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Saudi Aramco sees hydrogen market gaining momentum after 2030

Energy Transition

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Saudi Aramco sees hydrogen market gaining momentum after 2030

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Dubai — Saudi Aramco is aiming for its hydrogen business to be "world scale" by 2030, as that is when it expects the market for the clean fuel to scale up, Ahmed al-Khowaiter, the company's chief technology officer said Feb. 22.

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"We don't see much growth in [the hydrogen] market until 2030, when the infrastructure and policies will be in place," Khowaiter said at an online event hosted by Aramco, Saudi Arabia's state-run oil giant. "We think Japan and South Korea will be where the first hydrogen trading markets will begin in the end of 2020s, early 2030s."

The company is still analyzing potential demand volume for hydrogen and pricing, and Khowaiter said it was still too early to put a timeline on its plans. In September, Aramco made the world's first blue ammonia shipment – from Saudi Arabia to Japan -- for use in power generation.

An announcement will follow when Aramco has made a decision on investment plans in the space, Khowaiter said.

"It is a nautral progression to take on the responsibility for the huge demand for hydrogen. But we need to invest in carbon capture and sequestration technologies," Khowaiter said. "We are looking to diversifying our portfolio to include zero-carbon products."

Blue ammonia is created from natural gas and is expected to be a major form of transportable hydrogen, given its lower production costs compared with renewable ammonia and ease of transport compared with liquified hydrogen.

Green ammonia is created from carbon-free sources and therefore is cleaner than blue ammonia, but faces much higher development costs.

Saudi Arabia's planned zero-carbon city Neom in July formed a joint venture with Air Products and ACWA Power to create a $5 billion green hydrogen project, the world's largest. It is expected to produce about 1.2 milion mt/year of ammonia by 2025, and Neom's head of energy told S&P Global Platts earler this month that the city may sign more deals to create a hydrogen "ecosystem" for its power needs.

Still betting on oil

As much as Aramco is eying the hydrogen market, Khowaiter called plans by several countries to ban or phase out internal combustion engines "counterproductive."

"We see huge potential in improving efficiency of internal combustion engine," Khowaiter said. "We will be using liquid hydrocarbons and natural gas for many years to come."

Meanwhile, the company intends to be the "last man standing" among hydrocarbon producers, said Ahmed al-Subaey, Aramco's vice president of marketing, sales and supply planning, speaking at the same event. Saudi Aramco owns some of the world's most cost-efficient and least energy intensive oil reserves to develop, which the company says will enable it to maintain a strong position in the market, even if the global energy transition begins reducing the amount of oil consumed.

"Upstream continues to be our anchor," Subaey said. "The one thing we are committed to is to continue our record setting environmental performance. We're going to bring our carbon footprint even lower."

Other areas of growth include downstream activities and LNG.

"We will partner with companies across the globe to be part of the ecosystem of LNG. We have big plans to be a major player in the LNG business," Subaey said. "We are going to continue to grow in the downstream, it is our growth engine. We will grow down the value chain, retail and lubricants. We will also grow horizontally. The trading arm will continue to be the horizontal integrator across our assets."

However, due to the pandemic, Aramco has postponed its immediate plans to develop its LNG sector, CEO Amin Nasser said in October.

It is uncertain whether the company has abandoned plans for reaching a final investment decision on a 11 million mt a year US LNG export facility in Port Arthur, Texas. Aramco signed an agreement with US company Sempra for a 25% stake in the project in May 2019, worth several billion dollars, but Sempra said in 2020 that it would delay the final investment decision.