New Daily Assessments Bring Pricing Transparency To Crucial Market
and Emerging Global Hydrogen Hub
SINGAPORE / LONDON (November 23, 2021) – S&P Global Platts (Platts), the leading independent provider of information, analytics and benchmark prices for the commodities and energy markets, announced the launch of daily cost of production prices for hydrogen in Saudi Arabia, Oman, Qatar and United Arab Emirates on November 22nd, 2021.
These latest hydrogen prices reflect the daily cost of hydrogen production via proton exchange membrane (PEM) electrolysis, alkaline electrolysis, and steam methane reforming with carbon capture and sequestration. The new assessments covering the Middle East complement Platts existing suite of hydrogen production prices which extend to North America, Europe, Japan, and Australia.
Alan Hayes, Head of Energy Transition Pricing at S&P Global Platts, said: "Huge amounts of capital are being invested in hydrogen production in the Middle East and the projects under development will put the region at the center of the emerging hydrogen economy. The Middle East has the potential to become a global supply hub for hydrogen in much the same way as it is now for crude oil. This latest expansion of Platts hydrogen price coverage to include the Middle East will allow market participants to track the cost of production in this key region and importantly compare the costs of producing with other hydrogen production hubs around the world."
S&P Global Platts Analytics estimates the total investment value of announced hydrogen projects in the Middle East amounts to $44 billion. Of this total, $35 billion is being invested in projects that are expected to be operational by 2030. Investments in new production are being driven by hydrogen's potential to deliver significant reductions in carbon emissions across the whole economy.
First Middle East Hydrogen Production Prices
The first hydrogen cost of production prices for Saudi Arabia and UAE highlight the importance of regional differences in feedstock prices in determining the relative competitiveness of hydrogen production around the world. The latest assessments suggest a clear cost advantage for methane steam reforming in the UAE and Saudi Arabia in the current market. The first UAE assessment for steam methane reforming with carbon capture and sequestration is $5.60/kg which is in line with the same production pathway in Saudi Arabia which stands at $5.50/kg. This compares to $5.95/kg in Western Australia and Eur5.70/kg ($6.43/kg) in the Netherlands.
Comparisons across the electrolyzer pathways show a more varied picture but indicate a clear cost advantage for Australia in the current market, compared to both the UAE, Saudi Arabia and the US Gulf Coast.
In Western Australia, alkaline and PEM electrolysis production pathways were assessed at $2.11/kg and $3.39/kg, respectively. In the US Gulf, the latest alkaline pathway costs were assessed at $2.96/kg and PEM at $3.95/kg. In the UAE alkaline electrolysis was at $4.51/kg and PEM at $5.74/kg. In Saudi Arabia, the alkaline electrolysis production route was assessed at $3.24/kg, while PEM electrolysis was assessed at $4.26/kg.
The spreads in the cost of hydrogen production between regions will play a significant role in differentiating hydrogen prices around the world. These differences in price will have a major impact on the development of trade routes between the higher cost producers and emerging demand centers. These latest cost of production assessments indicate that different production routes may favor different regions when it comes to establishing global hydrogen trade routes.
Hydrogen can deliver lower carbon emissions across a range of sectors including road transportation, as a feedstock in industries such as steel making and even in power generation, directly or when converted to ammonia. It is this flexibility and advances in technology that are driving the investment surge in global hydrogen production.
Notes to editors
Platts new daily hydrogen cost of production prices for Saudi Arabia, Qatar, Oman and United Arab Emirates reflect the daily cost of hydrogen production via the following three pathways: proton exchange membrane (PEM) electrolysis, alkaline electrolysis, and steam methane reforming with carbon capture and sequestration. For all three production pathways, daily hydrogen prices will be published in $/kg, and $/MMBtu at 12.30pm (Gulf Standard Time).
Electricity costs are based on national power prices as set by the relevant authority in each county. Where available seasonal changes to nationally set rates will be applied to the relevant calculations.
Middle East natural gas prices for the SMR with CCS path will be based on Platts LNG FOB Mid East 25-45 Days prices (AARXQ00), less a gasification cost based on market research.
Electrolysis assumptions for PEM and alkaline will be based on market research including IEA's The Future of Hydrogen.
Platts publishes a set of hydrogen prices reflecting feedstock costs alone, as well as a second set including additional assumptions for capital expenses (CapEx). For more details on methodology, see the subscriber note.
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