandstorageTable3.Arabregion:targetfuturerenewableenergycapacityandpowermixshareCountryTarget(MW)TargetyearRenewableaspercentageoftargetpowermixVariablerenewableaspercentageof2020powermixAlgeriaa15,0002035302Bahrain7002035100.1Egypt54,0002035425Iraq2,2402025datanotavailable0.7Jordan3,22020303131Kuwait4,2002030150.5Lebanondatanotavailable2030302Libya4,6002030220Mauritaniadatanotavailabledatanotavailabledatanotavailable21Morocco10,00020305219Omandatanotavailable2030301Qatar1,8002030200.3SaudiArabiab58,7002030500.5StateofPalestinedatanotavailabledatanotavailabledatanotavailabledatanotavailableSudan5,3002031505SyrianArabRepublic4,5502030300.1Tunisia3,8152030305UnitedArabEmirates6,5002030datanotavailable7Yemen71420251513Source:RCREEE,2019andIRENA,2021b.aSmati,Said,2021.bOneoftheobjectivesoftheSaudiGreenInitiativeannouncedinApril2021istohave“50percentrenewablesintheKingdom’senergymixby2030”.https://www.saudigreeninitiative.org/.Statesthatarenotendowedorpoorlyendowedwithnaturalgasresourceswillnaturallyhavetocontinuetofocusonthegreenhydrogenoption(e.g.Morocco).However,theshifttogreenhydrogenproductionintheArabregionwilltaketimeandrequiresubstantialinvestment.Thisoverviewofplannedrenewablecapacitiesshowsthatafewcountries(Egypt,Morocco,Oman,SaudiArabiaandtheUnitedArabEmirates)couldemergeaspotentialsourcesofgreenhydrogenproductioncapacities.However,asindicatedabove,itwilldependontheprioritization(ornot)offurtherrenewableelectrificationoftheirpowersector.Still,countriessuchasSaudiArabiawiththeirplanneddevelopmentofahugerenewableenergycapacitymaynotbeaffectedbythisprioritizationchoice.Morocco,theArabregion’sleaderinrenewableenergy,alongwithJordan,isplanningthedevelopmentofgreenhydrogencapacityforpotentialexportstoEurope.Inthiscase,theimplementationwoulddependnotonlyontheissueofrenewableelectrificationversusgreenhydrogenproduction,butalsoonthefinancialandtechnologicalsupportforimportingsourcesofgreenhydrogeninEurope.Asstressedearlier,duringthetransitiontogreenhydrogenproduction,naturalgasis32PotentialblueandgreenhydrogendevelopmentsintheArabregionlikelytoplayakeyroleintheproductionoflow-carbonbluehydrogenintheArabregion.Nonetheless,averysmallnumberofArabcountriescouldmakeavailablethefinancialandnaturalgasresourcesneededtoproducebothblueandgreenhydrogen,especiallyforpotentiallong-termlow-carbonhydrogenprojectsdedicatedforexportstoregionsoftheworldwiththestrictestcarbonregulations.AccordingtoHydrogenEurope,Europecouldpotentiallyimportover2milliontonsoflow-carbonhydrogenfromNorthAfricathroughcross-borderpipelinesby2030.26However,thisisanextremelyambitiousplangiventhecurrentverypreliminarystatusoftheseexportplans.C.NaturalgasendowmentIn2020,90milliontonsofhydrogenwasproducedglobally(excludingabout30Mtofhydrogenpresentinresidualgasesfromindustrialprocessesusedforheatandelectricity).Sixtypercentofthistotalhydrogenproductionwasbasedonnaturalgasasaprimarysourceandrequired240billioncubicmetersofnaturalgas(IEA,2021),equivalenttoover50percentofallthenaturalgasconsumedintheArabregionin2020.Therestwasproducedusingcoalandverysmallvolumesofoilasprimarysources.Ofthetotalglobalhydrogenoutput,lessthan1percentconsistedofbluehydrogenproducedwithCSSfacilities.Asexplainedabove,naturalgasisessentialfortheproductionofbluehydrogen,butnoteveryArabcountryhasaccesstonaturalgassupplies.Wherenaturalgasisavailable,itislikelytobeprioritizedforgenerationofelectricity.Nevertheless,thereisaverysmallgroupofArabcountriesthataresurplusgascountrieswheregasisexportedthroughcross-bordergaspipelines27and/orbyLNGtankersandwherenaturalgascouldalsobeusedtoproducebluehydrogenforexportaftermeetingdomesticmarketneeds.Figure3belowshowsthatprovednaturalgasreservesareunevenlydistributedintheArabregion,withonlyaverylimitednumberofArabcountrieswithlargegasreserves.Furthermore,thisgasreserveschart,whichisoftendisplayedtoshowtheregion’sgaspotential,doesnotprovideacompletepictureofthenaturalgassituationintheregion.60%50%ofthetotalhydrogenproductionwasbasedonnaturalgasasaprimarysourceofallthenaturalgasconsumedintheArabregionin202033Figure3.Arabregion:mainprovednaturalgasreserves(bcm)050100150200250AlgeriaEgyptIraqKuwaitLibyaOmanQatarSaudiArabiaUnitedArabEmiratesSource:GECF,2021andOPEC,2021.34PotentialblueandgreenhydrogendevelopmentsintheArabregionFigure4.Arabregion–2020naturalgasproductionandconsumption(bcm)050100150200AlgeriaEgyptIraqKuwaitLibyaOmanQatarSaudiArabiaUnitedArabEmiratesDomesticconsumptionMarketedproductionSource:GECF,2021Figure4showsthefragilenaturalgasbalanceofseveralArabcountries,whereahighpercentageofcurrentgasproductionisconsumeddomesticallyorissimplyinsufficienttomeetdomesticneeds.ApartfromQatar,whichwillcontinuetobeamajornetgasexporterregionallyandglobally,naturalgasproducedinmostArabcountriesislikelytobeallocatedtomeetrisingdomesticdemandforgasinthepowersectorandindustry.However,theirgasusewillgrowmoreslowlyinthefuturethaninpreviousdecades.28LargenaturalgasreserveholderssuchasQatar,SaudiArabiaandtheUnitedArabEmirateshavetherenewableandnon-renewableenergypotentialtodevelopbothblueandgreenhydrogen,aspresentedintheensuingsection.355ExistingandplannedhydrogendevelopmentsintheArabregion36PotentialblueandgreenhydrogendevelopmentsintheArabregionWellover90percentofallthehydrogenproducedintheArabregionisgreyhydrogen.Low-carbonhydrogenexportsprovideopportunitiesforpotentialnewproducersintheArabregionandcouldinthelongtermofferArabhydrocarbonproducersdiversificationopportunitiesandincentivesforanacceleratedenergytransition.Asalternativestohelpmeetthelong-termtargetofcarbonneutrality,averylimitednumberofArabcountriesareproducingblueandgreenhydrogenanddevelopingacircularcarboneconomy.SeveralArabcountrieshavebeenconsideredaspotentialsourcesoflow-carbonhydrogenproductionbecauseoftheirsignificantsolarandwindenergypotentialandtheavailabilityoflargeplotsoflandtodeveloprenewableenergyprojects.Newexportopportunitiesareemergingforlow-carbonhydrogenfromtheArabregion,inpartduetothefactthatEurope’sdomesticlow-carbonhydrogensupplieswillnotbesufficienttomeetitsprojectedlong-termhydrogendemand.90%HHKeymessages37A.ChangingsceneHydrogenproductionandutilizationinArabcountrieshavebeendrivenbytherequirementsofindustries,suchasoilrefining,petrochemicalsandsteel,thattraditionallyconsumehydrogen.Wellover90percentofallthehydrogenproducedintheArabregionisgreyhydrogen.LargeamountsofhydrogenareconsumedmainlyintheGCCandNorthAfricaareas.GCCcountriespresentlyconsumebetween5and6milliontonsofhydrogenandSaudiArabiaaccountsforover40percentofthistotalGCCconsumption.29OverthelastsixyearssincetheParisAgreement,asmallnumberofArabcountrieschannelledtheirpolicyeffortstowardsthedevelopmentofrenewablesourcesofelectricity.Initially,thesewerenotdrivenbyclimatechangeconsiderations,butmainlybythefinancialnecessitytoreducecostlypetroleumproductimportsandleveragethefallingcostsofsolarpanels.CountrieslikeJordanandMoroccomanagedtosignificantlyincreasetheshareofrenewablesintheirenergymix.IntheGCCarea,theUnitedArabEmiratesemergedasthearea’schampionbyinitiatingseveralinitiativestodevelopcarbon-freeorlow-carbonalternatives.AlthoughthepresentshareofrenewablesintheenergymixoftheUnitedArabEmiratesremainsrelativelylow,thefederalandlocal(Emirate-level)governmentsintheUnitedArabEmirateshaveenactedstrategiesandplanswithambitiousdecarbonizationtargets,someofwhicharealreadybeingimplemented.Recently,SaudiArabiastarteddevelopingalargerenewableenergyprogrammeandinitiatedblueandgreenhydrogenprojects.B.Low-carbonhydrogendevelopmentsTheproductionofblueandgreenhydrogenandthedevelopmentofacircularcarboneconomyasalternativestohelpmeetthelong-termtargetofcarbonneutralityarebeingadoptedinaverylimitednumberofArabcountries.ItshouldbenotedthatmostofthecountriesintheArabregionarestillfacingchallengesintheplanningandimplementationofrealisticsustainablerenewableenergyprogrammes.Integratingadequatelevelsofrenewableelectricitygenerationremainsanobjectivethathasyettobeachievedinthisregion,asshownintable3.Nevertheless,theinternationalfocusonlow-carbonhydrogenhasresultedinnewlow-carbonhydrogendevelopmentinitiativesintheregion.Atpresent,therearefiveArabStatesthatareactivelypursuingand/orplanningnewlow-carbonhydrogendevelopments,includingblueandgreenhydrogenprojects.TheseincludeEgyptandMoroccoinNorthAfricaandOman,SaudiArabicaandtheUnitedArabEmiratesintheGCCarea.OtherArabStateswithexistingorplannedlargerenewableenergycapacityand/ornaturalgasresourceshaveexpressedinterestinhydrogendevelopmentsandareundertakinginitiativestoplanforthedevelopmentoflow-carbonhydrogenproduction.FocusingfirstonthefiveArabStatesmentionedabove,thefollowinghydrogenorhydrogen-relatedstrategies,policiesandplanshavebeendevelopedorannouncedinthem.Itshouldbenotedthatthesehydrogendevelopmentsandannouncementsarecontinuouslytakingplace;therefore,thisreportaimstoincorporateallthelatestdevelopmentsasofDecember2021.38PotentialblueandgreenhydrogendevelopmentsintheArabregion1.UnitedArabEmiratesTheUnitedArabEmirateswasoneofthefirstArabcountriestostartdevelopingstrategiesforthesustainabletransitionofitsenergysectorandothersegmentsofitseconomy.In2017,itlaunchedEnergyStrategy2050,which“aimstoincreasethecontributionofcleanenergyinthetotalenergymixfrom25percentto50percentby2050andreducethecarbonfootprintofpowergenerationby70percent.”30Thisstrategywasprecededbyseveralothercleanenergyinitiativesandprojects.InJanuary2012,theEmirateofDubailaunchedthedevelopmentoftheMohammedbinRashidAlMaktoumSolarPark.Theground-breakingceremonyfor“thefirstsolar-drivenhydrogenelectrolysisfacilityintheMiddleEastandNorthAfricaregion”31tookplaceinFebruary2019.Thisfacilityistobesitedinthissolarparkandisexpectedtobecomeoperationalin2022.TheUnitedArabEmirateshasnotyetproducedahydrogendevelopmentstrategy.However,thecommitmentofthefederalandlocalauthoritiestointroduceblueandgreenhydrogenintotheEmiratieconomyiscontinuouslyreiteratedanddecisionsarebeingtaken.InNovember2020,atameetingoftheAbuDhabiSupremePetroleumCouncil,CrownPrinceSheikhMohamedbinZayedmandatedADNOC“toexplorepotentialopportunitiesinhydrogenwiththeambitiontopositiontheUAEasahydrogenleader.”32InJanuary2021,theEmiratiMinisterofIndustryandAdvancedTechnologyandCEOofADNOCstatedthat“hydrogencouldbeagamechangerintheenergytransition.”33AsofNovember2021,theUnitedArabEmirateshasstartedbuildingitsfirstgreenhydrogenplantandtestingisunderway,accordingtoEnergyMinisterSuhailAl-Mazrouei.34Initssecondnationallydeterminedcontribution(NDC)submittedtotheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)inDecember2020,theUnitedArabEmirateshasclearlyidentifiedtheimportanceoflow-carbonhydrogenanditsintroductioninitseconomy.35InJanuary2021,ADNOC,MubadalaInvestmentCompanyandAbuDhabiDevelopmentalHoldingCompanyPJSC(ADQ),signedamemorandumofunderstandingtoformtheAbuDhabiHydrogenAlliance“toestablishAbuDhabiasatrustedleaderoflow-carbongreenandbluehydrogeninemerginginternationalmarkets.”36Acoupleoflow-carbonhydrogenorhydrogen-basedprojectshavebeenannouncedrecently,includingaplanned“world-scale”1milliontonperannumblueammoniaprojecttobedevelopedbyADNOCinjointventurewithOrascomConstructionIndustries(OCI)ofEgyptattheRuwaispetrochemicalpark.37Thisnewjointventure(Fertiglobe)announcedinAugust2021atrialshipmentofblueammoniatotheJapanesecompanyItochu.AnotherprojecttobesitedattheKhalifaIndustrialZoneinAbuDhabiisplannedtoproduce0.2milliontonsperannumofgreenammonia.Thisprojectistobedevelopedbyaprivately-ownedcompany,HeliosIndustry.38IntheEmirateofDubai,SiemensEnergy,theDubaiElectricityandWaterAuthority(DEWA)andExpo2020Dubaihave“inauguratedthefirstindustrialscale,solar-drivengreenhydrogen25%-50%70%IncreasethecontributionofcleanenergyinthetotalenergymixfromReducethecarbonfootprintofpowergenerationbyBy205039facilityintheMiddleEastandNorthAfrica”,sitedatMohammedbinRashidAlMaktoumSolarPark.39Low-carbonhydrogenistobeincreasinglyusedintheUnitedArabEmiratesinthetransportationandothersectors.HydrogenisalreadyusedintheUnitedArabEmiratesinfuelcellelectricvehicles(FCEVs).In2019,theEmiratesAuthorityforStandardizationandMetrology(ESMA)issuedthefirsttechnicalregulationforhydrogenusedinvehicles.40TheUnitedArabEmiratesisalsoplanningtoexportlow-carbonhydrogenandaimstocaptureaquarteroftheglobalhydrogenfuelmarketby2030,accordingtostatenewsagencyWAM.41InNovember2021,thetwoenergycompaniesoftheUnitedArabEmirates,ADNOCandAbuDhabiNationalEnergyCompany(TAQA),teameduptocreateaglobalrenewablesandhydrogenventurewiththeobjectiveofdevelopingatotalgeneratingcapacityof30GWby2030.42AttheCOP26climateConferenceofthePartiesinGlasgow,theUnitedArabEmiratespresentedits“hydrogenleadershiproadmap”andannouncedthatitwill“targeta25percentshareoftheglobalhydrogenmarket.”432.SaudiArabiaSaudiArabiahaslongfocusedonleveragingitslargehydrocarbonresourcesdomesticallyandexternally.Inthemid-2010s,theGovernmentintensifieditseffortstodiversifyitseconomyandreducethecountry’sheavyrelianceonhydrocarbons.TheseeffortsculminatedinSaudiVision2030,issuedin2016,whichformulatesthecountry’s“long-termgoalsandexpectations”.Itidentifiesthedevelopmentofrenewableenergyresourcesasastrategicobjectiveandhighlightsthestrategicgoalofgrowingthecontributionofrenewableswithinthenationalenergymix.44Theimplementationofarenewableenergyprogrammetooksometimetobelaunched,butitisnowprogressingwiththeaimofdevelopingtheArabregion’slargestrenewableenergycapacitywithoneofthemostcost-competitiveelectricitygenerationcosts.By2030,SaudiArabiaplanstogenerate50percentofitselectricityfromrenewableenergysources,asannouncedinNovember2020,atasessionoftheG20presided40PotentialblueandgreenhydrogendevelopmentsintheArabregionbySaudiArabia.ItwasreiteratedinJanuary2021atthe11thSessionoftheAssemblyoftheInternationalRenewableEnergyAgency(IRENA).45DuringtheG20meetings,SaudiArabiaconcentrateditseffortsontheadoptionoftheconceptofthecircularcarboneconomy(CCE)46foracleanandsustainableenergytransition.TheCCEapproach,whichwasendorsedbytheG20members,providestheframeworkfortheproductionanduseoflow-carbonhydrogendomesticallyandforexports.47Atthesametime,SaudiArabiaannouncedthatithadcommissionedateamtoprepare“anationalstrategyonhowweevolvewithhydrogen.”48Atpresent,SaudiArabiahastwolow-carbonhydrogenprojectsincludingbothblueandgreenhydrogen.ThelargestisthegreenhydrogenprojecttobelocatedinNeominthenorth-westernregionofSaudiArabia,whichistheworld’slargestgreenhydrogenproject.The$5billionNeomgreenhydrogen-basedammoniaprojectisbeingdevelopedbyajointventurebetweenNeomandACWAPowerofSaudiArabiaandAirProductsoftheUnitedStates.Theprojectwillbeequallyownedbythethreepartnersandwillproducegreenammoniaforexport.Theprojectisscheduledtobeonstreamin2025andwillincludeover4GWofrenewableenergy,usingelectrolysistoproduce650tonsofgreenhydrogenand1.2milliontonsofgreenammoniaperday.49Furthermore,planshavebeenannouncedtodevelopanassemblyplantinthecityofNeomtoproduceupto10,000hydrogenfuelcell-poweredvehiclesayearaspartofamemorandumofunderstandingbetweenHyzonMotorsoftheUnitedStatesandtheModernIndustrialInvestmentHoldingGroupandNeomcompany50ofSaudiArabia.Thesecondprojectisabluehydrogen-basedammoniaprojectlocatedinJubailIndustrialCityintheeasternprovinceofSaudiArabia.JubailisthelargestindustrialparkofSaudiArabiaandtheArabregionandoneofthelargestindustrial4GW5billion650tonsBy2050Neomgreenhydrogen-basedammoniaprojectofrenewableenergytoproduceofgreenhydrogen1.2milliontonsofgreenammoniaperday41parksintheworld,andsuchprovidessignificantcomparativeadvantagefortheproduction,utilizationandexportoflow-carbonhydrogenandammonia.TheexistingKingFahadPortofJubailisconnectedtoJubailIndustrialCity,providinganadditionaladvantageforexportoflow-carbonhydrogen-basedammonia.Thisbluehydrogen-basedammoniaprojectusesexistinginfrastructureinJubailwherethehydrogenandammoniaareproduced.TheCO2iscapturedandsenttooilfieldsforenhancedoilrecoveryandtoamethanolplantinJubail.InSeptember2020,SaudiArabiaexportedapilotshipmentof40tonsfromthisSaudiindustrialhub,whichwastheworld’sfirstshipmentofbluehydrogen-basedammoniatoJapan.51SaudiAramcoandtheInstituteofEnergyEconomicsofJapan(IEEJ)developedthisexportinitiative,inpartnershipwiththepetrochemicalscompanySABICofSaudiArabia.Thebluehydrogen-basedammoniawasusedinJapantogeneratecarbon-freeelectricity.52SaudiArabiahasalsosignedmemorandaofunderstandingwithGermanyandSouthKoreatoestablishpartnershipsforthedevelopmentoflow-carbonhydrogenandhydrogen-basedinitiatives.InOctober2021,atthefirstSaudiGreenInitiativeForum,SaudiArabiaannouncedthatitwasplanningtobecomealeadingglobalsupplierofblueandgreenhydrogenandthatitwouldproduceandexport4milliontonsoflow-carbonhydrogenby2030.533.OmanComparedtoSaudiArabiaandtheUnitedArabEmirates,OmanhaslimitedreservesofhydrocarbonsandisstillimportingasmallvolumeofnaturalgassuppliesfromQatarthroughtheDolphinEnergygaspipelineviatheUnitedArabEmirates.Itis,however,pursuingtheupstreamdevelopmentofitsnaturalgasresources,incollaborationwithinternationaloilandgascompanies,tomeetitsdomesticneedsandforpotentialadditionalexports.OmanisalsoundertakingmanyeffortstodeveloprenewablesourcesofenergytodiversifyitsenergymixandreduceitsrelianceonfossilfuelsforelectricitygenerationandreleasemoregassuppliesforLNGexports.RenewableenergyprojectshavebeeninitiatedbytheoilandgascompanyofOman,PetroleumDevelopmentOman(PDO),theglobalintegratedenergycompanyOQbasedinOmanandseveralOmanienergyandpetrochemicalscompanies,suchasOmanOil.OQhassetupaspecialrenewableenergyandenergyefficiencyunitcalledOQAlternativeEnergy.TheemerginginterestofOmaningreenhydrogenproductionisdrivenbythecountry’splannedexpansionofitsenergycapacity.EJAAD,“amembership-basedvirtualcollaborativeplatform”,54includingtheOmaniMinistryofOilandGas,PDOandtheOmaniResearchCouncil,is“coordinatingtheeffortstocreateanationalstrategyforhydrogenasapromisingeconomicengine.”55Intermsofprojects,twoinitiativesinvolvinginternationalpartnershipswereannouncedin2020.ThefirstinitiativewaslaunchedinJanuary2020withthecreationoftheOmanHydrogenCentreattheGermanUniversityofTechnology,Oman.Thiscentre“willserveasthecentreofknowledgeinhydrogentechnologyinOmanandbeyond–regionallyintheGCC.”56Thesecondinitiative,announcedinMarch2020,isapartnershipbetweentheBelgianconsortiumDEMEConcessionsandOQAlternativeEnergytodevelopagreenhydrogenproject(HyportDuqm)intheSpecialEconomicZoneofOmanatDuqm.Thefirstphaseofthisgreenhydrogenprojectconsistsofa250to500MWelectrolyserplanttobesuppliedwithrenewableelectricityfromsolarandwind.InAugust2021,aspartofitsVision2040totransformitseconomy,Omanestablisheda42PotentialblueandgreenhydrogendevelopmentsintheArabregionnationalhydrogenallianceconsistingof13publicandprivatesectorinstitutionstoproduce,transportanduselow-carbonhydrogen.574.MoroccoInNorthAfrica,Moroccohasdevelopedarelativelylargevariablerenewableenergy(solarandwind)capacityprogrammeinashortperiodoftime.ItistodayaleadingdeveloperofrenewableenergyresourcesintheArabregionandconsequentlyacandidatetoproducegreenhydrogenandgreenhydrogen-basedammonia.Moroccoisplanningtobecomeasourceofgreenhydrogenorgreenhydrogen-basedammoniasuppliesforEurope.Topromotethedevelopmentofthissourceoflow-carbonhydrogen,itsGovernmenthasundertakenthefollowingmainactions:“Settingupanationalcommissionongreenhydrogenincludingpublicandprivatesectorparticipants.Launchofastudytoformulateagreenhydrogenroadmap.Ongoingpilotprojectfortheproductionofgreenammonia.Developmentofanintegratedprogrammeofgreenammoniaproduction,throughtheredeploymentofrenewableenergy.Holdingalargescientificandtechnologicalconferencededicatedtogreenhydrogen.”58InJune2020,MoroccoandGermanysignedapartnershipagreementcoveringtwogreenhydrogenrelatedprojects.Thefirstproject,Power-to-X,willconsistofapilotprojecttoproducegreenhydrogen.ThesecondprojectisthecreationofaresearchplatformonPower-to-X,knowledgetransferandstrengtheningofrelatedskills.59Moroccoisactivelyworkingonthedevelopmentofgreenhydrogenproductioncapacity.Itsagencyforthedevelopmentofsustainableenergy(MASEN)isplanningtheconstructionofahybridsolarPV/windpowerplanttosupplya100MWelectrolyserplanttoproducegreenhydrogen.Theproject,whichispresentlyatthefeasibilitystudystage,isscheduledtobecommissionedbetween2024and2025.60Moroccocontinuestorelyheavilyonfossilfuelimports,thoughinvestmentsinrenewableenergycapacityareincreasingtoreducetheshareoffossilfuelsinthecountry’senergymix.Itsshareofrenewableenergywilllikelyrisefromabout20percentto52percentby2030.However,thismeansthatasof2019,almost70percentoftheelectricitygeneratedinMoroccostilloriginatedfromcoal-firedpowerunits.61Thereisaquestionofhowrenewableenergycapacityshouldbeallocatedbetweendirectelectrificationandgreenhydrogenorgreenhydrogen-basedammoniaproductionforexporttoEuropeandforlocalfertiliserproductiontoreduceimportsofgreyammonia.Nevertheless,MoroccoisexpectedtocontinuetoplayaleadingroleintheArabregion’sgreenhydrogencapacityanditisplanningtocaptureupto4percentoftheglobaldemandforgreenhydrogenandgreenammonia.625.EgyptPresently,EgypthasthelargestinstalledrenewableenergycapacityintheArabregionandisactivelyplanningtheexpansionofthisexistingcapacityforthegenerationofcleanelectricity.Recently,ithasalsoannouncedlow-carbonhydrogenprojectsandinitiativesinpartnershipwithinternationalcompanies.43ItiscurrentlyupdatingandextendingitsIntegratedSustainableEnergyStrategyto2040toincorporatethecountry’s“renewableenergycontributionandtransitiontoagreeneconomy.”Thisincludesthedevelopmentoflow-carbonhydrogenprojectsandinitiatives“towardsthedevelopmentofahydrogeneconomyinEgypt”,andaninter-ministerialcommitteehasbeensetuptodevelopits“NationalHydrogenStrategy”.Infact,Egypthasalreadylaunchedseverallow-carbonhydrogenprojectsandinitiatives.InJanuary2021,theMinistryofElectricityandRenewableEnergysignedanagreementwithSiemenscompanyofGermanytoundertakestudiesforthedevelopmentofagreenhydrogenpilotproject,including100–200MWofelectrolysercapacity.63InAprilandJuly2021,theEgyptianGovernmentsignedseparateagreementswiththeBelgiancompanyDEMEandEniofItalyforlow-carbonhydrogenprojectstargetingdomesticandexportmarkets.ThiswasfollowedbythesigninginOctober2021ofanagreementbetweenthejointEgyptian–EmiraticompanyFertiglobeandtherenewableenergycompanyScatecofNorwayforagreenhydrogenandgreenammoniaproject.64InMay2021,theMinistryofElectricityandRenewableEnergyofEgyptreceivedsixoffersfrominternationalcompaniesfromChina,Germany,Italy,Japan,theUnitedKingdomandtheUnitedStatestoimplementlow-carbonhydrogenproductionprojects.Acommitteehasbeensetuptoreviewtheseoffers.EgyptisclearlydeterminedtoreduceitsGHGemissionsandtransitiontoagreenereconomyinthelongterm,includingthedevelopmentoflow-carbonhydrogencapacity,particularlygreenhydrogen.ThiscouldatleastpartlyreplacethelargevolumesofgreyhydrogencurrentlyconsumedbyEgyptianindustry.656.OtherArabcountriesOtherArabcountrieshavebeenconsideredaspotentialsourcesoflow-carbonhydrogenproductionbecauseoftheirsignificantsolarandwindenergypotentialandtheavailabilityoflargeplotsoflandtodeveloprenewableenergyprojects.TheseincludeAlgeria,basednotonlyonitssolarenergypotential,66butalsoitslargecross-bordernaturalgaspipelineinfrastructure44PotentialblueandgreenhydrogendevelopmentsintheArabregionconnectedtoEurope.Inthelong-term,thisgasinfrastructureconnectioncouldpotentiallybeusedtotransportlow-carbonhydrogenproducedinNorthAfricatoEurope.Infact,low-carbonhydrogenplansformulatedbyEUinstitutionsincludehydrogentransportthroughthecross-bordernaturalgaspipelinesbetweenAlgeriaandItalyandSpain.StudiesandinternationalworkshopsonthepotentialdevelopmentofgreenhydrogenproductioninAlgeriawerefirstinitiatedin2000byAlgerianscientistsandresearchcentres.However,multi-facetedchallengespreventedprogresstowardsimplementation.67In2021,thenewlycreatedMinistryofEnergyTransitionandRenewableEnergyre-introducedthetopicofgreenhydrogendevelopmentinthenationalagendawithinthecontextofthecountry’splannedenergytransitioninitiatives.InFebruary2021,astudyongreenhydrogenandPower-to-XwaslaunchedbythisministryinpartnershipwithGermany’sGIZ.ThiswasfollowedbyaworkshopinApril2021bytheMinistryofEnergyTransitionandRenewableEnergyandtheMinistryofHigherEducationandScientificResearchonthedevelopmentofgreenhydrogeninAlgeriaanditspotentialimpactonthecountry’senergytransition.Agreenhydrogenallianceandanewgreenhydrogennationalplanwereannouncedattheendofthisworkshop.68InJuly2021,thekeyobjectivesofthisgreenhydrogennationalplanwereissuedbytheMinistryofEnergyTransitionandRenewableEnergy.69OtherAlgerianentitieshavealsoexpressedinterestinthepotentialdevelopmentoflow-carbonhydrogen.ThenationaloilandgascompanyofAlgeria,Sonatrach,andEniofItaly,haveagreedtoperformafeasibilitystudyonapilotprojecttoproducegreenhydrogeninAlgeria.70Theserecentdevelopmentshaveprovidedtheopportunitytoreconsiderthelow-carbonhydrogeninitiativeaspartofthecountry’sfuturepotentialcleanenergyalternatives.AttheendofNovember2021,theAlgerianGovernmentappointedanationalcommitteetoformulateanationalhydrogenstrategyforthedevelopmentoflow-carbonhydrogeninAlgeria.Algeriacouldofferseveraladvantagesforthepotentialdevelopmentofgreenhydrogen,suchasveryfavourablesolarirradiancelevels,largeplotsoflandsandawell-developedenergyinfrastructure.Nevertheless,developinglow-carbonhydrogencapacityislikelytobealong-termobjectiveasthecountryfacesrecurrentchallengesinitscleanelectrificationefforts.Asindicatedinfigure2,Algeriapresentlyhasaverysmallrenewableenergycapacity.Mauritaniahasalsoannouncedplanstodevelopgreenhydrogenandgreenammoniacapacities.However,thereislimitedinformationavailableontheseveryambitiousprojects.71,72C.PlannedhydrogenexportsIndustrializedcountries,suchasthoseoftheEuropeanUnion,JapanandSouthKorea,continuetofocusonthedecarbonizationoftheireconomies.Amongamixofcleanalternativestomeettheir2050climateneutralitycommitments,theyareintroducinglow-carbonhydrogen,especiallyinsectorswhereitishardtoelectrifyandabatecarbon.However,basedontheprojectionsthathavebeenpresentedfortheirplannedconsumptionoflow-carbonhydrogenorlow-carbonhydrogen-basedammonia,thedomesticlow-carbonhydrogensuppliesofEuropewillnotbesufficienttomeettheirprojectedlong-termhydrogendemand.Consequently,thisopens45opportunitiesforlow-carbonhydrogenimportsfromtheArabregionandelsewhere.AbriefoverviewofhydrogenexportprojectsfromArabcountriesispresentedbelow.1.PotentialNorthAfricanhydrogenexportsInitshydrogenstrategy,theEuropeanUnion(EU)referstopotentialimportsoflow-carbonhydrogenfromthe“EU’sneighbouringcountriesinEasternEuropeandintheSouthernandEasternMediterraneancountries”.ItidentifiesparticularlyNorthAfricaanditsgeographicalproximityandthefactthatitcouldpotentiallyprovidecost-competitiverenewablehydrogensupplies.73TheEUstrategydoesnotspecifytheimportroutesfromNorthAfrica,butaninitiativelaunchedbyEuropeangaspipelineoperatorscalledtheEuropeanHydrogenBackbone(EHB)indicatesthathydrogenimportsfromNorthAfrica,plannedfor2040orpossiblyearlier,wouldberoutedthroughItalyandSpain.74Thiswouldpotentiallyincludelow-carbonhydrogensupplies,fromAlgeria,possiblyLibya,MoroccoandTunisia.2.PotentialMiddleEasternhydrogenexportsTheMiddleEastisanothersourceofpotentiallow-carbonhydrogensupplytoEuropeandtosomeAsiancountries.TherehavebeenreferencestotheplannedEastMediterraneangaspipelineprojecttoSouthernEuropeasapotentialcross-bordernaturalgasinfrastructurethatcouldbeusedtotransportrenewablelow-carbonhydrogen.However,thisambitious2,000-kmgaspipelineprojectisunlikelytomaterialiseanytimesoon.Potentiallow-carbonhydrogensuppliesfromtheMiddleEastaremorelikelytobetransportedbyspecializedshipstoAsiaandEurope.Atpresent,therearenoclearlyidentifiedhydrogengasexportprojectsfromtheMiddleEast,apartfromtheNeomgreenhydrogenprojectinSaudiArabia.46PotentialblueandgreenhydrogendevelopmentsintheArabregionTherehasalsobeenapilotexportshipmentofbluehydrogen-basedammoniafromtheJubailIndustrialCityofSaudiArabia.Giventhecostconstraintsofpurehydrogentransportationacrosslongdistances,low-carbonhydrogenfromtheMiddleEastwouldpredominantlybeshippedinthecheaperlow-carbonammoniaform.3.PotentialchallengesofhydrogenexportsFinally,itisimportanttoraisethequestionofwhetherthepotentialsourcesofcleanenergyintheArabregioncouldproduceenoughlow-carbonhydrogentomeettheprojectedimportdemand.Furthermore,couldArabsourcescompetewithotherpotentiallow-carbonhydrogenproducerssuchasAustralia(especiallyforAsianmarkets),ChileandRussia?Thesechallengesareoutlinedinthefollowingsection.Low-carbonhydrogenexportsalsoprovideopportunitiesforpotentialnewproducersintheArabregionandcouldinthelongtermofferArabhydrocarbonproducersdiversificationopportunitiesandincentivesforanacceleratedenergytransition,butachievingthisobjectivehasbeenchallengingsofar.Forproducerswithcross-bordergaspipelineinterconnectionswithEurope,low-carbonhydrogentradecouldhelpoptimizetheuseofthisgasinfrastructure,especiallyasEuropeangasimportsstarttodeclinesignificantlyby2030andbeyond.Still,thisislikelytobeaverylong-termopportunity.4.Potentialdevelopmentapproachesforlow-carbonhydrogenAlthoughStatesarelikelytoadoptdifferentpathwaystodecarbonizetheireconomiesandmovetowardslong-termcarbonneutrality,therearecommonfeaturesregardingthedevelopmentandimplementationofblueandgreenhydrogenprojects.Bluehydrogenprojectsaremainlyinitiatedandledbythenationaloilandgascompanies(NOCs)inhydrocarbon-producingcountries,inpartnershipwithinternationaloilandgascompanies(IOCs),localandinternationalprivatesectorcompaniesandgovernmentagenciesinenergyimportingcountries.However,inthecaseofgreenhydrogenprojectswhicharecloselylinkedtorenewableenergyprojects,utilitycompaniestendtoplayaleadingroleindevelopmentandimplementation.Furthermore,low-carbonhydrogenprojectstendtobeconcentratedinindustrialclusters,parks,“valleys”ornewhubs(e.g.Neom),wheremostofthelow-carbonhydrogenproducedisexpectedtobeconsumeddomestically,orinportareaswhereitcanbeconsumedlocallyand/orinthelongtermbeexportedaslow-carbonhydrogenorgreenammonia.476Challengesandopportunities48PotentialblueandgreenhydrogendevelopmentsintheArabregionBluehydrogencanactasaneffectivebridgetogreenhydrogen,andCCSorCCUSenabletheproductionofrelativelylessexpensivebluehydrogen.Thewaterrequirementsofgreenhydrogenproductioncouldlimititsuseincertainwater-scarceregions.However,desalinatedwateronlyaddsabout1percenttothecostofgreenhydrogen,sowiththepropermechanisms,waterscarcityissuescanbeavoidedandgreenhydrogenproductioncanevenbeseenasanopportunity(toprovidelocalcommunitieswithexcessfreshwater)asopposedtoarisk.Countriesinvolvedinorplanningthedevelopmentoflow-carbonhydrogenproductioncapacitiesareconfrontedwithseveralinterrelatedtechnical,economic,regulatoryandfinancingchallenges.Inthelongterm,thecostgapbetweenblueandgreenhydrogenproductionispredictedtonarrowsignificantly.Addressingfinancingchallengeswillrequireanadequatelegalandregulatoryframeworktosupportthescalingupoflow-carbonhydrogenproductioncapacities.Thecostofproducinggreenhydrogen,currentlytwotothreetimesthatofbluehydrogen,isamajorbarriertoscalingupitscapacity.Thecommercialviabilityoflow-carbonhydrogenprojectsrequiresasignificantscalingupofthehydrogenproductioncapacity,underpinnedbysecurelong-termmarketdemand.Keymessages1%49A.Technicalandcommercialbarriers1.ScalingconstraintsStartingwiththeinterlinkedtechnicalandcommercialbarriersandfocusingontheproductionofgreenhydrogenthroughelectrolysis,themainchallengeisthefactthatelectrolysistechnologieshavenotyetreachedthecommercialviabilityneededtorealisticallymeetlong-termnet-zeroemissionstargets.Thescalingupofthesetechnologiesandconcomitantreductioninproductioncostswilltaketimeandrequirelargefinancialresources.Thisscalingupconstrainthasasignificantimpactonthecostcompetitivenessofgreenhydrogenandtherollingoutofacommerciallyandfinanceablegreenhydrogenprogrammeasdiscussedbelow.2.EnergyefficiencyAnothertechnology-relatedfactorthatispresentlyconsideredasignificantbarrieristheenergyinefficiencyorenergylossesofthesystemsusedtoproducegreenhydrogen.AccordingtoIRENA,between30and35percentoftheenergyconsumedintheprocessofproducinggreenhydrogenthroughelectrolysisislost.Furthermore,thetransformationtootherforms,especiallytotransportthecleanproduct,canleadtobetween13and25percentenergylosses.75Overtime,withtechnologyimprovements,theselossescouldbereduced.However,theyremainaconstrainttothegrowthofgreenhydrogenproductionandthescalingupofproductioncapacityforviablecommercialization.3.CCSorCCUSconstraintsTheSpecialReportoftheIntergovernmentalPanelonClimateChange(IPCC)76andtheInternationalEnergyAgency’srecentNetZeroreport77indicatetherelevanceofCCSorCCUSintheshorttomedium-termreductionofCO2emissions.Inthetransitiontogreenhydrogenand/oralongwiththeproductionofgreenhydrogen,CCSorCCUSenabletheproductionofrelativelylessexpensivebluehydrogen.ThisprocessisbasedontheintegrationofCCSorCCUSfacilitiestocapture,utilizeand/orstoreCO2.However,thistechnologyremainsexpensiveandhasstillnotevolvedatthescalerequiredtomeetNetZeroEmission(NZE)targets,withonlyalimitednumberofprojectsusingCCSorCCUSandlocatedmainlyinOECDcountries.Presently,thereare27commercialfacilitiesinoperationglobally,78withonlythreeintheArabregion.Althoughrecognizedasakeyalternativetoquicklyreduceemissionsandhelpdevelopthemarketforlow-carbonhydrogen,companieshavebeenveryreluctanttoinvestinCCSorCCUSfacilities,requestingstrongsupportfromgovernments.Thehighcostofthescaled-upfacilitiesrequiredtomeetNZEtargets,theavailabilityofsuitableCO2storageoptionsandpublicacceptanceofCCSorCCUSprojectsarekeychallengesfortheseprojectsandthereforeforthepotentialproductionofbluehydrogen.4.LimitedtransportinfrastructurePresently,thetransportationofthehydrogenproducedisnotanissue,asthebulkofthehydrogenisconsumedonsiteorclosetowhereitismanufactured.Forexample,oilrefinerysiteconfigurationsintegratehydrogenproductionunits.Therearealsosomerelatively50PotentialblueandgreenhydrogendevelopmentsintheArabregionsmallhydrogenpipelinenetworksinoperationintheUnitedStatesandinseveralEuropeancountries.However,intheArabregion,withtheplannedsignificantexpansionoflow-carbonhydrogencapacityfordomesticusesandpotentiallyforexports,theexistinghydrogenpipelineinfrastructurewouldbehard-pressedtocopewithgrowingdomesticandcross-bordertransportrequirements.5.WaterusageconstraintsThequantityofwaterrequiredbygreenhydrogenplantscouldlimittheiruseincertainregionsoftheworld.Thepotentialtotalconsumptionoffreshwaterworldwide,ifthepresentproductionofpurehydrogenwerebasedonthewaterelectrolysistechnology,wouldbe617millioncubicmeters,equivalenttoonly1.3percentoftheglobalenergysector’swaterconsumption(IEA,2019).However,desalinatedwateronlyaddsabout1percenttothecostofgreenhydrogen,sowithpropermechanismswaterscarcityissuescanbeavoidedandgreenhydrogenproductioncanevenbeseenasanopportunity(toprovidelocalcommunitieswithexcessfreshwater)asopposedtoarisk.However,theabove-mentionedgloballyaggregatedlowwaterconsumptionfiguredoesnotreflecttheadverseeconomicandsocialimpactthisfreshwaterusagecouldhaveonregionswithseverefreshwaterscarcityissues.ThisisanextremelyimportantconsiderationintheArabregion,79especiallyininlandareaswithnoaccesstopotentialsourcesofdesalinatedseawater.Furthermore,evenifaccessible,thedesalinationofseawaterisanenergy-intensiveandcostlyprocessthatwouldneedtobeassessedwithinalocalorregionalcontext.However,acommerciallyandenvironmentallysustainablewayofdevelopingadditionalseawaterdesalinationcapacityforgreenhydrogenproductioncouldalsoprovideopportunitiestosupplyfreshwatertolocalcommunities.6.RegionaltechnicalconstraintsIntheArabregion,developersandoperatorsoflow-carbonhydrogenproduction,transformationandtransportationcapacitieswouldfacesomeadditionaltechnicalconstraintsintermsofskillavailabilityandrelevantmanufacturingcapacityfortechnologycomponents.Nonetheless,thesebarriersshouldbeeasiertoovercomethrougheffectiveinternationalpartnershipsandprocurementifplannedadequately.ItshouldhoweverbeacknowledgedthatthesepartnershipsandinternationalprocurementaffordabilitywouldbelimitedtoasmallgroupofArabcountries.B.EvolvingeconomicsTheeconomicsoflow-carbonhydrogenproductionremainverychallengingandaredirectlylinkedtothetechnologicalconstraintsdescribedabove,amongothers.Themainissueisthemuchhighercostofproducinggreenhydrogencomparedtobluehydrogen.Itshouldbenotedalsothatbluehydrogenproductionisnotwidelydevelopedyet,butthetransitionallow-carbonbluehydrogenoptioncouldprogressmorequicklythanthegreenhydrogenoption.Inthelong-term,thecostgapbetweenblueandgreenhydrogenproductionispredictedtonarrowsignificantly,asshowninthefiguresbelow,ifthescalingupofgreenhydrogencapacitytakesplaceasexpected.51Figure5.Indicativehydrogenproductioncosts:2019($/kg)012345678Greyhydrogen(SMR)Greyhydrogen(AWE)BluehydrogenGreenhydrogen(PEM)0.9-2.11.5-2.53.7-7.52.6-6.9Source:KearneyEnergyTransitionInstitute,2020.Figure6.Indicativehydrogenproductioncosts:2025–2030($/kg)01234Greyhydrogen(AWE)BluehydrogenGreenhydrogen(PEM)1.6-2.61.3-1.61.6-2.2Source:KearneyEnergyTransitionInstitute,2020.Theindicativehydrogenproductioncostrangespresentedinfigures5and6showthatitmaytakearoundtenyearsforgreenhydrogentoachievenearcostparitywithbluehydrogen.Thisassumesthatallthenecessaryfundingismadeavailableandmarketsforlow-carbonhydrogenevolvefavourablyoverthisassumedtimehorizon.Inthemeantime,theproductionofbluehydrogenusingnaturalgasasaprimarysourcethroughtheSMRtechnologyandwithCCS/CCUScouldprovidealow-carbonhydrogentransitiontoamorecost-effectivegreenhydrogensolution.Thisisagainassumingthattheabove-mentionedCCSchallengesarerapidlyaddressed.However,thetransformation(toothergreenforms)andtransportationofthelow-carbonhydrogenorgreenproducts(e.g.greenammonia)couldsignificantlyincreasethecosttoend-users,especiallyforsuppliesoverlongdistances.1.AbluehydrogentransitionWiththeadditionofCCSorCCUSfacilities,thecostofbluehydrogenproductionwillincreasecomparedtogreyhydrogen.AccordingtotheInternationalEnergyAgency(IEA),thecapitalexpenditure(CAPEX)ofproducinglow-carbonhydrogenwillincrease,onaverage,byabout50percentwhiletheoperatingexpenditure(OPEX)willdouble.TheseestimatedcostincreaseswoulddependontheSMRplantdesignandlocation(IEA,2019).ThecostincreaseofnaturalgasduetotheadditionofCCUSismuchlowerinrelativetermsbutisanimportantfactorwhencomparingthecostsofbluehydrogenproductionacrossdifferentregionsoftheworld(figure7).ThisispertinenttoArabnaturalgas-producingcountries,especiallygassurpluscountries.52PotentialblueandgreenhydrogendevelopmentsintheArabregionFigure7.Estimatedbluehydrogenproductioncosts–2018($/kg)00.501.001.502.002.50UnitedStatesEuropeCapexRussiaChinaMiddleEastNaturalgasOpexSource:IEA,2019.IfitisassumedthatCAPEXandOPEXestimatesdonotvaryonaverageacrossregions,whichisnotalwaysthecase,theabovechartshowsthatbluehydrogenproducedintheMiddleEastandtheUnitedStatesisrelativelycostcompetitivecomparedtootherregionsoftheworld,at$0.94/kgfortheMiddleEastand$1.00/kgfortheUnitedStates.InthecaseofNorthAfricangas-producingcountries,bluehydrogenproductionusingnaturalgasasaprimarysourcecouldbemorechallenging.TheincreasinglyconstrainednaturalgasbalancesofproducerssuchasAlgeriaandEgyptcouldlimitbluehydrogenproductiongrowthprospectsinthisarea.Inthelongtermandpostconflict,Libyacouldbeapotentialcandidatewithabetternaturalgasbalancesituation.Thiswillhowevertaketimeandmaygobeyondtheabove-mentionedtransitionphase.Nevertheless,NorthAfricaoffersmuchbetteropportunitiesintheproductionofgreenhydrogenusingexistingandpotentialrenewableenergyresources.Therefore,thenear-termcostadvantagesofbluehydrogenproductionarelikelytobeleveragedmainlyinthefewArabgassurpluscountriesoftheGCCarea.2.RenewableenergyandgreenhydrogenSeveralparties,especiallyinEurope,favourafastertransitiontothegreenhydrogenoption.Meetingthisambitionwouldrequiretherapiddevelopmentofelectrolysiscapacityoverthenexttenyearsandbeyond.In2020,therewasatotalglobalelectrolysiscapacityof0.2GW.AccordingtoIRENA,ifallstrategiesalreadyannouncedwereimplemented,itwouldresultin85GWofelectrolysiscapacityinstalledby2030.Thiscorrespondstoabout85percentofIRENA’sPlannedEnergyScenario(PES),asshowninthefigurebelow.80Figure8clearlydepictsthesubstantialelectrolysercapacityexpansionplannedfor2030.Severalnewelectrolyserprojectsareplannedindifferentregionsoftheworldwithannouncementsindicatingover8GWby2030inEurope,22GWinAustraliaandanimpressive70to80GWby2030inChina.8153Figure8.Plannedelectrolysercapacityby2030(GW)020406060801001202030-Irenapes2030-Strategies2020100850.20Source:IRENA,2020b.Severalsignificantchallengesneedtobeaddressedtoimplementarealisticandcost-effectiveintroductionofgreenhydrogeneitherfordomesticusesorforexportsorboth.Atpresent,thecostofproducinggreenhydrogenisamajorbarriertothedevelopmentofscaledupgreenhydrogencapacity,withIRENAestimatingthatitispresentlytwotothreetimesthecostofbluehydrogen(figure5).Theproductioncostofgreenhydrogenisdrivenbythreemaininteractingelements:electrolyserinvestmentcost;capacityfactor(percentageuseoroperatinghours)andthecostofelectricityfromrenewableenergysources.Overthelasttenyears,thelevelizedcostofelectricitygeneratedusingsolarphotovoltaics(PV);concentratedsolarpower(CSP)andonshorewindsourceshasdeclinedby82percent,47percentand39percent,respectively.82Thesegenerationcostsareexpectedtocontinuetodeclinefurtherforsolarandwindpowertechnologies.SomeofthesesubstantialdropsinrenewableelectricitygenerationcostsarereflectedinrenewableenergyprojectsintheArabregion.TheAlDhafra2GWsolarphotovoltaicprojectintheUnitedArabEmiratesistheworld’slargestsolarPVprojectandhasoneoftheworld’smostcompetitiveelectricitypriceat$0.0135perkWh.83AlShuaiba600MWPVprojectofSaudiArabiareachedanevenlowerpricelevelof$0.0104perkWh.84Arabcountries,suchasJordan,Morocco,SaudiArabiaandtheUnitedArabEmirates,withexistingandpotentiallylowanddecliningcostsofelectricitygeneratedfromrenewablesourcesofenergy(solarandwind),offerakeycomparativeadvantageintheproductionofgreenhydrogen.However,asemphasizedabove,thisadvantagecanbecapturedwhentheutilizationlevelofelectrolysersincreases,dependingontheavailabilityofrenewableelectricity.Egypt,Morocco,SaudiArabiaandtheUnitedArabEmiratesareplanningtodeveloplargecapacitiesofelectricitygenerationbasedonrenewableenergysources.Iftheambitioustargetspresentedintable3areachieved,54PotentialblueandgreenhydrogendevelopmentsintheArabregionby2030/2035,eachoftheseArabcountries’renewableenergysharewouldreachbetween30andslightlyover50percentofeachcountry’senergymix.Somecountriescouldhavesurpluselectricitygenerationcapacityandcouldallocaterenewableenergycapacitytoelectrolysers,especiallyduringlowelectricityusageperiods(e.g.inwinter).85C.FinancingconstraintsOutsidetheGCCarea,NorthAfrica,especiallyEgyptandMorocco,offersopportunitiestoleverageitsincreasingrenewableenergycapacitytoproducegreenhydrogen.However,NorthAfricancountriesarenotendowedwiththesamelevelsoffinancialresourcesandfaceadditionalchallengesinsecuringexternalfinancingforhydrogendevelopmentprojectscomparedtoPersianGulfcountries.Therefore,theywillhavetorelyoneffectivepartnershipswithinternationalcompaniesorinstitutionsnotonlytodevelopandinstalltherelevanttechnologies,butalsotoinvestinthewholelow-carbonhydrogenproductionchain.ThisincludesCCSorCCUSfacilitiesforbluehydrogenandnewrenewableelectricitygenerationunitsandelectrolysersforgreenhydrogen,plusthetransport,transmissionandtransformationinfrastructure.Investmentsinlow-carbonhydrogendevelopmentsforboththedomesticmarketandforexportrequiresubstantiallevelsoffundingtocoverthedifferentsegmentsofthehydrogenchain.InlinewiththeobjectivesoftheEUhydrogenstrategyandasdescribedearlier,atotaldomesticelectrolysercapacityof6GWby2024,increasingto40GWby2030,isgoingtobedeveloped.Europe’splansalsoincludethepotentialdevelopmentof40GWofelectrolysercapacityinNorthAfricaandtheUkraineby2030.86Figure9.PlannedNorthAfricaelectrolysercapacityasperEurope’sroadmap(MW)05,0002023202420252026202720282029203010,00015,00020.00025,00030,000Ammonia-domesticuseOtherdomesticusesExportsSource:HydrogenEurope,2021.55Threequartersor30GWofthisnon-EuropeanelectrolysercapacitywillbelocatedinNorthAfricaby2030,asshowninfigure9.87Itishoweverunclearhowthedevelopmentofthisshort-termambitiouselectrolyserprogrammeinEurope’s“southernneighbourhood”wouldbefinanced,giventheprogrammecouldcostbetween$20and$30billionormore(dependingontechnologies,capacitysize,timingandrateofcapitalcostreduction).IntheGCCarea,arecentstudycommissionedbytheMENAHydrogenAllianceestimatesthatannualinvestmentsof$16to$25billion(conservativescenario)wouldberequiredoveraperiodof25yearstoinstall150to210GWofelectrolysiscapacitytoachieveagreenhydrogenproductioncapacityof50to70milliontonsby2050.Theseinvestmentsincludecapitalexpendituresforstorageandconversion,renewableenergyandelectrolysers.88Theabove-mentionedcapital-intensiveinvestmentplans/scenariosfortheArabregionwouldbequitechallengingtoimplement.AccordingtotheIEA’sreportonFinancingCleanEnergyTransitioninEmergingandDevelopingEconomies(EMDE),“Thereisnoshortageofglobalcapital,butthereisashortfallofcleanenergyinvestmentopportunitiesaroundtheworldthatofferadequatereturnstobalancetherisks.”89Themainfundingconstraintisclearlytheavailabilityofcommerciallyviablecleanenergyprojects.Thecommercialviabilityoflow-carbonhydrogenprojectsrequiresasignificantscalingupofthe16-2550-70Annualinvestmentsofwouldberequiredoveraperiodof25yearstoachieveagreenhydrogenproductioncapacityofbilliondollarsmilliontons56PotentialblueandgreenhydrogendevelopmentsintheArabregionhydrogenproductioncapacityunderpinnedbysecurelong-termmarketdemandwithcontractualpurchasecommitmentslikethosethatenabledthelaunchoftheinternationaltradeofLNG,atleastinitially.Othermechanisms,likeContractsforDifference,90couldalsoensurestabilityofrevenue.Commercialbanks,amongothers,arelikelytowaitforlow-carbonhydrogenprojectstobede-riskedbeforeofferingfinancingattheneededscale.Therefore,bothpublicandprivatesectorfundingandfinancialincentiveswillbenecessary.OrganizationssuchastheDiiDesertEnergyinitiativerecommendthatMENAcountriesleveragetheir“existingknowhowandsuccessstoriesinfinancingprojectsviainternationaldevelopmentinstitutionsindevelopingMENAcountriesandlargecommercialbanksinGCCcountries.”91WhilefundinginNorthAfricamaybechallengingtosecure,especiallytoexpandelectrolysercapacity,itcouldberelativelylessconstrainedinotherpartsoftheArabregion,specificallyintheGCCarea,suchasinSaudiArabiaandtheUnitedArabEmirates.However,itremainsanimportantfinancialchallengethatneedstobeaddressedbybothpublicandprivatesectorstakeholders.Althoughtherewouldbesomeinitialgovernmentand/orinternationalinstitutionalsupporttolaunchthefirstprojects,alarge-scalelow-carbonhydrogenprogrammeisunlikelytobefullyorevensignificantlysubsidizedbyArabhydrocarbon-producingcountriesalreadysufferingfromasignificantdropintheirhydrocarbonexportrevenues.D.LegalandregulatoryframeworkAddressingfinancingchallengeswillrequireanadequatelegalandregulatoryframeworktosupportthescalingupoflow-carbonhydrogenproductioncapacities.Thisframeworkwillneedtoreflectrealisticstrategiesformulatedatthecountryorregionallevelthatwillserveasthebasisfortheformulationofalegalandregulatoryframeworktosupportthedevelopmentoflow-carbonhydrogenineachcountryorregion.Insomecountries,therearealreadyregulationsorstandardsthatcovercertainaspectsofsuchhydrogendevelopments.Atpresent,mosthydrogensupportinitiativeslaunchedindifferentcountriesarefocusedontheuseofhydrogeninthemobilityortransportsectors,whileelectrolysers,anessentialsegmentforgreenhydrogenproduction,havesofarreceivedarelativelylowerlevelofsupport.InmostArabhydrocarbon-producingcountries,governmentsprovidesomeformofsubsidy,especiallyenergypricesubsidies,totheirindustries,andthereisnowsignificantpressuretoreduceandeventuallyphaseoutthesesubsidies.Apotentialincreaseinthecostsoftheirmanufacturedproductsresultingfromtheintroductionanduseoflow-carbonhydrogeninArabindustrieswouldbeachallengeforArabpolicymakers.Meanwhile,forexport-orientedindustries,especiallythosealreadyexportingorplanningtoexporttoEuropeanmarkets,thecarbonfootprintoftheirexportproductscouldbecomeanissueifaccesstothesemarketsisrestrictedandalternativemarketscannotbesecured.Asamatteroffact,inJuly2021,theEuropeanUnionadoptedanewcarbonborderadjustmentmechanism(CBAM)“whichwillputacarbonpriceonimportsofatargetedselectionofproductssothatambitiousclimateactioninEuropedoesnotleadto‘carbonleakage’.”92ThesectorscoveredbytheCBAMincludecement,ironandsteel,aluminiumandfertilisers.ThesearekeyindustriesinmostoftheArabStatesplanningtodevelop57low-carbonhydrogenprojects.Therefore,thegradualdecarbonizationoftheseexportindustrieswouldbeunavoidableovertimeiftheywantaccesstoEuropeanmarkets.Onerecurrentthemethatemergesfromthediscussionsatalllevels(national,regionalandinternational)ontheformulationofasupportivelegalandregulatoryframeworkistheissueofgovernmentsubsidiestosupportthelow-carbonhydrogenindustryforbothblueandgreenhydrogenproduction.Thepathwayforsomeregionsorcountriescouldbeagradualtransitionfromabluetoagreenhydrogeneconomytoallowforascalingupofcapacityandfuturecostreductions,whileotherscouldopttoleapfrogthetransitionphaseandmovedirectlyintogreenhydrogen.Therewouldalsobecountriesthatwouldcontinuetodevelopbothblueandgreenhydrogencapacitiesconcurrently.Therefore,thelegalandregulatoryframeworkswouldvary,reflectingthedifferentpathwayschosenbyspecificcountriesorgroupsofcountries.Arabhydrocarbon-producingcountrieshavebeenproducingandusinggreyhydrogenforthepastseveraldecades.However,thereisnodedicatedlegalandregulatoryframeworkfocusedonthedevelopmentoflow-carbonhydrogenproductionanduse(domesticallyorforexports)inanyArabcountry.Apartfromthepreparationoftechnicalregulationsrelatedtohydrogenuseinthemobilitysector.93ExistingandpotentialusersofhydrogenintheArabregionarepredominantlylargeindustrieslikeoilrefining,petrochemicalsandsteel.Theseindustriesfacethinmargins(e.g.oilrefining)orfluctuatinggrowthprospects(e.g.steelmanufacturing)andwouldnotbeabletoeasilyabsorbtheincreasedcostsoflow-carbonhydrogensuppliesandcouldopposethepaymentofanypricepremiumforsuppliesoflow-carbonhydrogen.Nonetheless,asindicatedabove,thedecarbonizationorreductionofthecarbonfootprintofArabexportindustries,especiallythosethatarehardtoabate,isunavoidableoverthelongtermandtheseadditionalcostswillatsomestagehavetobeinternalized.Dependingonthecostoflong-distancehydrogentransportandthedevelopmentofacommerciallyviableinternationalhydrogenmarket,potentiallow-carbonhydrogendevelopmentsintheArabregioncouldinitiallybelimitedtosmallorpilotexportprojects.Overtimetheselow-carbonhydrogendevelopmentscouldpotentiallybefocusedonthegradualreplacementofthelargequantitiesofgreyhydrogenproducedandconsumedmainlyintheGCCandNorthAfricancountries.Thiswouldbedrivenbytheimminentthreatoftheimpositionofcarbontaxesonimportsofunabatedindustrialproducts.E.OpportunitiesforArabcountriesTheseriesofchallengesreviewedinthissectionshowthatthesebarriers’levelsofdifficultyvaryfromoneregiontoanotherandevenamongdifferentcountrieswithinaregion.Infact,opportunitiescouldemergeincountriesthatarebetterpositionedandpreparedtoaddressthesechallenges.InthecaseofArabcountries,thefollowingfactorscouldprovidesomecomparativeadvantagesandopportunitiesinthedevelopmentoflow-carbonhydrogencapacities.Ingas-richArabcountries,theproductionofbluehydrogenusingnaturalgasasaprimarysourceintheSMRprocesscoupledwithCCSorCCUSfacilitiescouldsmoothoutthetransitiontoalower-costgreenhydrogenproductionphasebysupportingascalingupoflow-carbonhydrogen58PotentialblueandgreenhydrogendevelopmentsintheArabregioncapacity.However,theseArabhydrocarbon-producingcountrieswouldneedtotakeamoreactiveroleinmobilizinginvestmentsinscaled-upCCUSandgeologicalstoragefacilities.94InrelationtoCCSorCCUS,capturedCO2couldbeusedinenhancedoilrecovery(EOR)projectsandinsomeindustriesinhydrocarbon-producingcountriesand/orbestoredsafelyawayfrompopulatedareasindepletedhydrocarbonfields(wheregeologicconditionsallow).Greenhydrogenproductioncouldbenefitfromlow-costrenewableelectricitysuppliesandtheavailabilityoflargelandareasinsomepartsoftheArabregiontodeveloporexpandrenewableenergycapacity.Waterusageingreenhydrogenproductioncouldbeanissueincountrieswithveryscarcefreshwaterresources.However,GCCcountrieswithlong-establishedseawaterdesalinationindustriesandlargeproductioncapacitiescouldleveragethisexperiencetomitigateanyadversewaterusageimpactswhenexpandingthesecapacitiestoproducegreenhydrogen.Furthermore,thedevelopmentofscaled-updesalinationcapacitycouldalsoprovidelocalcommunitieswithadditionalwatersupplies.Thisisassumingthattheaddeddesalinationcapacityforgreenhydrogenproductioniscommerciallyviableandthatthedesalinationfacilitieshavealowcarbonfootprint.NorthAfricangasproducingcountries(AlgeriaandLibya)havelargecross-bordernaturalgaspipelineinfrastructurelinkingthemtosouthernEurope.TheselinkscouldpotentiallybeusedtoexporthydrogenandhavebeenmentionedinEuropeanplanstoimportgreenhydrogenfromNorthAfrica.However,theseplanswilltakealongtimetomaterializeforthereasonsoutlinedaboveintheChallengessection.SomekeyArabhydrocarbon-producingcountrieshavelargeindustrialparksorclusterswherelow-carbonhydrogenprojectscouldbelocatedatlowercoststhangreenfieldsites.Substantialsharesofthehydrogenproductioncouldbeconsumedlocallybyindustriesintheseparks.Finally,thedevelopmentofalow-carbonhydrogenindustrycouldhelpachieveeconomicdiversificationawayfromhydrocarbons,oneofthemostelusiveobjectivesofthehydrocarbon-producingcountriesoftheArabregion.However,todoso,thenewlow-carbonhydrogenindustrywillhavetodisconnectfromtheexistinghydrocarbonindustry.Forexample,thisnewindustrycannotrelyonexistinghydrocarbonorhydrocarbon-relatedinputsandinfrastructuretobetrulydiversified.Ifthisnewlow-carbonhydrogenindustryiscompletelyindependentofproducingcountries’oilandgassectors,whichconstitutethecoreoftheircomparativeadvantage,theyruntheriskofnotbeingcompetitive.95Therefore,theprosandconsofagenuinediversificationstrategyneedtobeconsidered,inadditiontotheeconomicandhumancapitaladjustmentsthatwouldberequiredovertimetoreachinternationallycompetitivecostlevels.ThissituationwouldbedifferentamongdifferentgroupsofArabhydrocarbon-producingcountries,dependingontheimportanceofthehydrocarbonsectorintheirrespectiveeconomies.597Conclusionsandrecommendations60PotentialblueandgreenhydrogendevelopmentsintheArabregionKeymessagesLow-carbonhydrogenissettoplayacrucialroleinachievingcarbonneutralitytargetsby2050,alongsiderenewableenergyelectrificationandenergyefficiency.Allrelevantpublicandprivatesectorstakeholders,especiallyhydrocarbon-producingcountries,needtotakeurgentactiontomobilizeinvestmentstoscaleupCCSandCCUScapacitytoproduceeconomicallyviablebluehydrogen.Toscaleupcapacitiesandmakeblueandgreenhydrogencommerciallyviable,marketsforlow-carbonhydrogenneedtobecreated.Thisequationwouldbedifficulttosolvewithoutgovernmentsupportandincentives.Overthenexttentofifteenyears,theprospectsforblueandgreenhydrogendevelopmentintheArabregionarelikelytobelimitedtoahandfulofcountriesintheGCCareaandNorthAfrica,withprojectslocatedmainlyinindustrialparksorclustersandportsthatcouldbecometheArabregion’slow-carbonhydrogenhubs.Dedicatingalargepartofexistingorexpandingrenewableenergycapacitytogreenhydrogenproductioncouldmeanthatmorefossilfuel-basedelectricitywouldneedtobegeneratedtocompensate.Thelarge-scaleuseofelectrolysistoproducegreenhydrogenisnotyetmatureandproductioncostsremainprohibitivelyhigh.HHHH61A.ConclusionsLow-carbonhydrogenissettoplayacrucialroleinachievingcarbonneutralitytargetsby2050,alongsiderenewableenergyelectrificationandenergyefficiency.Ofparticularinterestisitspotentialuseinhard-to-abateorhard-to-electrifysectorswherecleanelectrificationisnotfeasible.Withelectricityinputaccountingformuchoftheproductioncostofgreenhydrogen,fallingrenewablepowercostswillnarrowthegap.Attention,meanwhile,mustshifttoelectrolysers,thesecond-largestcostcomponent.Withlargerproductionfacilities,designstandardizationandinsightsfromearlyadopters,thesecostscouldfallby40percentintheshorttermandupto80percentinthelongterm.Inpriceterms,theresultinggreenhydrogencouldfallbelow$2/kilogramwithinadecade,makingitcostcompetitive.96Thefocusonhydrogenisnotnew,andtherehavebeenseveralattemptsbeforetodevelopitsproductionandutilization,buttonoavail.Therecentglobalenthusiasmforlow-carbonhydrogenisdrivenmainlybyrapidlyincreasinginternationalattentiononaddressingclimatechangethroughcarbonneutrality.Itisalsoreinforcedbythecontinuouslyfallingcostsofrenewableelectricitygeneration,themainoperatingcostofgreenhydrogenproductionthroughelectrolysis,andthefallingcostsofelectrolysers.However,thistechnologyisnotyetmatureenoughtoproducegreenhydrogenatalargescale,andproductioncostsremainprohibitivelyhigh.Today,SMRtechnologyisusedtoproducemostofthehydrogenconsumedglobally.WhencoupledwithCCSorCCUSfacilities,bluehydrogenisproduced.Usingbluehydrogenasatransitionfuelwouldhelptoscaleupcapacityandenablesignificantcostreductionsforgreenhydrogenproduction.97However,allrelevantpublicandprivatesectorstakeholders,especiallyhydrocarbon-producingcountries,needtotakeurgentactiontomobilizeinvestmentstoscaleupCCSandCCUScapacity.Toscalecapacitiesandmakeblueandgreenhydrogencommerciallyviable,marketsforlow-carbonhydrogenneedtobecreated.ThisequationwouldbedifficulttosolvewithoutGovernmentsupportandincentives.Therefore,asupportivelegalandregulatoryframeworkplussomeformofGovernmentfundingwouldberequired,untilthemarketdevelopsandallowsforprivatesectorentitiestotakeaneffectiverole.InthecaseofmostArabcountries,Governmentfinancialsupportwouldbeextremelyconstrained,ifavailableatall.ExistingandpotentialusersofhydrogenintheArabregion,especiallyindustrieswithsmallmarginsandfluctuatinggrowthprospects,wouldnotbeabletoeasilyabsorbtheincreasedcostsoflow-carbonhydrogensupplies.However,theimpendingimpositionofcarbonadjustmentmechanismsbymajorblocs,suchastheEUandsomeAsiancountries,ontheimportofindustrialproductscouldseverelyaffecttheaccessofArabindustrialproductstothesekeymarkets.Therefore,decarbonizationthroughthegradualreplacementofgreyhydrogenproductionandconsumptionintheArabregion’sindustrialcentresisunavoidable,especiallyinhard-to-abateindustries.Inthetransitionphase,thefewArabcountrieswithlargenaturalgasreservescouldfocusonbluehydrogenproduction.However,forthosewhoarenotendowedwithnaturalgasresourcesorwhohavedecidedtoundertakebothblueandgreenhydrogenprojects,someprioritizationissuesmayarise.IntheArabregion,thetargetedshareofrenewableenergycapacityinthepowermixisnotplannedtoexceed30percent,besidesafewselectcountriesaimingfor50percent,andeventheserelativelyconservativetargetswillbedifficulttoachieve.Dedicatingalargepartof62PotentialblueandgreenhydrogendevelopmentsintheArabregionexistingorexpandingrenewableenergycapacitytogreenhydrogenproductioncouldmeanthatmorefossilfuel-basedelectricitywouldbeneededtocompensate.ThiswouldclearlyaffectthegoalofcarbonneutralityandSDG7,whichemphasizestheexpandinguseofcleanenergy.ThesameobservationappliestoArabStatesthathaveovercommittedthemselvestolargefossilfuel-basedelectricitygenerationexpansionprogrammes.Thejourneytoacommerciallyviable,scaled-uplow-carbonhydrogenindustrywouldbealongandchallengingone.By2030,weneedelectrolysercoststofallby75to80percentinordertoachievegreenhydrogencostsintherangeof$2/kg.Oncethishappens,productioncanscaleinordertoreachour2050decarbonizationtargets,whichrelyongreenhydrogenasakeypieceofthepuzzle.EveninArabcountrieswellendowedwithlargenaturalgasresources,largerenewableenergycapacityandafavourablefinancialposition,thetimelineforscalinggreenhydrogencapacitywouldtaketime,likelybeyond2030/2035.Itiscrucialthatthislongtimehorizonbeproperlyunderstoodtoformulatearealisticallyachievablepathway(orpathways)withanopenchoiceoftechnologieswhileavoidinginvestment(andlock-in)inoldtechnologiesandstrandedassets.Overthenext10to15years,theprospectsforblueandgreenhydrogendevelopmentintheArabregionarelikelytobelimitedtoahandfulofcountriesintheGCCareaandNorthAfrica,withprojectslocatedmainlyinindustrialparksorclustersandportsthatcouldbecometheArabregion’slow-carbonhydrogenhubs.Wehavethetechnologytodeveloplow-carbonhydrogen;whatweneednowisaction,andtheeffectivepolicytoenableit.B.RecommendationsThefollowingareselectrecommendationsforArabcountriestoacceleratethedevelopmentoflow-carbonhydrogenlocallyandglobally.