Saudi Arabia, the world’s largest crude oil exporter, is preparing to make a significant investment in green hydrogen production. According to sources familiar with the matter, the kingdom’s sovereign wealth fund, the Public Investment Fund (PIF), has created Energy Solutions Co. The new company will finance green hydrogen power production.
PIF to Invest at Least $10 Billion in Green Hydrogen
The PIF, chaired by Crown Prince Mohammed bin Salman, expects Energy Solutions Co. to invest at least $10 billion. The investment figure could grow substantially in the coming years, depending on hydrogen demand and the company’s investment pipeline. Some investments will be made in partnership with state oil producer Saudi Aramco.
Former Thyssenkrupp Uhde CEO to Lead Energy Solutions Co.
Energy Solutions Co. is expected to be led by Cord Landsmann, the former CEO of Thyssenkrupp Uhde. The company, wholly controlled and funded by the PIF, could be officially announced as early as this month. The PIF is the powerful sovereign investor driving many of Saudi Arabia’s economic diversification efforts.
Saudi Arabia Aims to Become a Major Green Hydrogen Producer
Saudi Arabia aims to become one of the world’s largest producers of green hydrogen. This is part of its strategy to reduce reliance on oil sales while remaining a global energy supplier. Green hydrogen burns without releasing carbon, making it an attractive solution for countries seeking to reduce emissions. It is particularly useful for energy-intensive industries that cannot easily run on electricity, such as metals manufacturing and aviation.
Challenges in Green Hydrogen Production and Adoption
Despite its potential, green hydrogen faces several challenges:
- High production costs: Producing green hydrogen is currently very expensive, which may hinder widespread adoption.
- Infrastructure requirements: Significant costs and time are required to build the necessary infrastructure in importing countries.
- Transportation difficulties: Hydrogen is difficult to transport safely, which can further complicate its adoption as a mainstream fuel.
- Lack of long-term contracts: Few potential buyers are willing to sign long-term contracts to receive hydrogen fuel.
These challenges have caused many planned green hydrogen projects to stall.
Saudi Arabia’s Commitment to Hydrogen Production
Saudi Arabia is home to one of the few large-scale green hydrogen projects in the world under construction. The $8 billion project’s equity partner has agreed to purchase its entire output, overcoming a significant hurdle. Aramco has also expressed interest in investing in blue hydrogen production. This involves using fossil fuels with emissions from the process captured and stored.
As governments and industries seek less-polluting alternatives to hydrocarbons, Saudi Arabia is determined not to cede the emerging hydrogen business. Competitors such as China, Europe, or Australia could potentially capture this massive source of income. The kingdom has set a goal to provide 15% of global blue hydrogen production, in addition to green hydrogen investments. This is according to PIF governor and Aramco chairman Yasir Al Rumayyan.
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