Middle East refineries set to grow hydrogen capacities faster than distillation to 2025

Middle Eastern oil refineries are set to grow conventional hydrogen production capacities faster than distillation capacities to 2025, S&P Global Platts World Refinery Database shows, reflecting rising demand for the energy carriers to desulfurize petroleum products.

Conventional hydrogen capacity growth flattens after 2025, the data shows, as independent, standalone renewable hydrogen projects begin to be commissioned across the region, potentially replacing some conventional hydrogen production to 2030.

"Large refinery expansions together with tighter product sulfur specifications will require much more hydrogen for desulfurization units," said Joe Pezzino, Senior Advisor, Global Oil at Platts Analytics.

Ultimately, production will shift to renewable hydrogen but the region "will lag behind others as most announced activity (projects) to date, as far as immediate construction is concerned, is in Europe and the US," Pezzino added.

Middle East refinery hydrogen capacities are seen rising to 5,355 MMcf/d (about 4.6 million mt) by 2025, up 78% from 3,011 MMcf/d in 2020.

Distillation capacity is seen rising to 16,711 mb/d in 2025, up 65% from 10,149 mb/d in 2020.

After 2025, hydrogen capacity levels off while distillation capacity rises so that it hits 17,966 mb/d by 2030, up 77% over the previous decade.

Refiners will increasingly be able to procure hydrogen from the open market so a flattening of refinery capacity some years away is not overly significant.

Furthermore, hydrogen units can be installed within two years, so refineries are under no immediate pressure to plan conventional hydrogen expansion after 2025.

For oil products, however, long-term purchase contracts require refiners to plan distillation capacities through to 2030.

Middle East refineries largely produce hydrogen via steam methane reforming with some naphtha reforming.

Kuwait refineries have the region's largest hydrogen capacity, followed by Saudi Arabia and Iran.

Zero and low-carbon hydrogen

Turning to the emerging market for independent renewable and low carbon hydrogen projects, Platts Analytics' Hydrogen Production Assets database shows the Middle East hosting one of the first electrolysis facilities to open in 1998 – Guardian Glass' alkaline electrolyzer in Egypt, with production of 94.5 mt/year.

In all, 30 Middle East hydrogen projects are listed in the database with nine electrolysis-based and six low-carbon, fossil-fuel-plus-carbon-capture-based projects, spread across eight nations.

Accumulated output for these projects is seen at 3.28 million mt/year hydrogen, assuming normalized annual capacity factors.

The largest electrolysis project in the dataset is the 25-GW Green Energy Oman scheme being developed by InterContinental Energy in Al Wusta.

With a capital investment of $30 billion, Green Energy Oman could eventually produce 1.8 million mt/year of renewable hydrogen. Platts Analytics put global hydrogen production at 73.9 million mt in 2021.

A final investment decision is due in 2026 with first hydrogen in 2028, ahead of full capacity in 2038.

The project consortium includes OQ (formerly Oman Oil) and Enertech, the renewables developer owned by the sovereign wealth fund of Kuwait.

The second largest is planned for Riyadh in Saudi Arabia -- a 4-GW electrolyzer being developed by Saudi Aramco, Modern Industrial Investment Holding Group and InterContinental Energy, with a projected output of 237,250 mt/year.

Meanwhile, East Port Said in Egypt is to host a 1-GW electrolyzer being developed by H2 Industries, aimed at producing 300,000 mt/year of hydrogen using a biomass or waste-fired power feedstock.

Platts assessed Oman hydrogen produced via alkaline electrolysis at $2.74/kg Feb. 18, among the cheapest of Platts' electrolysis assessments globally.

Select Middle East standalone hydrogen projects

Source: S&P Global Platts Analytics Hydrogen Production Assets database

CCUS up and running

The Middle East has growing operational experience in carbon capture and storage that should serve the hydrogen sector well once low carbon H2 projects develop.

In the UAE, Emirates Steel Industries started operations at a CCS unit designed to capture 800,000 mt/year CO2, according to the Platts Analytics' CCUS Facilities databank.

Uthmaniyah CO2-EOR Demonstration, a natural gas processing plant in which Saudi Aramco is the main participant, has a nameplate capacity to capture 800,000 mt/year CO2 and has been operating since 2015.

Qatar LNG has a natural gas processing unit with dedicated geological storage designed to capture 2.2 million mt/year CO2 from 2019.

From 2025, Abu Dhabi CCS Phase 2, a gas processing plant in the UAE, is designed to capture 2.3 million mt/year CO2.

Among other future projects for standalone hydrogen production, the Ruwais Industrial Complex in UAE is slated to capture 271 mt/year CO2 from Abu Dhabi National Oil Company (ADNOC)'s 300,000-mt/year conventional hydrogen production.

Finally the Grey Green H2 Hybrid project in Oman (Sumitomo is a project participant) aims to start capturing CO2 from 2023.

Platts assessed the price of UAE hydrogen produced via SMR with CCS, including capex, at $3.75/kg Feb. 18.

"If government efforts to deploy CCS are stepped up, carbon dioxide capture rates might reach around 50 million mt/year by 2035, assuming a simple doubling of delivery rates," said Abhijeet Thakkar, Carbon Analyst at Platts Analytics.

To achieve this, however, Gulf Cooperation Council states needed to provide support through R&D funding "so that CCUS facilities don't fall short of their designed name plate capture capacities," Thakkar said.

-- with data and additional reporting from S&P Global Platts' Data Associate Zoya Dobreva