•Acceleratedomesticrenewableenergyprojectstoincreasetheshareofrenewableelectricityinpowersystemstoensureadequatecapacityforgreenhydrogenproduction.•Exploreflexibilitymeasuresincludingregionalgridinterconnectioninordertoeffectivelymanagetheinherentvariabilityofsolarandwindgeneration.•Establishcertificationandstandardizationschemesforgreenandbluehydrogenthatarealignedwithinternationalstandards.•Reduceriskbyformulatinglow-carbonhydrogenstrategiesthatreflecteachcountry’scarbonneutralityobjectivesandcommitments,renewableandnon-renewableenergyendowmentsandfinancialstrengthsand/oraccesstofundingsources.Governmentscanalsoreduceoff-takeriskbyestablishinglocallow-carbonhydrogendemandinitiatives.•Increasepublicfundinginresearch,educationandinnovationaswellastheinfrastructurerequiredtoproduceandtransportlow-carbonhydrogen,hydrogenderivativesandlow-carbonindustrialproducts.Providestronginnovationsupporttoensureprojectsreachthecommercializationstageandtoincentivizemarketcreationwhilecollaboratingwithlocaluniversitiesandresearchcentresandinternationalresearchanddevelopmentpartnerships.•Encourageinvolvementofallrelevantpublicandprivatesectorstakeholdersintheinitialstrategydesignprocessandobtaintheirbuy-in.63Strategiesshouldbebasedonthoroughmulti-disciplinaryassessments,includingsocialandenvironmentalimpactstudiesandcost/price-sensitivemarketevaluations.•Leverageexperienceintheoilandgassectorsaswellasinternationalpartnershipswithoilandgascompanies.Alsoleverageexistingrefiningandshippinginfrastructuretoacceleratethetransitiontotheproductionandexportofsustainablefuelandindustrialmaterials,therebymitigatingdisruptionstolocaleconomiesandjobsinthefaceofglobaldecarbonizationstrategiesandincomingcarbonborderadjustmentmechanisms.•Developadequatelegalandregulatoryframeworkstoincentivizelow-carbonhydrogeninvestmentsbylocalandinternationalinvestors.Focusondecarbonizationofhard-to-electrifysectorsbutavoidthefinanciallydemandingandhigh-riskcycleofsubsidies.•Studyandthoroughlyunderstandallthebarriersthatcouldariseinthispotentialnewlow-carbonfuelandmaterialstradewithothercountriesandregions(e.g.carbonpricing,certificatesorguaranteesoforigin)sincemostofthelow-carbonhydrogenthatwouldpotentiallybeproducedintheArabregioncouldinitiallybeexported.•Theinternationaltradeoflow-carbonhydrogenandderivativesisatitsembryonicstageandneedstimetodevelop.However,contractualarrangementsneedtobepreparednowtogovernfuturetransactions.64PotentialblueandgreenhydrogendevelopmentsintheArabregionReferencesAdnoc(2020).“H.H.SheikhMohamedbinZayedCommendsADNOC’sAgilityandResilienceatSPCMeeting”,22November.Availableathttps://www.adnoc.ae/en/news-and-media/press-releases/2020/hh-sheikh-mohamed-bin-zayed-commends-adnocs-agility-and-resilience-at-spc-meeting.ADQ(2021).“Mubadala,ADNOCandADQformalliancetoaccelerateAbuDhabiHydrogenleadership”,pressrelease,17January.Availableathttps://adq.ae/media/news/mubadala-adnoc-and-adq-form-alliance-to-accelerate-abu-dhabi-hydrogen-leadership.AirProducts(2020).“AirProducts,ACWAPowerandNEOMSignAgreementfor$5BillionProductionFacilityinNEOMPoweredbyRenewableEnergyforProductionandExportofGreenHydrogentoGlobalMarkets”,7July.Availableathttps://www.airproducts.com/news-center/2020/07/0707-air-products-agreement-for-green-ammonia-production-facility-for-export-to-hydrogen-market.AlKhowaiter,AhmadO.andMufti,YasserM.(2021).“SaudiAramco’sPerspectivesonHydrogen:OpportunitiesandChallenges”,OxfordEnergyForum,Issue127,May.Availableathttps://www.oxfordenergy.org/wpcms/wp-content/uploads/2021/05/OEF-127.pdf.AlReyadahCCUSproject(2017).AbuDhabi.Availableathttps://www.cslforum.org/cslf/sites/default/files/documents/AbuDhabi2017/AbuDhabi17-SiteVisitInformation.pdf.Alatawi,HatemandAbdulelahDarandary(2020).“TheSaudiMoveintoHydrogen:AParadigmShift”,KAPSARC,22December.Availableathttps://www.kapsarc.org/research/publications/the-saudi-move-into-hydrogen-a-paradigm-shift/.Alshammari,Hebshi(2021).“SaudiArabiaaimstogenerate50percentofpowerfromrenewablesby2030”,ArabNews,20January.Availableathttps://www.arabnews.com/node/1795406/saudi-arabia.Aramco(2020).“World’sfirstblueammoniashipmentopensnewroutetoasustainablefuture”,27September.Availableathttps://www.aramco.com/en/news-media/news/2020/first-blue-ammonia-shipment#.Barlow,AdamandMcErlane,Caitlin(2021).“PublicandPrivateFinanceforClimateActionTakesCenterStageatCOP26”,BakerMcKenzie,04November.Availableathttps://www.bakermckenzie.com/en/insight/publications/2021/11/public-and-private-finance-for-climate-action.Barrington,Lisa(2021).“Omansetsuphydrogenalliancetodevelopcleanfuelindustry”,Reuters,12August.Availableathttps://www.nasdaq.com/articles/oman-sets-up-hydrogen-alliance-to-develop-clean-fuel-industry-2021-08-12.Bellini,Emiliano(2021).“SaudiArabia’ssecondPVtenderdrawsworldrecordlowbidof$0.0104/kWh”,PVMagazine,8April.https://www.pv-magazine.com/2021/04/08/saudi-arabias-second-pv-tender-draws-world-record-low-bid-of-0104-kwh/.BulletindesEnergiesRenouvelables(2007).Editorial,CentredeDeveloppementdesEnergiesRenouvelables,Algiers,11June.Availableathttps://www.cder.dz/bulletin/bull11/ber11.pdf.Cockayne,James(2021).“MauritaniaEyesaPieceoftheHydrogenPie”,MEES,01October.Availableathttps://www.mees.com/2021/10/1/refining-petrochemicals/mauritania-eyes-a-piece-of-the-hydrogen-pie/76a30060-22b5-11ec-acb1-0d7b250fa802.CouncilofAustralianGovernmentsEnergyCouncil(2019).“Australia’sNationalHydrogenStrategy.”Availableathttps://www.industry.gov.au/sites/default/files/2019-11/australias-national-hydrogen-strategy.pdf.DEMEGroup(2020).“DEMEandPartnersPresentHyport®Duqm,ALarge-ScaleGreenHydrogenProjectInOman”,03March.Availableathttps://www.deme-group.com/news/deme-and-partners-present-hyportrduqm-large-scale-green-hydrogen-project-oman-.Dickel,Ralf(2020).“Bluehydrogenasanenablerofgreenhydrogen:thecaseofGermany”,OxfordInstituteforEnergyStudies,May.Availableathttps://www.oxfordenergy.org/wpcms/wp-content/uploads/2020/06/Blue-hydrogen-as-a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1.73EuropeanCommission,2020.74GasforClimate,2020b.75IRENA,2020c.76IntergovernmentalPanelonClimateChange,2018.77IEA,2021c.78GlobalCCSInstitute,2021.79RutgerWillemHofste,PaulReigandLeahSchleifer,2019.80IRENA,2020b.81IRENA,2021a.82IRENA,2020a.83Masdar,2020.84Bellini,Emiliano,2021.85Hasanandothers,2019.86vanWijk,AdandJorgoChatzimarkakis,2020.87ThiswouldincludeallNorthAfricancountriesfromMoroccotoEgypt.ButthefocusislikelytobeinitiallyonMorocco,asthereisalreadyaninternationalpartnershipinplaceandanexpandingrenewableenergyprogramme.88Dii&RolandBerger,2021.89IEA,2021a.90AlKhowaiter,AhmadO.andMufti,YasserM.,2021.91DiiDesertEnergy,2020.92EuropeanCommission,2021.93Kordvani,AmirandSalah,Fatma,2020.94Fattouh,B;Heidug,W;andZakkour,P,2021.95Poudineh,RahmatallahandFattouh,Bassam,2020.96IRENA,2020b.97Dickel,Ralf,2020.Diversifyingtheenergymixisakeyaspectoftheenergytransition.Beyondacceleratingtheuptakeofrenewableenergyandelectrifyingrelevantsectors,alternativeenergycarriersincludinghydrogenandhydrogenderivativesshouldbeexploredtoensurethetransitionisjustandsustainable.ThispublicationfocusesonexistingandplannedhydrogendevelopmentsintheArabregionandexploresthemajorchallengesandopportunitiesofhydrogenproductionandusetosupporttheregion’senergytransitionwithinthecontextofthe2030AgendaforSustainableDevelopment.ThereportalsoconsidersrecentdecisionsbyseveralStatestointroducenet-zeroGHGemissiontargetsby2050anddiscussestheimplicationsforsustainablehydrogenproduction.22-00130