BusinessDay

Nigeria dithers as world’s largest oil region turns hydrogen hub

The biggest oil-exporting region in the world, the Middle East, has set its sights on becoming a major clean energy exporter of green hydrogen, a message Africa’s biggest oil-producing country is yet to come to terms with.

While Nigeria remained passive despite having a variety of resources to produce hydrogen, the largest oil producers in the Arab Gulf are jumping on the hydrogen bandwagon, especially the green variety produced from water electrolysis, which involves using electricity from solar or wind.

Most oil-producing countries are positioning to take advantage of numerous investment opportunities in hydrogen, which most analysts expect to play a prominent role in lowering carbon emissions from energy-intensive industries, a development Nigeria still remains relatively silent about.

Last week, two announcements of green hydrogen projects in the Middle East made headlines: Dubai launched the first industrial-scale green hydrogen project in the region, while Oman announced plans to build one of the largest green hydrogen plants in the world.

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Dubai, one of the emirates of the United Arab Emirates (UAE), which is currently OPEC’s third-largest oil producer, launched the first industrial-scale, solar-powered green hydrogen facility in the Middle East and North Africa in collaboration with Siemens Energy, Dubai Electricity and Water Authority (DEWA), and Expo 2020 Dubai.

During the day, the plant uses some of the photovoltaic electricity from the Mohammed bin Rashid Al Maktoum Solar Park to produce green hydrogen via electrolysis. At night, the green hydrogen is converted into electricity to power the city with sustainable energy, Siemens Energy said.

The Solar Park is expected to generate as much as 5 gigawatts (GW) of clean energy by 2030 as the largest single-site solar park in the world.

Companies in the region, international technology partners, and analysts believe that Dubai and the whole of the Middle East have a bright future in solar power generation, considering the abundant sunshine in the region.

“Against the background of low costs of electricity for solar PV and wind power in the region, hydrogen has the potential to be a key fuel in the energy mix of the future and could open up energy export opportunities for those areas with access to abundant renewable energies,” Siemens Energy said.

The UAE could become an exporter of hydrogen, Siemens Energy CEO Christian Bruch told CNBC’s Dan Murphy in an interview on Friday.

“I do believe it must be, it will be, it should be, one of the key future commercial models in the UAE and the wider region, to be also, in future, an energy exporter for the world,” Bruch told CNBC.

Another oil producer in the Middle East, Oman—not an OPEC member but part of the OPEC+ alliance—also made a major announcement involving green hydrogen.

Oman’s state-held energy company OQ, Hong Kong-based green fuels developer InterContinental Energy, and Kuwait’s government-backed clean energy investor and developer, EnerTech, announced a plan for one of the biggest facilities of green hydrogen in the world. The plant will be powered by 25GW of renewable energy and could cost as much as $30 billion.

“Given the site’s strategic location between Europe and Asia, as well as excellent solar irradiance and wind resource facing the Arabian Sea, the development is well-positioned to offer a secure and reliable supply of green fuels globally at a highly competitive price,” InterContinental Energy said.

“Alternative energy is a key driver for OQ’s long-term growth and a cornerstone of its strategy. It is also in line with the country’s ambitious Oman Vision 2040 that aims to diversify the nation’s resources and maximize the financial value derived,” said Salim Al Huthaili, CEO, Alternative Energy at OQ.

The region’s top oil producer and the world’s largest oil exporter, Saudi Arabia, is also eyeing green hydrogen projects and a share of the emerging clean hydrogen market.

NEOM, the future sustainable city promoted by Saudi Crown Prince Mohammed bin Salman, signed last year a deal with Air Products and Saudi ACWA Power for a $5 billion green hydrogen-based ammonia production project, which will export the product.

All these plans suggest that the oil powerhouse Middle East is not immune to the energy transition and growing global demand for clean energy products.

The above development not only puts Nigeria, Africa’s largest economy, in a precarious situation but also exposes how the world is gradually turning away from crude oil to gas to drive their economies.

“Nigeria needs a national strategy either through production of hydrogen from fossil fuels as a short-term measure or developing a hydrogen infrastructure or ultimately clean production of hydrogen from renewable energy sources,” Henry Adegun, team lead, Foster, said.

In 2021, countries are already making green hydrogen a priority for their energy needs, with lots of cost attributed to the country’s natural resources, such as Chile, which is investing in hydrogen infrastructure due to its optimal wind resources.

Wind energy development in Nigerian is still at an infant stage and the few wind energy technologies found in the country are mainly windmills that are used for irrigation water pumping in some rural communities in the Northern region.

Some studies have opined that if 1 percent of Nigeria’s landmass is used for solar PV electricity generation, it is capable of producing around 207,000GWh of electricity per year, which is more than enough to satisfy Nigeria’s energy requirements. Despite the high potential, there is no grid-connected solar plant in the country currently.

One way or another, most experts say Nigeria must face up to a future without oil, which the country can choose through a voluntary transition from a petro-state to a more balanced and productive economy, or through dragging, kicking and screaming, into the post-oil age.

Nigeria is Africa’s largest oil producer, but its oil wealth has been a curse. Rife, corruption and environmental damage have plagued Nigeria’s oil history for decades.

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