Hydrogen Diplomacy: The Future of the Middle East is Now

Earlier this year in February, Germany is reported to have opened its first ‘hydrogen diplomacy’ office in the Kingdom of Saudi Arabia. This move comes at a time when the Arabian Kingdom has just launched its Vision 2030 to diversify its economy and modernise its society with a commitment to develop renewable energies and make green hydrogen a priority. This comes as a welcome change on the socio-economic and energy front.

German companies are said to be chipping in to help the country and the institution of a hydrogen diplomacy office will now amplify cooperation in this area. At a time when the manufacturers of traditional fossil fuels are recognising the need to adapt to a new energy model, Germany is instituting “hydrogen diplomacy offices” in strategically important partner countries.

The ascendancy of multilateral trade relations is key to the expansion of the renewable energy market through concerted negotiations between signatories. The report, entitled Geopolitics of the Energy Transformation: The Hydrogen Factor, talks in-depth about a future where the geography of energy trade and energy relations alters as countries fundamentally change their energy mix. Even IRENA’s research talks of new centres of geopolitical influence built on the production, export, and use of hydrogen as traditional fossil fuel use, in this case, oil and gas plummets.

At a granular level, the current international energy trade governance system is fragmented and multi-layered. In order to streamline it, there is an increasing need for regulatory frameworks that provide for greater legal cohesiveness. Building geo-political and economic cooperation would help strengthen global energy security.

Strategising at a regional, bilateral and multilateral level requires various individual stakeholders to work on the key pillars of decarbonising the global energy system which includes energy efficiency, behavioural change, electrification, renewables, hydrogen, and hydrogen‐based fuels, and CCUS. This further means that for traditional fossil fuel-enabled energy-rich countries like the ones in the Middle East, strong trade ties must be struck in a way that they continue to dominate the energy circular economy, only this time with hydrogen in lieu of oil and gas.

The importance of hydrogen in the Net-zero Emissions Scenario is reflected in its increasing share in cumulative emission reductions. To add to it the efflux of international gas prices owing to a demand rebound in the post-pandemic era along with a lack of investment in new production and reduced Russian supplies in Europe has all meant only one thing - A Global Hydrogen Empowered Economy is the need of the hour.

According to recent reports, strong hydrogen demand growth and the adoption of cleaner technologies for its production will enable hydrogen and hydrogen-based fuels to avoid up to 60 Gt CO2 emissions in 2021-2050 in the Net-zero Emissions Scenario, representing 6% of total cumulative emissions reductions.

In an era of multilateralism, the energy trade governance system must focus on the WTO and energy transportation issues. Regionally, it is imperative for nations in the Middle East to explore ways in which energy efficiency gaps could be filled and overlaps eliminated whilst remaining true to the high-level normative framework, concentrating on those measures that would augment energy security.

Hydrogen technologies have proved to be remarkably resilient during the Covid-19 pandemic, with their momentum plateauing in 2020, a record year in policy action and low-carbon hydrogen production, with ten governments around the world adopting hydrogen strategies. It was further reported that close to 70 MW of electrolysis capacity was installed, doubling the previous year’s record, and two facilities producing hydrogen from fossil fuels with CCUS became operational, expanding production capacity by about 15%.

When the demand for Hydrogen demand stood at 90 Mt in 2020, it was practically all for refining and industrial applications and produced almost exclusively from fossil fuels, resulting in close to 900 Mt of CO2 emissions which in some small way defeated the whole purpose of energy efficiency or green energy. There were lessons to be learned.

And this is where the need for multilateral viewpoints, strategic allies, and alliances becomes quintessential. According to the Economic Times, India and the UAE have agreed to establish a joint Hydrogen Taskforce to help scale up economies and technologies, with a special focus on the production of Green Hydrogen. The Joint Statement issued by the two countries reads: Recognising that climate action will bring significant opportunities, for societies, economic growth, and businesses, the leaders agreed to support each other’s clean energy missions. In this context, the Leaders agreed to establish a joint Hydrogen Task Force to help scale up technologies, with a special focus on the production of Green Hydrogen. The leaders acknowledged ongoing UAE investments in India’s clean technology programs and initiatives and called for reinforcement of B- B and public-private partnerships.

