UAE could capitalize on hydrogen, but…

In the transition to a more sustainable kind of energy, hydrogen is essential. While several nations are vying for a piece of the market pie, the UAE is positioned to take the lead and become a significant exporter of this energy carrier.

Dubai and Abu Dhabi are both in a good position to seize the hydrogen potential. In fact, the Abu Dhabi Department of Energy approved a Position Paper in December 2020, and in January 2021, Mubadala, ADNOC, and ADQ joined forces to make Abu Dhabi a hub for green and blue hydrogen.

Similar to this, Dubai opened a solar-powered green hydrogen factory in May 2021, making it the first of its sort in the MENA region. It is made to fit test platforms for usage in transportation and industry. Beyond this, there is already almost 8GW worth of electrolyzer projects planned for the MENA region through 2030.

Favorable local conditions
The UAE, which has long held a dominant position in the world’s energy supply market, carries with it a wealth of knowledge, a solid asset base, and significant geopolitical ties and contacts that will be crucial in deciding the direction of import and export dynamics.

Meanwhile, the UAE will become a leader in the export of blue hydrogen due to a surplus of cheap gas and the potential of CCUS (or ammonia). Additionally, it benefits from having access to solar electricity, one of the most affordable renewable energy sources on the planet.

The UAE’s Hydrogen Leadership Roadmap, which was unveiled in November 2021 and is a comprehensive national plan to promote domestic low-carbon businesses, advance the country’s goal of being net-zero, and establish the UAE as a viable hydrogen exporter, has already made progress.

But for these goals to come true, there are a number of obstacles that need to be overcome…

Strategy, policy, and regulation advancement
The Hydrogen Leadership Roadmap is a positive step, but the UAE must also address other fundamental issues before it can fully take advantage of this opportunity. These include creating a strong regulatory framework, cooperating with other nations to implement certification programs and technical standards, and establishing a licensing procedure.

Increasing upstream rivalry
It seems like many places are now trying to establish themselves as the new “Middle East for hydrogen.” For instance, South American nations are already attempting to establish supply chains in Europe, while North Africa is strategically situated to potentially deliver low-carbon gas to the European market due to its proximity to Southern Europe. New players from areas with access to affordable renewable energy sources will enter the energy supply industry in this brave new world. As a result, there will be more competition, new connections between organizations and areas, and innovation. In order to stay up with the speed and scope of change, local stakeholders must invest in international outreach. Some international agreements have already been inked.

Taking on the midstream query
A significant obstacle must be solved in order for a market for traded hydrogen and low-carbon gas to develop across continents that is both safe and cost-effective. Currently, hydrogen must be transformed into ammonia before it can be transported. It’s possible that existing ammonia supply chains will expand and be used to transport hydrogen, but this is most likely only feasible when ammonia is the intended end product. There are substantial technological, economic, efficiency, and scale difficulties that must be overcome for hydrogen supply chains to become a reality. This may offer the UAE a medium-term opportunity to expand its industrial base and establish itself as a world leader in the manufacture of in-demand goods like green steel.

A reality check is necessary downstream
Hydrogen doesn’t necessarily need to be employed in a wide variety of applications just because it can. Decarbonizing current (CO2 intensive) hydrogen demand, for instance, would be a good place to start because it involves little in the way of up-front capital expenditures from off-takers. The IEA estimates that the world’s demand for hydrogen will be roughly 90 Mt in 2020, with 80% coming from largely unabated fossil fuels and the remaining 20% coming from residual gases produced primarily in refineries. Before even considering alternative use cases in applications like heavy goods vehicles (HGVs) in transport, backup power (fuel cells or GTs), and heat in industry or buildings, decarbonizing this “grey” hydrogen should keep early low carbon hydrogen producers busy for a while.

Cooperative relationships
The integration of the power and gas markets will lead to the formation of new alliances among energy businesses, coalitions among governments, and a sharp increase in deal activity as major players in the energy sector seek to reposition themselves to take advantage of the opportunity. In order to safeguard and de-risk the supply chain, assets and infrastructure, competitive finance, and end-demand markets, many people will prefer partnerships or alliances to pure mergers and acquisitions. In order to create fair ventures where all parties believe their assets, knowledge, intellectual property, or markets are valued appropriately, the industry must work together and think creatively. Setting up “partnerships” teams that can both recognize external possibilities and clearly communicate the value they bring to the table will be crucial.

Going forward
Instead of being a revolution, the emergence of a worldwide hydrogen market will be an evolution. It is a transformation that will take place gradually and offer specific opportunities in new markets that energy companies around the world can seize.

Setting up the nation’s fundamental infrastructure, including its legal system, corporate practices, and standards, is the first step. Building capability and talents within the nation and choosing the best strategic partners for this endeavor will thereafter become a matter of utmost importance.