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Oman Is On Course To Overturn Its Oil Industry And Become A Renewables Giant, But Will They?
Can green hydrogen replace oil in the Middle East?
While some particularly dense people out there have a hard time understanding the basic science of climate change, the scientific and popular consensus is that fossil fuels are destroying the precious planet we call home. If we want to save this planet and leave a garden of Eden for our children, we have only a few decades to revolutionise our societies and ditch the dino-juice. This switch is relatively easy for some countries, but for others, it is a Herculean effort. Take the Middle East; practically all these countries’ economic growth over the past 50 years has been driven by their oil exports, and now their entire society, culture and governmental structures are built around black gold. For them, ditching oil is social and economic suicide. But it doesn’t have to be. Oman, which is one of the wealthiest countries in the world thanks to its oil industry, is making moves to become a world leader in a burgeoning industry that could topple oil: green hydrogen. But can they really make the transition and help save the planet?
Firstly, let’s begin with what green hydrogen is. Hydrogen is a brilliant fuel source, it can be burnt like natural gas, but when it burns, it only produces water vapour and nitrous oxides, meaning no carbon emissions. It can also be fed into a fuel cell, where it reacts with atmospheric oxygen to produce electricity. As such, hydrogen can power everything from jets to cars to even your gas stove, all without driving climate change.
But hydrogen is not readily available. It is so reactive that it can only be found as part of a compound, such as methane (CH4) or water (H20). As such, we need to expend energy to extract raw hydrogen from these compounds. By far, the most common way of making hydrogen is via steam reforming. This is where natural gas (methane) is heated with steam to convert it into hydrogen and carbon dioxide. Not only does this emit carbon emissions from the reforming process, but the energy used to create the steam is usually derived from fossil fuels too, adding to the overall emissions. This type of hydrogen is known as grey hydrogen, and using it to power vehicles or home appliances isn’t eco-friendly at all.
In comparison, green hydrogen has been refined without any carbon emissions. Typically, green hydrogen is made via electrolysis of water, where renewable electricity is placed across the water, splitting the molecules into hydrogen and oxygen atoms. This type of hydrogen has the potential to be the eco-friendly fuel of the future!
But if that is true, why aren’t we using green hydrogen yet? Well, there are plenty of reasons. The infrastructure to refine, transport and supply this fuel hasn’t yet been deployed, limiting the number of consumers or companies willing to buy hydrogen-powered hardware. There is also an efficiency issue. You see, electrolysis isn’t that efficient, and neither are fuel cells, giving hydrogen a round trip efficiency (how much of the renewable energy actually goes into practical use) at most, only 46%. Meanwhile, battery electric alternatives like EVs have a round-trip efficiency of around 80%.
Hydrogen still has a place in our net-zero future because it makes up for these shortcomings. It is incredibly energy dense and can power high-powered combustion vehicles, allowing for long-distance hydrogen-powered jets or even hydrogen-powered shipping vessels. It’s also potentially a solid competitor to EVs, as hydrogen-powered cars can refuel in a matter of minutes, drive for hundreds of miles more per refuel than an EV, have a far lower environmental impact (mainly due to more efficient manufacturing) and have the possibility of becoming cheaper than EVs (once production is scaled).
So, as we transition to net-zero, green hydrogen is set to become a significant industry, despite the fact it is currently tiny. This makes it an incredibly promising industry to invest in, as it is wide open for a country or company to take a massive lead.
Well, it seems like Oman is poised to do just this, and because of their unique climate, they might be ideally suited to dominate and drive forward the green hydrogen industry.
According to a report by the International Energy Agency (IEA), Oman is putting in the groundwork to switch from being an oil-producing country to a green hydrogen-producing country. How? Well, Oman aims to produce at least 1 million tonnes of green hydrogen a year by 2030, up to 3.75 million tonnes by 2040, and then 8.5 million tonnes by 2050. This might not sound like a lot, but 1 kg of hydrogen contains 33 kWh of energy, and 1 kg of oil contains only 11 kWh of energy, or a third less. Oman currently produces 37 million kg of oil annually, equivalent to 12 million tonnes of hydrogen. So, these plans show that Oman is serious about replacing its oil with hydrogen.
But how are they going to make this much green hydrogen? With solar power!
Oman is particularly well suited to solar power. While the high temperatures do make solar panels less efficient, Oman is one of the sunniest countries in the world, with bearly any cloud cover and long sunny days all year. Overall, this means that a solar panel in Oman will make far more power over the course of a year than an identical one in the EU or USA. This increased energy output per panel can counteract the inefficiencies of electrolysis, as it reduces the cost per kWh of renewable energy.
But Oman’s geography also makes it ideally suited for green hydrogen. While its desert ecosystem is an important one, it is low in biodiversity, low in biomass and not as threatened by human expansion, as we don’t tend to build many farms or cities in the desert. This means that they can convert vast amounts of their land area to solar farms without having massive environmental or social damage.
What’s more, green hydrogen infrastructure is very, very similar to natural gas infrastructure, and Oman already has a developed natural gas industry. This means that there are already thousands of trained workers in Oman who can easily work to build and establish hydrogen infrastructure.
All of this together means that Oman can not only produce green hydrogen for less than many other countries, but it also has the geographic and societal means to be able to do so.
As such, Oman has put aside 1,500 square kilometres to build solar power with the express purpose of using it for green hydrogen production by 2030. But it has also identified 60,000 square kilometres of land, which it can use to build solar farms to meet its 2040 and 2050 targets.
But can Oman really ditch oil for hydrogen?
I mean, oil and gas represent around 60 percent of Oman’s export income, and domestic natural gas accounts for over 95 percent of the country’s electricity generation. The country as it is today was built from its oil industry since it started in the late 60s. Surely, the wealthy upper and ruling class of Oman won’t give up their lucrative oil for hydrogen. Especially when you consider that their green hydrogen push will take $33 billion worth of investment, and that will only pay for it until 2030. Their vast riches must be far better off being put back into an existing, already profitable industry.
Indeed, getting Oman to stop oil production and invest in green hydrogen will take a sizeable push, but the opportunity they have in the hydrogen industry is far, far larger.
Today, the oil market is worth $1,720 billion, and green hydrogen is only worth just over $4 billion. But, while net-zero targets are set to dramatically shrink the oil industry over the next few decades (some estimates by up to half), green hydrogen is set to grow to a market value of $1,400 by 2050! And as we said, thanks to Oman’s unique climate, geography and demographic, it is one of the best locations in the world to capitalise on this market.
If they can position themselves as a dominant force of green hydrogen, then by 2050, they will be making far more money from hydrogen than fossil fuels have ever given them.
But this golden opportunity doesn’t guarantee a smooth transition. Many things have to happen for this switcheroo to happen. Firstly, the green hydrogen industry has to take off, and that hasn’t happened yet. Secondly, these plans have to survive potential funding cuts, oil company lobbying and potential social issues (people trained in the fossil fuel industry not wanting to retrain). So, Oman does have an incredibly bumpy road ahead. Still, I think the people of Oman know a great opportunity when they see one, and won’t want to miss the chance to become a global renewables’ leader.
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