Bilateral and multilateral energy partnerships are critical in accelerating the adoption of hydrogen. Norton Rose Fulbright reported that Japan’s Ministry of Economy, Trade, and Industry signed a memorandum of cooperation in January 2021 with Adnoc to encourage bilateral cooperation in the fields of fuel ammonia and carbon recycling, focusing on the demonstration of technology and expansion of the market.

Saudi and Egypt are also fortifying their regional ties this year. The Saudi Arabian Commerce Minister Majid al-Qasabi is reported to have stated that the two allies signed 14 investment deals worth $7.7 billion in total which relate to the development of renewable energy, including green hydrogen, as well as infrastructure and e-commerce, as per Egypt’s official Middle East News Agency. Green hydrogen is becoming increasingly sought after across the Middle East and North Africa.

The UAE and Russia, members of the OPEC+ alliance, are also reported to have signed an agreement to collaborate on hydrogen development, production, storage, and transportation. The two energy producers aim to fulfill clean energy strategies under their net-zero carbon emissions pledge. In 2021, the UAE was targeting a 25% global market share of low-carbon hydrogen by 2030 with the launch of its "hydrogen leadership roadmap" as presented at the UN Climate Change Conference. The roadmap delineated support for domestic, low-carbon industries and aims to establish the country as a leading hydrogen exporter.

The UAE already has seven hydrogen projects underway and is targeting a large share of key export markets, including Japan, South Korea, Germany, and India, as well as other markets it identifies as being of "high potential" in Europe and East Asia.

Several countries are increasing efforts to locally source renewables, with the region consistently attracting some of the lowest bids in the world for solar PV projects. A key challenge particularly for fuel exporting countries in this case is to immunise themselves to any sort of future shocks in energy markets, which could diminish oil demand thereby reducing revenues. Several producers are formulating plans for low-carbon energy industries, seeking to diversify their economies at the same time as their energy mix.

Take Europe which has been working on stock-taking, “To meet the European Union’s (EU) requirement of 20 million tonnes of hydrogen by 2030, electrolyser capacity will have to increase 100-fold in the next eight years to about 320-400 gigawatts and much of it will be installed in the MENA region,” Jorgo Chatzimarkakis confirmed at a virtual event organised by International Renewable Energy Agency (IRENA). He also mentioned that given the current situation in Europe, the EU would need 40 million tonnes of hydrogen by 2030 if it were to replace Russian gas totally but has settled to import 50 percent and source the remaining half locally.                             

Frank Wouters, Chairman of the Advisory board at MENA Hydrogen Alliance and Senior VP at Reliance Industries, commented: “Twenty million tonnes is four times more than what we saw a month ago. If we are really serious about decarbonisation and start thinking of an energy system from a point of cost-effectiveness, decarbonisation, ease of transport, cost of transport, cost of storage of energy, then I think there will be a lot more hydrogen in the future than we're thinking.” [Don’t miss an exclusive interview with Frank Wouters in this issue!]

On a global level, multiple bilateral and multilateral cooperation agreements and initiatives have since been announced, which include the Clean Energy Ministerial Hydrogen Initiative, the Hydrogen Mission of Mission Innovation, and the Global Partnership for Hydrogen under the aegis of the United Nations Industrial Development Organization. These join the existing International Partnership for Hydrogen and Fuel Cells in the Economy and the IEA Hydrogen and Advanced Fuel Cells Technology Collaboration Programme.

However, all of this progress does not match up to the needs of the Net Zero Emissions by 2050 Scenario. Low-carbon hydrogen demand for new applications remains limited to road transport only. More efforts are needed in demand creation and in reducing emissions associated with hydrogen production.

Stronger coordination among stakeholders is vital if we have to ensure efficient global progress.

In the words of Jorgo Chatzimarkakis, “The challenge is huge. We need to agree upon concrete projects and create a framework whereby these projects have a clear common denominator.”