Overline: Discussion Paper

Headline: Why the Gulf States Are Betting on Hydrogen

The oil- and gas-producing countries of the Gulf Cooperation Council (GCC) are famous for their economic dependence on the hydrocarbon system, with revenues from oil and gas exports accounting for the bulk of state finances. The GCC, also known as the Gulf Council, was established in 1981 in Abu Dhabi by Bahrain, Qatar, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates. The GCC fosters cooperation in the areas of foreign and security policy, promotes economic and scientific cooperation, and works to strengthen ties between the peoples of its member states.

Across the Gulf states there is broad resistance to moving away from oil and gas economies, writes Natalie Koch, IASS Fellow and Professor of Human Geography at the University of Heidelberg. Alternative energy aspirations are nonetheless spreading in the region - especially among the younger generation.

Solar power has received the most attention and funding within the GCC over the past decade, writes Koch. However, renewable energy generation capacities across the region are still negligible, as Koch explains: At the end of 2020, the region had 146 GW of installed power capacity, of which renewables accounted for 3,271 MW. Of this, solar PV technologies were the most dominant technology (71%), followed by concentrated solar power (23%), biomass and waste (4%), and wind (2%).

Now the Gulf region is shifting its focus to hydrogen. As Koch explains, local leaders have both an economic and political interest in joining the hydrogen rush, with the Dubai Future Foundation announcing its intention to help hydrogen energy “move from hype to reality”.  

96 percent of hydrogen currently produced from fossil fuels in Gulf states

In the Gulf states fossil fuels are currently used to produce 96 percent of hydrogen. The bulk of this is produced using natural gas in a process called “steam methane reforming” (SMR). The resulting product is referred to as “gray hydrogen”, while “brown hydrogen” derives from coal gasification. Both methods of production are greenhouse gas intensive. So-called “blue hydrogen” is also produced through natural gas-SMR. However, this production process is categorized differently as it is paired with carbon capture and storage (CCS). As very little of the hydrogen produced today is “green”, blue hydrogen is commonly framed as a bridge to a green future.

The limited capacity of renewables in the Gulf is significant for the story that blue hydrogen production will just be a short build-up to the ultimate goal of green hydrogen production – without vast renewable energy capacities, there will be no green hydrogen. According to Koch, existing solar farms in the Gulf states are “little more than a drop in the bucket of their overall energy mix”, which continues to be dominated by oil and gas.

She suggests that if the myth that blue hydrogen is a minor detour on the road to green hydrogen takes hold internationally – as it seems to have done in some parts of the world – then these privileged industries are especially well positioned to tap into their existing infrastructures to produce blue hydrogen for potentially decades. As energy insiders know, writes Koch, “Once infrastructure is in place, path dependency has an astonishing power to keep people buying even after they realize that the myth of a “green” future has been a lie all along.”

Business as usual in a new hydrogen economy?

With a new hydrogen economy, much of the Gulf states’ existing oil and gas infrastructures could continue to be used. For example, there is already an established practice of producing hydrogen at oil refineries. In addition, it can be stored and transported through many of the existing infrastructures. Domestic production of hydrogen in the Gulf is seen as a way to maintain local industries that are only economically viable today because of their access to cheap, subsidized fossil energy, such as the steel, aviation and shipping industries.

Koch suggests that Gulf leaders could use hydrogen initiatives to show that they recognize their countries’ challenges and that they are “doing something” and demonstrate the paternalist care that is an important part of their local legitimacy. There is a risk, she warns, that Gulf states could appropriate the hydrogen dream as a strategic tool in preserving authoritarianism, as it offers opportunities to maintain economic and political power structures within the context of a global energy transition. However this process plays out, questions of energy justice are bound to remain. 

Publication:
Koch, Natalie: Gulf Hydrogen Horizons. Why are Gulf oil and gas producers so keen on hydrogen? IASS Discussion Paper, November 2022. DOI: 10.48481/iass.2022.044