Green hydrogen to cut heavy reliance on hydrocarbons in GCC countries

The GCC nations are ideally positioned to participate in the upcoming blue and green hydrogen markets since they have access to cheap domestic gas production and renewable energy sources.

The rating firm Moody’s Investors Service states that only green hydrogen has the potential to lessen the dependency on hydrocarbons in the GCC countries, despite the fact that both types of hydrogen, blue and green, will contribute to lowering the global carbon footprint.

When the world’s carbon transition quickens, the creation of green and blue hydrogen could lessen the negative economic and fiscal effects on GCC sovereigns of lower global oil demand and prices. But only green hydrogen will lessen the GCC countries’ substantial reliance on hydrocarbons and, consequently, their underlying credit exposure to hazards associated with the longer-term carbon transition.

According to a new analysis, the transformation will, however, take place only gradually and over a number of years.

Governments in the GCC are setting up facilities to produce low-carbon blue hydrogen and zero-carbon green hydrogen from water using electrolysis and renewable energy (from natural gas with carbon capture).

However, the analysis warned that it would be difficult to achieve large-scale production in the coming years, particularly for green hydrogen.

The production of blue hydrogen is more likely than the more expensive and difficult production of green hydrogen in the short-to-medium term due to their access to cheap domestic natural gas, their expertise in carbon capture and storage (CCS), and their infrastructure that is at least partially available.

Given their availability to low-cost renewable energy production and proficiency in water desalination, Oman, Saudi Arabia, and the UAE also have the potential to manufacture and export green hydrogen over the long term.

It will be difficult to produce enough renewable energy capacity to sustain an increase in green hydrogen production because GCC renewable energy projects continue to experience significant delays in the auctioning processes, according to Moody’s.

Furthermore, major further investments in technology and infrastructure for storing and transporting hydrogen would be needed for the large-scale commercialization of green hydrogen.