Saudi Arabia tees up multibillion-dollar bet on hydrogen

SAUDI Arabia has been preparing to make a multibillion-dollar bet on hydrogen, and will launch a new company to produce the low-carbon fuel, sources said.

The kingdom’s sovereign wealth fund, chaired by de facto ruler Crown Prince Mohammed bin Salman, has created a company called Energy Solutions to finance “green hydrogen power production”, the sources noted, asking not to be identified as the information is private.

The Public Investment Fund (PIF) expects the company to invest at least US$10 billion, they added.

The outlay could grow significantly in the next few years, depending on the demand for hydrogen and its investment pipeline. Some investments will be made with state oil producer Saudi Aramco.

The newly created company is expected to be helmed by former Thyssenkrupp Uhde chief executive officer Cord Landsmann. It could be formally announced as soon as this month.

The company would be controlled and funded by the PIF – the powerful sovereign investor driving many of Saudi Arabia’s economic diversification efforts.

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Spokespersons for the PIF declined to comment.

Saudi Arabia is aiming to become one of the world’s biggest producers of hydrogen – a fuel which burns without releasing carbon – as it looks to reduce its reliance on oil sales while remaining a global energy supplier.

The “green” variety of the fuel is made from just water and renewable power. It poses an attractive solution for countries aiming to reduce emissions from energy-intensive industries that cannot easily run on electricity, such as metals manufacturing and aviation.

However, green hydrogen production is enormously expensive. Its detractors point to the huge costs and time required to build infrastructure in importing countries. The fuel is also tricky to transport safely.

Few potential buyers are willing to sign long-term contracts to receive the fuel, and many planned projects have stalled as a result.

Saudi Arabia is home to one of the few large-scale green hydrogen projects in the world to start construction.

One of the US$8 billion project’s equity partners agreed to buy its full output, clearing a major hurdle for the plans.

Aramco has said it wants to invest in making blue hydrogen, produced using fossil fuels, with emissions from the process captured and stored to prevent them going into the atmosphere.

As governments and industries seek less-polluting alternatives to hydrocarbons, the world’s biggest crude exporter does not want to cede the burgeoning hydrogen business to China, Europe or Australia and lose a potentially massive source of income.

Saudi Arabia plans to provide 15 per cent of blue hydrogen production globally, in addition to investing in green hydrogen, PIF governor and Aramco chairman Yasir Al Rumayyan said in February. BLOOMBERG