Oman targets leadership in green hydrogenJuly 24, 2023
Abdulaziz Al Shidhani, managing director of Hydrogen Oman (Hydrom), talks to The Energy Year about Oman’s prospects in the global hydrogen market and the main barriers preventing a faster and more widespread deployment of hydrogen. Energy Development Oman-owned Hydrom was launched in 2022 to orchestrate, structure and accelerate the development of the green hydrogen sector in Oman.
How do you view the global dynamics shaping the rising interest in greener energy sources?
There is no doubt that an increasing international momentum is being observed to seriously and collectively address global challenges with regards to safeguarding the environment, securing energy to sustain and grow economic activities, and addressing the aspects of universal accessibility and affordability of energy.
Since last year, for instance, leading economies have issued game-changing strategies, policy instruments, regulations and international initiatives shaping the rising commitment and interest in green energy. The USA’s Inflation Reduction Act with the unprecedented level of government subsidy allocation to green hydrogen, Repower Europe in Europe supported by policy instruments such as Germany’s H2Global in Germany and the EU’s European Hydrogen Bank and Carbon Border Adjustment Mechanism (CBAM): these are strong demonstrations to the rising global interest in and commitment to the energy transition journey.
What will Oman’s role be in the hydrogen game?
First of all, it is worth underlining the main reasons behind the serious steps taken by Oman – as an oil and gas producing country – to unlock the potential of green hydrogen. If you look at the Oman Vision 2040 as the guiding document, besides the significant commitment to preserve the environment, it features a target of achieving an average annual GDP growth of 5% supported by strong ambitions to diversify the domestic economy away from hydrocarbons, to maximise in-country value and create attractive jobs to an increasing young population.
Then, following His Majesty Sultan Haitham bin Tariq’s issuing of royal directives in March 2022, the green hydrogen economy in the sultanate has move forward to culminate in the announcement of Oman’s green hydrogen strategy in October 2022, which offers what is needed and looked for by the market: clarity.
The strategy provided clarity on production ambitions targeting 1 million tonnes by 2030 all the way to 8 million tonnes by 2050. It also provided clarity on the sector structure which Hydrom was established to orchestrate, as well as clarity on the resources available in terms of wind and solar. In addition, it aims to secure more than 50,000 square kilometres of land dedicated for green hydrogen investments, which will be able to generate more than 10 times the domestic energy demand by 2050 assuming the GDP growth envisioned by Vision 2040. Finally, it provides clarity on the award process, which is based on equal-opportunity, transparent, public auction rounds.
When it comes to Oman’s role in the green hydrogen game, the ambitions of its strategy were not only around the production targets set, but rather were comprehensive in a way that capitalises on the country’s strategic geographical location, political stability, strong infrastructural network, capable human capital, ease of doing business and rich renewable energy resources – blending all of these factors to turn the sultanate into one of the leading global hydrogen hubs.
Hence, Oman plans on the one hand to decarbonise its existing industry while expanding the industrial base that is limited today by the limited gas supplies, and on the other to create a full ecosystem around this sector including investments in R&D, supply chains and new technologies as well as opportunities for local manufacturers to set up solar panels, wind turbines, electrolysers and downstream business such as the production of green steel.
What are the main barriers preventing a faster and more widespread deployment of hydrogen?
The biggest challenge for hydrogen is the global disconnection between supply and demand. To make hydrogen work, developers need to have a captive demand and consistent clients they can send hydrogen and its derivatives to. What adds to the complexity is the trade-off between short-term energy security challenges with the opportunity to tap into the incentive schemes offered by governments and long-term offtake commitments and the anticipated technological breakthroughs that will bring the cost down.
Supply chain concentration in relatively few countries is another barrier. Yes, we have direct access to abundant solar and wind resources but unless supply chain risks of key components are mitigated by geographical relocation, the risk profile of investments at both the sending end and receiving end is high enough to slow down the transition to green hydrogen.
Finally, it’s all about cost and opportunity cost. If the cost of hydrogen production, conversion, shipment, transportation and processing stays high compared to other alternative energy sources, subsidy schemes can’t be relied on alone to de-risk such significant investments that are long term in nature.
How would you define Hydrom’s scope and mission?
Hydrom was established in October 2022. It is owned by Energy Development Oman and regulated by the Ministry of Energy and Minerals, and represents a central and independent entity orchestrating the national interest in green hydrogen. We position ourselves as the single-facing entity to deal with regarding hydrogen, looking at its global supply and demand as well as technology evolution, and being in touch with the developers who are interested in investing in this resource in Oman.
Our scope is primarily to master plan the emerging hydrogen sector, delineating government-owned areas of land, structuring large-scale green hydrogen projects, managing the process for their allocation to developers, overseeing their execution and facilitating the development of common infrastructure, connected ecosystem industries and hubs to support the country’s drive to reduce its carbon footprint and achieve decarbonisation targets.
What is your assessment of global electrolyser capacity and the required amount for the development of green hydrogen domestically?
The capacity of electrolysers is very much dependent on the energy mix you use between solar and wind, other forms of renewable energy and battery storage. It depends on the levelised cost of electricity you can produce, as well as the profile that you can generate that maximises your capacity factor of electrolysers. The other key elements are whether the electrolysers can tolerate fluctuations in electron flow, and if so, to what extent, as well as their efficiency and the learning curves of the different technologies available.
