Germany signed a joint declaration of intent with Oman. Oman’s hydrogen initiatives can supply affordable sustainable energy.

Deeper trade links with the Sultanate support a value-oriented trade policy, international climate protection, and Gulf power stability. Avoids risky disputes.

In 2022, German and European energy policy focuses on Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE, and Oman. Hydrogen is needed for long-term decarbonization of industry and aviation, along with liquid gas, which is urgently needed. The Gulf States have good renewable energy hydrogen conditions. Germany and the EU are concerned about long-term import diversification and quick hydrogen industry ramp-up, in addition to costs.

The Gulf States have big hydrogen plans and seek technology, investment, and trade partners. . The federal government’s 2022 golf trips did not visit Oman, and authorities and companies are focused on the first three countries. These are more prominent oil and gas producers than Oman in Europe.

For domestic political considerations, the sultanate’s ambitions are very serious. German hydrogen goals should include geostrategic and climate foreign policy. But, the Oman case shows that German sector management still needs improvement.

Oman’s hydrogen policy is linked to its economic, climatic, and development goals. Vision 2040, a 2021–2040 sustainable development agenda, guides it. The sultanate has set goals and decided ways to coordinate and monitor their implementation. Goals include economic pioneering and diversification. This requires identifying and promoting complementing core areas and future industries. Non-fossil economy is anticipated to rise from 61 to 91.6% of economic production. Their public budget share will double to 18%. Green economy and renewable energy expansion will boost Oman’s competitiveness. By 2030, they should supply 20% of energy, by 2040 35–39%.

Hence, Oman’s economic and energy export plan leverages effects to restrict present expenditure and promote the future while establishing medium-term perspectives. First, partial privatizations and debt capitalization increase liquidity and lower current liabilities, relieving the public budget. In 2021, state-owned, leveraged businesses received concessions to exploit important oil fields. Other public energy businesses are awaiting proportionate sales. Hydrogen uses foreign capital. Oman mostly provides natural resources. Second, the Sultanate, via onshoring, reserved jobs for locals and targeted future important technologies to reduce long-term unemployment. In addition to Vision 2040, a “In-Country Value” framework requires the Omani energy industry to contribute to the sultanate’s socio-economic growth. Oman expects 70,000 new domestic hydrogen jobs.

Oman publishes its hydrogen plans in October 2022. It plans to produce 1 to 1.25 Mt of hydrogen by 2030, 3.5 and 8 Mt by 2040 and 2050, respectively. The modest Gulf state has big intentions. By 2030, neighboring Saudi Arabia, eight times larger in land and population, aims to create 4 Mt of hydrogen per year, whereas the EU wants to produce 10 Mt. The sultanate forecasts the project’s electrolyzer capabilities and additional renewable electricity generation at 8-10 or 16-20 GW by 2030 and 100 or 185 GW by 2050. The Ministry of Energy estimates 132 billion euros for all infrastructure.

In accordance with Oman’s economic strategy, private multinational consortia will produce hydrogen while state-owned enterprises build the infrastructure. For 47 years, the royal family is advertising land tracts with production concessions. In phase A, there are six blocks, separated into two rounds: two blocks in Duqm (see graphic) will be awarded in April 2023, while four blocks in Dhofar will be bid on in May 2023.

The tender requirements aim to promote domestic development, investor leverage, and involvement. Minimum bids include 0.04 euros per square meter for site lease and 5% of hydrogen produced as a contribution in kind and profit taxes. The production company’s stock must include at least 20% of the Omani firm OQ’s alternative energy branch. Corporate taxes apply. Vertically integrated electricity-to-hydrogen derivative production projects are awarded. A cost-effective and dynamic solar-wind combo generates electricity. The consortium chooses derivative form and electrolyser technology.

Oman’s energy ministry had already signed many declarations of intent with potential importers like Germany, Belgium, the Netherlands, and Japan and strategic partners like Shell. The first consortia have signed land use agreements. . Regional cooperation has been scarce. Saudi and Emirati investments in Oman’s hydrogen sector have been announced. Meanwhile, Kuwait’s sovereign wealth fund was interested.

