State-owned Saudi Aramco is already eyeing the potential to dominate the emerging hydrogen industry, just as it dominates the oil sector, despite only shipping its first blue ammonia cargo in September.
After a number of false dawns, the potential for the low-carbon fuel has gained credibility in the past few years, according to Aramco chief technical officer Ahmad al-Khowaiter.
The progress has come from reduced renewable energy costs, maturing hydrogen production technology and growing importance placed on reducing emissions, Khowaiter said at the Atlantic Council's Global Energy Forum.
But the fuel is not competitive yet because of infrastructure costs.
"We as the oil and gas industry produce about 75pc of hydrogen for use in the refinery," Khowaiter said. "And the challenge is putting the infrastructure in place to get it to the customer."
To be transported, hydrogen needs to be liquefied or compressed, which makes the process costly and complicated. But another way to transport hydrogen is by transporting ammonia as a hydrogen carrier. Ammonia is much easier to liquefy, store and transport than hydrogen.
This was the thinking behind Aramco's 40t blue ammonia shipment in September, which Aramco said would be used in power plants to generate electricity with no CO2 emissions.
The blue ammonia was produced in a process in which it was synthesised from nitrogen and blue hydrogen, but most of the CO2 generated in the process was captured and isolated. The blue hydrogen used in the process was produced from hydrocarbons, in this case, natural gas. And the 50t of CO2 captured during the blue ammonia production process was to be used for methanol production and enhanced oil recovery.
"The advantage of diesel and oil has been its fungibility — its ability to transfer at a lower cost. If we can transfer that same energy in a hydrogen, or a hydrogen carrier like ammonia, we will get the same value [as] from our hydrocarbons," Khowaiter said.
Blue ammonia, produced from hydrocarbons and blue hydrogen, and green ammonia, produced from renewable sources and green hydrogen, can be transported and used as fuel in power plants to generate carbon-free electricity.
The focus for now will be on blue hydrogen. But as global customers increase their demand for ever-lower carbon-intensive fuels, producers like Aramco will have to move towards green hydrogen, which is again produced from renewable sources with almost no CO2 involved.
The abundance of potential solar power, favourable geology and access to capital are other advantages for the Mideast Gulf producers. These could help state-owned energy giants such as Aramco and Abu Dhabi's Adnoc "replace their dominance in hydrocarbons with dominance in net-zero emissions", Jean-Francois Seznec of the Atlantic Council's Global Energy Centre said.
Yousif al-Ali, executive director of clean energy at Abu Dhabi-based renewable energy company Masdar, also highlighted this comparative advantage. "Being countries that have oil and gas heritage, [these countries] have the right infrastructure to pioneer the hydrogen business," he said.
But it will not be easy, Seznec said, as it will require enormous expenditure on research and development. "Saudi Arabia is at the forefront, but it will need to be multiplied many times over," he said.
Aramco already boasts that its crude has one of the lowest carbon intensity levels, with 10kg of CO2 produced for every barrel, compared with a global average of 40-60kg a barrel.
"We invested in capturing associated gas a long time ago for environmental reasons, which had zero value at the time, but turned out to have great economic reasons. That's the kind of long-term view that is needed today," Khowaiter said.