In Oman, with the energy mixes that we are considering, we can round the ratios up like so: for every 100,000 tonnes of hydrogen produced per year, you multiply by 10 to determine the gigawatts needed, so you need 1 GW of electrolysers, which requires a feed of 2 GW of renewables capacity. So, for every 100,000 tonnes you need 2 GW of renewable energy with a 50-50 mix between solar and wind as a base case assumption. That said, the optimal mix for the best output from land in Wusta or Dhofar is indicated to be around 75% wind and 25% solar, but again this depends on the availability of sun and wind and on the technology used, especially in the case of higher wind turbines.
Are Oman’s assets ready to support the targeted production of 1 million tonnes of green hydrogen by 2030?
In line with the formula I mentioned, to produce 1 million tonnes of green hydrogen by 2030, we will need 20 GW of electricity coming from renewable sources and 10 GW of electrolysers. Our collective consumption of electricity in Oman, which gives you an idea of our grid capacity, is roughly 10 GW. This means that our requirement for clean energy is already double the size of our grid as of today, so our grid is not ready.
That said, if you look at the map of Oman, you can see clearly that the main electricity demand centres are predominantly in the north and south of the country, whereas the lands allocated for green hydrogen projects are more in the central part to the south and not well connected with the national grid and don’t necessarily require connection to the grid, especially in the short run. The concept of green hydrogen clusters applies especially in the short term, where renewable energy is generated locally within the cluster to produce green molecules and transport them to clusters dedicated for green downstream businesses or to export facilities.
Hydrom has recently kick-started a common-use infrastructure stream and is working hand in hand with the national champions, namely OQGN [OQ Gas Network], Nama Group for electricity and water, and other Oman Investment Authority utility service companies – and definitely under the steerage of the energy ministry – to fast-track the development of the common infrastructure needed for the five projects Hydrom has already signed in Al Wusta, as well as another five to six projects targeted for signing in the second round in Dhofar for both the public auction and the remaining legacy initiatives.
Overall, we have six to seven years to work on it and there are a number of options being evaluated from technical, commercial and regulatory considerations to address challenges effectively. Speed and cost are key objectives set for the first pieces of common infrastructure to be developed. I strongly believe that we are well positioned in Oman to deliver on our promises by leveraging our national champions’ technical, financial and project execution capabilities, as well as the international partnerships we are exploring on this front.
What strategies are Oman and Hydrom pursuing to set up a solid infrastructure network able to support these hydrogen developments?
In terms of infrastructure, pipelines can transmit greater volumes of energy compared to overhead lines or submarine cables. We have the gas pipelines, but we need to build a dedicated hydrogen network. We want to come up with a model aimed at achieving timely, well-co-ordinated build-up, scalable but cost effective and foreign direct investment oriented.
To achieve this, we have already conducted a first strategic workshop with key stakeholders to explore the best model to provide optimal configuration for the common use infrastructure that maximises in-country value and attracts foreign direct investment. We work closely with the national champions – such as OQGN, OETC [Oman Electricity Transmission Company] and Nama Water – which have ambitions to venture into the green hydrogen space as part of their growth stories not only within the hydrogen clusters but as well between these clusters and to enhance connectivity to the industrial hubs and exporting facilities.
As for the ports’ infrastructure, co-ordination is ongoing with the three main international ports, namely Port of Duqm, Port of Salalah and Sohar Port, to synchronise the move towards positioning Oman as a leading player in the green hydrogen economy.
That said, the plan to build up the infrastructure complex was to require a minimum number of projects in order to bring some economies of scale into the picture, which we have now.
Can you give us an overview of the next phases for awarding the land blocks?
For us to meet the target of producing a minimum of 1 million tonnes per year (tpy) of green hydrogen by 2030, our plan is to conduct two bid rounds for public auction and in parallel regularise the legacy initiatives that have signed the commercial terms with Hydrom back in March of this year.
As of today, both of the two public auction-offered opportunities have been awarded and three of the legacy initiatives have signed the project-related agreements. All five projects are located in the Al Wusta governorate and collectively should produce around 750,000 tpy, which represents 75% of the 1-million-tpy target.
However, not all of these projects will go as scheduled, and therefore Hydrom has already launched on June 21, 2023, the second round in Dhofar governorate, which consists of three blocks offered for public auction and another three from the legacy initiatives that collectively should produce another 900,000 tpy. The qualification stage has already commenced and we’ve started receiving registration requests through the Hydrom auction platform. Our plan is to award and sign at least five of the six blocks by Q1 2024.
Which players have shown interest in the initiatives to develop hydrogen projects in Oman?
Maybe the best answer to this is a reflection on the signings that have taken place so far. I remember, when the green hydrogen strategy was announced back in October last year, the box of the structure where international developers play a role was empty. As of the end of June 21 (today), that same box is filled with 14 logos of international players from around 10 countries. Among these players are large, well-known oil and gas operators, utility developers and operators, infrastructure funds, investment funds, offtakers and technology providers.
Going forward, with the roadshows that are taking place supported by the official missions of the Ministry of Energy and Minerals, foreign ministry and other government authorities, we expect other players to join in, such as those who are taking serious steps in the receiving ends in Europe and Asia, such as port operators and regional operators of gas infrastructure.
Do you see Oman positioning itself as a first mover in the hydrogen race?
Absolutely. We see this starting from the royal directives early last year to accelerate steps to develop the green hydrogen economy in Oman, followed by the ambitious but straightforward strategy announced late last year and the results-oriented moves demonstrated in a record time to sign five project development agreements worth more than USD 30 billion with international investors, along with the launch of the second bid round. That is nothing if not a first mover path.