The geopolitics of hydrogen is bringing Saudi Arabia and the GCC closer to Europe
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It is becoming clear for those who follow Saudi Arabia’s economic reform, that the Kingdom has grand plans to become the top supplier of hydrogen in the region and the world.
This is driven by Saudi Arabia’s quest to diversify its export, build a new renewable industry, lower its carbon footprint, and address climate change goals.
Saudi Arabia, which has clear advantages on this front, is advancing in building the world's largest hydrogen plant with a 650 tons capacity in NEOM.
As a whole, GCC countries have a number of competitive advantages enabling them to play a significant role in the production of green hydrogen on a global scale.
The region has abundant solar and wind energy, ranking amongst the highest solar radiation in the world, making it a high potential region for renewables.
According to the IEA, the abundance of renewables makes the GCC region potentially one of the most cost competitive regions for hydrogen production with long-term cost potentially reaching $1.5 to 2 per kg.
Having ample access to substantial funding sources from sovereign funds such as the Saudi Public Investment Fund, and Abu Dhabi Investment Authority, also puts the region on a superior level compared to other regions in the world.
Strategically positioned between the large consumer-driven European markets and East Asian markets, the GCC area have proven, according to the World Shipping Council, its ability to benefit from its position by building and operating a strong export infrastructure, in the likes of Jebel Ali and Saudi Jeddah ports, ranking among the top 40 ports in the world.
Simultaneously, Europe, who is leading the evolution of the new energy systems, has deployed ambitious targets to reach carbon neutrality by 2050.
The European Union’s decarbonization plans have recently accelerated following the conflict between Russia and Ukraine, as the region plans to be independent of Russian oil and gas as soon as possible.
The Kingdom’s evolving relationship with its partners can yield constructive results for both its economy and its key partners.
Fuad Al-Zayer
In particular, Germany’s energy intensive steel and chemical industries — which require a great deal of energy and have high CO2 emission — puts the country’s needs for new energy sources like renewables and hydrogen as top priority.
In response, Germany launched the “Germany Hydrogen Strategy” which allocates around $2 billion for the production of hydrogen out of the country with an emphasis on the MENA region.
Focusing on the MENA region makes sense, as the region has multiple plans which align with the European Union’s plans to produce hydrogen. Its transportation infrastructure including ports and vessels, which are initially built for LNG, can be easily adopted for hydrogen.
In line with this, Germany recently opened a Hydrogen Diplomacy Office in Saudi Arabia. This step is taken to increase dialogue within the aim to develop the international hydrogen market as well as enhance cooperation between Germany and the GCC region, in particular Saudi Arabia.
This initiative depicts the growing significance of global international cooperation between countries in the production and use of hydrogen as the fuel of choice for the future.
It is interesting indeed how hydrogen is triggering a transformation in geopolitical relations between countries like Germany and Saudi Arabia.
According to a report recently released by the International Renewable Energy Agency, hydrogen is expected to have a far-reaching influence on the energy supply chain in the near future.
The report concluded that countries having favorable conditions to produce renewable energy, such as Saudi Arabia, would probably become renewable energy exporters.
It was also revealed that trade in hydrogen and its downstream products will influence global bilateral relations and create new ties and dependencies between countries.
It seems that the world now is increasingly perceiving Saudi Arabia as a producer of all types of “energy” including hydrogen and renewables, not just an exporter of oil and gas.
The Kingdom’s evolving relationship with its partners can yield constructive results for both its economy and its key partners.
During the Saudi Green Initiative last October, Saudi Energy Minister Prince Abdulaziz bin Salman said “We strive to make Saudi Arabia a reliable source of all forms of energy,” as the Kingdom has the capabilities to produce and integrate new forms of energy into the kingdom's economy and exports.
The geopolitics of hydrogen seems to be bringing Europe and the GCC region closer together both diplomatically and economically.
That should be good for everyone!
• Fuad Al-Zayer is an independent energy consultant with expertise in energy transition, digitization, and innovation. He is the former Head of the Data Services Department at OPEC and a former Global Coordinator of the JODI Data Transparency Initiative at the IEF.
