Countries dependent on oil revenues are diversifying their investments, inspired by surging oil prices, and are considering the production of low-carbon hydrogen for export. Wood Mackenzie published an article studying how the MENA region and its NOCs are diversifying into new energies.

Source: Wood Mackenzie

The current prices, which are 3-4 times that of gas on an energy basis, are not acceptable to many markets. To reduce production costs, scale is needed, and policy support will be essential to level the playing field for carbon-intensive alternatives. According to Wood Mackenzie, in both base case and net zero scenarios, global hydrogen trade is expected to reach 4 to 10 Mtpa by 2030 and 42 to 119 Mtpa by 2050.

The shift towards hydrogen will be accompanied by a significant increase in power demand, which will be further amplified by a 36% population growth and 95% GDP growth over the next three decades. The high per capita energy and water consumption in the Middle East will be primarily met by renewables, with exceptional increases in wind and solar installed capacity. This renewables-intensive power grid will require support from dispatchable generation, expecting additional investments in nuclear power, CCS-equipped gas, and grid battery storage.

The Middle East could play a pivotal role in decarbonising the global economy due to its abundant natural resources. Present and future investments in carbon capture and blue hydrogen projects could establish regional CCUS hubs, reducing costs and enabling adjacent industries to participate. Large-scale hydrogen production also allows the region to create new niches in the global economy, such as the production of synthetic fuels, low-carbon chemicals, and emissions-free hydrogen for steel smelting.