In order to be used as a legitimate energy source, hydrogen must be physically created by harnessing a primary source of energy, such as solar, wind, nuclear or gas. Depending on the primary source of energy used and the particulars of the process, the hydrogen produced will be named as one of a variety of colours.
Blue hydrogen is produced when natural gas is split into the separate elements of hydrogen and carbon dioxide, and the residual carbon dioxide is prevented from being emitted into the atmosphere by a process called Carbon Capture Usage and Storage (“CCUS”). Consequently, blue hydrogen is often described as ‘low-carbon hydrogen’, as the CCUS process emits minimal greenhouse gases.
Blue hydrogen has predominantly been utilised in North America and East Asia, whilst low carbon hydrogen leaders in Europe have favoured a balance of green and grey hydrogen. However, in January 2023, Germany announced plans to build blue hydrogen plants and a major pipeline to feed Norway, as pressure in Europe mounts to diverge from a reliance on Russian energy.
Following Europe’s shift towards blue hydrogen, the Middle East is undergoing its own significant energy transition to capitalise on its abundant local resource base. The UAE, Saudi Arabia and Qatar are leading the charge towards sustainable hydrogen development.
The MENA region benefits from low cost natural gas, as well as easy access to depleted oil wells which are essential in the CCUS process for isolating the captured carbon dioxide. Therefore, utilising these resources responsibly could catalyse oil-rich nations in the Middle East, to take accountability for their disproportionately high carbon footprints and contribute to global sustainability goals.
Blue hydrogen in the UAE
At COP26 in 2021, the UAE announced plans for a “hydrogen leadership roadmap” with the goal of promoting low-carbon domestic industries and competing in hydrogen exports. Since identifying hydrogen as the “fuel of the future” in their Nationally Determined Contribution (NDC) under Article 4 (12) of the 2016 Paris Agreement, the UAE has demonstrated its commitment to hydrogen with the teaming up of ADNOC (Abu Dhabi National Oil Company), TAQA (Abu Dhabi National Energy Company), and Mubadala (Abu Dhabi’s global investment company). These three entities are shareholders in ‘Masdar’, Abu Dhabi’s future energy company and global leader in renewable energy and hydrogen.
The Abu Dhabi Department of Energy is also targeting the production of over one million tonnes of hydrogen per year by 2030, which will be achieved by balancing both blue and green hydrogen production proportionately.
The UAE has also shown a keen interest for investment in global blue hydrogen projects. In 2022, ADNOC joined BP’s ‘H2Teesside’ blue hydrogen project with a 25% stake, targeting the development of two 500 megawatt hydrogen production units by 2030. Following this, BP joined ADNOC to evaluate a new blue hydrogen project in Abu Dhabi. By engaging in global cooperation for blue hydrogen projects, the UAE is exhibiting the right strategy required to meet the International Energy Association’s declaration that 14% of the cumulative emission reductions needed to meet the 2060 global temperature goal must come from CCUS technologies.
Abu Dhabi’s biggest CCUS facility, Al Reyadah C02-EOR Project, captures and stores 0.8 Million Metric Tonnes per annum (“MMtpa”) from the steel industry. It is estimated that this facility captures around 90% of the carbon dioxide emitted from the Musaffah Emirates Steel factory, reflecting the efficiency of blue hydrogen in reducing carbon emissions.
One of the central challenges which the UAE faces in regard to blue hydrogen, is that the UAE’s most accessible primary energy source, gas, is not sufficiently abundant to power the nation’s optimistic production targets. This means that the UAE will need to rely on purchasing gas from Qatar and other countries to meet these objectives. Therefore, moving forwards, the UAE’s utilisation of blue hydrogen will be reliant on negotiating viable gas supply agreements.
Blue hydrogen in Saudi Arabia
In October 2021, Saudi Arabia announced the allocation of its eastern ‘Jafurah’ gas field, the largest shale gas field in the country, for the purpose of producing blue hydrogen. Now currently in production, Saudi Aramco expects this ambitious project to generate the green energy equivalent of displacing around 500,000 barrels of crude oil, as well as producing 630,000 barrels of natural gas liquids per day by 2030.