A national network of public corporations and ministries, led by the Ministry of Energy and Minerals (MEM) and Hydrom, a 2022-founded state-owned company, develops the hydrogen economy (see graphic). The MEM governs the energy and economic sectors politically, strategically, and regulatoryly. The Vision 2040 targets apply to the oil and gas industry. Hydrom oversees land use concessions, shared upstream infrastructure, project allocation, product sales, and coordination between stakeholders. Hydrom is a subsidiary of Energy Development Oman (EDO), which in 2021 subordinated the state oil corporation Petroleum Development Oman (PDO). . The royal family issues decrees and distributes land and other resources.

Midstream and downstream public companies and authorities dominate (see chart ). OQ, a vertically integrated holding corporation of Omani energy companies, comes first. Through its alternative energy segment, OQ produces hydrogen and supplies infrastructure. Oman’s national logistics holding firm, ASYAD, transports hydrogen and its derivatives by sea and manages multiple export ports. Belgium and the Netherlands network these special economic zones. These will become integrated hydrogen ecosystems like the European “Hydrogen Valleys.” The ports are suitable as domestic hydrogen hubs and worldwide hydrogen and derivative hubs due to their location in the Arabian Sea, along international trade flows. A higher authority regulates them and coordinates downstream infrastructure. The Hy-Fly Alliance, founded in 2021, coordinates public and private, national, and international hydrogen players.

Geopolitical concerns, especially the diverse and speedy supply of affordable renewable energy, support hydrogen imports and collaboration with Oman.

. Omani deployments stabilized the region from the first Gulf War through the Iran nuclear pact. Only Oman has good connections with all regional states. Oman’s role is more nuanced than (active) neutrality and often seeks status quo. Oman stayed impartial during the 2017 Qatar crisis, when Saudi Arabia, Bahrain, and the UAE cut diplomatic relations and all business and passenger activity with Qatar within one day. Yet, it has compensated Qatar for lost food supplies, expanded bilateral ties, and mediated with Kuwait. The Yemen conflict requires the sultanate. It provided Yemeni diaspora health treatment and travel visas and contributed to the 2022 truce.

Europe is interested in a strong Omani hydrogen economy. The Arab Spring has driven the Gulf States, who were previously more domestically oriented, to embrace a more active foreign policy and, especially Saudi Arabia, the UAE, and Qatar, to compete for hegemony. The smaller Gulf States, especially Oman, slow down hostilities (such as the Qatar crisis in 2017). In supra-regional conflicts, their regional plurality limits power. Bahrain shows the effects of losing autonomy. Since it called on Saudi Arabia for military aid during 2011 demonstrations, its foreign policy has increasingly favored Riyadh and supported escalations like the Qatar blockade and Yemen war. The Cold War with Iran and the Yemen war could spark supra-regional military activity in the Levant, North Africa, and the Horn of Africa as the Gulf States gain influence.

Value-based trade, climate foreign policy, and predictability
Germany’s decoupling from Russia has revived discussions about value orientation, risks, and foreign trade’s benefits. .

Foreign climate policy must consider Oman’s hydrogen cooperation. Gulf States export greenhouse gases beyond oil and gas. They also emit the most per person domestically. Climate foreign policy must pragmatically incorporate oil and gas companies. All Gulf nations save Qatar have pledged climate neutrality. Oman and the UAE have the most ambitious target year (2050), the most advanced strategy, and a direct connection to the hydrogen economy, making them pioneers. Hydrogen production can accelerate Omani industrial decarbonization. Since environmental protection in the Gulf States is characterized by national(ist) rivalry, this approach could spillover effects on the other Gulf States and become an effective worldwide climate protection method.

Germany seems to believe that hydrogen will be a demand market in the medium future and that the cautious hunt for exporters may continue. But, Japanese and Korean buyers, as well as EU countries like Belgium and the Netherlands, are increasing. They import hydrogen knowing that Germany will pay more for it. Exporters now realize their appeal, which may raise prices. Hydrogen will initially be scarce due to electrolyser capacity limitations.

. Gulf hydrogen, especially from Oman, is crucial. Policy and market design face geopolitical problems and possibilities.

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