The UAE plans to focus its efforts on blue hydrogen as OPEC's third-largest producer pushes ahead with its clean energy program, and taps into its oil and gas sector to help create a new industry that is likely to take shape before green hydrogen, an energy ministry official told S&P Global Platts.
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"Realistically, blue hydrogen is cheaper than green hydrogen and as an oil and gas producer we are very well positioned to be very competitive when it comes to blue hydrogen and it's coming in the next few years, while green hydrogen still needs more time," Yousif al-Ali, the ministry's assistant undersecretary for electricity, water and future energy affairs, said in a May 16 interview.
Green hydrogen is produced from renewable energy, while blue hydrogen is derived from fossil fuels with carbon capture, utilization and storage.
The energy ministry, Abu Dhabi National Oil Co, the country's biggest energy producer, and two sovereign wealth funds ADQ and Mubadala Investment Co. have formed a hydrogen alliance to promote the production and use of the fuel in the UAE, and ultimately for exports.
"Renewable energy, solar and wind, have a limitation, especially when it comes to storage, especially when it comes to baseload generation. It will be expensive," said Ali.
"However, we think hydrogen will play an important role for different aspects of transportation, for electricity generation and different aspects that renewables cannot cover."
The UAE and ADNOC have been signing a number of agreements, particularly with Asian countries and companies to promote their hydrogen plans.
In April, the energy ministry signed a cooperation agreement with its Japanese counterpart under which Tokyo will consider developing an international hydrogen supply chain with the UAE as it accelerates efforts to deploy large-scale uses of hydrogen.
"Japan has technology and being a major importer of LNG, we think of them as a [potential] major importer of our hydrogen," he said, adding the agreement will explore all forms of hydrogen.
Japan formulated its carbon neutral 2050 strategy in December 2020 with an aim to produce 3 million mt/year of hydrogen by 2030 and 20 million mt/year by 2050 by accelerating developments of international supply networks as well as cultivating demand in various sectors.
ADNOC currently produces about 300,000 mt/year of hydrogen for its downstream operations and plans to expand it to more than 500,000 mt/year. The national oil producer has struck a number of hydrogen agreements, including ones with Malaysia's Petronas and South Korea's GS Energy. ADNOC also plans to boost its capacity to capture CO2 from its own gas plants to 5 million mt/year of CO2 by 2030 from 800,000 mt/year at present.
Masdar, the Abu Dhabi-based clean energy company owned by Mubadala, plans to build a pilot green hydrogen plant in the oil-rich emirate with the help of Siemens Energy that will showcase technology to produce sustainable aviation fuel, fuel for transportation and synthetic products for the maritime sector.
Mubadala, which manages some $243 billion in assets, has also signed a hydrogen agreement with Siemens Energy.
"It is expected green hydrogen can be competitive in 10 years and blue hydrogen may be competitive before, in 5 to 7 years," said Ali.
S&P Global Platts Analytics expects 2021 global pure hydrogen demand to increase to 74.1 million mt, up 4.2% year on year from the 3.8% year-on-year slump brought on by COVID-19 in 2020.
Looking ahead, Platts Analytics anticipates pure hydrogen demand will approach 79 million mt by 2025 on the back of increased refinery runs, a greater call on ammonia, and a budding demand for hydrogen in alternative sectors.
The cost of hydrogen to be developed in the UAE will depend on the pricing of carbon, offtake agreements and technologies being used, among other factors, Ali said.
Hydrogen production from fossil fuels in the Middle East currently costs about $1.50/kg, the UAE's Energy Minister Suhail al-Mazrouei said in January.