Saudi Arabia also sees huge economic potential in blue hydrogen, with the 2022 report by King Abdullah Petroleum Studies and Research Center (KAPSARC) forecasting that the cost of producing blue hydrogen could fall from $1.34/kg to $1.13/kg by 2030. However, the same report also highlights the issue of the high costs of sea transport for liquid hydrogen in regard to exportation, which could add an additional cost of up to $2/kg.
With exportation therefore representing a low profit margin, Saudi Arabia may have to look to alternative markets and consider balancing the production of hydrogen.
In terms of regulatory framework, Saudi Arabia currently has no legislation for hydrogen projects. This has been met with some concern, considering that the Saudi Vision 2030 aims to make Saudi Arabia the world’s leading hydrogen supplier in a bid to reduce its reliance on domestic oil. Amidst increasing amounts of blue hydrogen deals, the lack of an established regulatory framework means that blue hydrogen projects must proceed with caution. However, should new legislation be implemented, prioritising blue hydrogen development may lead to questions over the role of natural gas in Saudi Arabia.
Saudi Arabia’s biggest CCUS facility, Uthmaniyah C02-EOR Demonstration Project, captures and stores 0.8 MMtpa, which it pipes 85km to the ‘Ghawar’ oil field to sequester the carbon dioxide. This facility is estimated to store around 40 million standard cubic feet per day, by injecting it safely into the oil reservoir.
Blue hydrogen in Qatar
In August 2022, Qatar announced plans to build the world’s largest blue ammonia plant, a compound substance created from nitrogen and blue hydrogen using the same CCUS storage process to sequester the residual carbon dioxide. Much like blue hydrogen, blue ammonia can be used as a low-carbon fuel, but has the added qualities of being suitable for transportation mainly in shipping, and also fertiliser production.
This project, called the ‘Ammonia-7 Project’, will be operational in 2026 and is expected to produce around 1.2 million tonnes of blue ammonia per year. More significantly, in terms of sustainability, this facility will also have the capacity to sequester 1.5 million tonnes of carbon dioxide each year.
Qatar’s biggest CCUS facility, Ras Laffan CCS Project, is the oldest commercial facility in the Middle East and captures the carbon dioxide from the Ras Laffan Liquefied Natural Gas (“LNG”) facility. This operates slightly differently from those in the UAE and Saudi Arabia, instead injecting the carbon dioxide into a dedicated geological storage site as opposed to an oil reservoir. This facility is estimated to be capturing between 1.1 to 2.1 MMtpa of residual carbon dioxide.
In terms of regulatory framework, Qatar currently has no legislation for hydrogen projects. While initiatives like the Ammonia-7 Project are likely to influence or at least encourage regulatory implementation, there are no definite indications that this will happen any time soon. Nevertheless, Qatar has committed to reduce the carbon intensity of its LNG facilities by 25% under the Qatar National Vision 2030, suggesting that increased investment into blue hydrogen could be essential in meeting this objective.
The future of blue hydrogen in the Middle East
As a region, the Middle East currently accounts for around 10% of the world’s CCUS capacity, as evidenced by the large-scale commercial CCUS storage sites in the UAE, Saudi Arabia and Qatar. Unlike green hydrogen, blue hydrogen is expected to retain its market price, making the Middle East an ideal region to become a market leader given its abundant CCUS storage resources and access to low-cost natural gas.
Blue hydrogen is not without its limitations, however, and the most significant limitation is its high capital, operational and maintenance costs. Although investment in blue hydrogen has been soaring throughout the Middle East, it will be difficult to say whether that is money well spent until we see whether the upcoming 2030 targets are exceeded or failed, and to what extent.
One positive aspect for blue hydrogen in particular, is that its costs are approximately half that of green hydrogen, and blue hydrogen has a projected market value of USD $500bn by 2050. Yet, with the high costs of production logistics and exports, it remains to be seen whether the Middle East will truly dominate the global blue hydrogen market.
Perhaps the most interesting space regarding blue hydrogen in the Middle East will be the implementation of regulatory frameworks governing the standards and regulations for the emerging blue hydrogen industry. So far, only Abu Dhabi has announced the development of a new blue hydrogen policy in August 2022, yet no further insight has been given regarding its publication or implementation. Consequently, this will be a key area to look out for in the future.