Saudi Aramco appears to put blue hydrogen plans on hold as high cost puts off potential buyers



The world’s largest oil company, Saudi Aramco, appears to be putting its blue hydrogen plans on hold as its chief executive points to the high costs involved and the consequent lack of off-takers.

Saudi Arabian state-owned Aramco’s chief executive Amin Nasser told a call with analysts Tuesday the company has not been able to secure any long-term off-take agreements for the hydrogen, which is produced from fossil gas with carbon capture, utilisation and storage (CCUS), Bloomberg reported. The comment came even though the company had already sent shipments of blue hydrogen (in the form of blue ammonia) to both Japan and South Korea.

State-owned Aramco, which has always focused on oil rather than gas, wants to spend tens of billions of dollars on exploiting its huge untapped Jafurah sour-gas field to meet rising demand for natural gas within Saudi Arabia and then convert the remaining gas into blue hydrogen for export.

According to an announcement in June last year, Aramco planned to produce 11 million tonnes of blue ammonia by 2030 — produced from about two million tonnes of blue hydrogen.

But due to the difficulty in finding off-takers for blue hydrogen, the company is now considering exporting liquefied natural gas instead, which might make more sense in light of Western countries’ determination to wean themselves off Russian gas.

Nasser told analysts that blue hydrogen could cost the equivalent of about $250 a barrel of oil — more than three times higher than the current Brent spot price, Bloomberg reported.

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“It is very difficult to identify any off-take agreement in Europe [for blue hydrogen],” he said.

“Even the customers in Japan and Korea [which are planning massive hydrogen economies] are waiting for government incentives. Until they get these incentives, it’ll be costly for them to pursue that blue hydrogen.”

Most subsidies being planned around the world are for the production of clean hydrogen — mainly the green variety ­— rather than its usage, although the US state of Colorado this week passed a new law providing a tax credit for the use of clean hydrogen in hard-to-abate sectors.

And while the Netherlands and Germany are offering subsidies for imported green hydrogen, through the latter’s H2Global scheme, blue hydrogen is not part of the programme.

But very few firm clean-hydrogen off-take agreements have actually been signed anywhere in the world.

Nasser added that developing Aramco’s blue hydrogen programme has been “very expensive”.

“It’s a lot of capital and you need customers. So we will not sanction a project without securing an off-take agreement,” he explained.

Only last month, Aramco had declared a “landmark achievement” by shipping blue ammonia to Japan in order to co-fire it in a gas boiler to produce electricity at an oil refinery.

And in January, Saudi Arabia had declared plans to make the country the world’s largest exporter of clean hydrogen — a month after state-owned Aramco had shipped the world’s first commercial shipment of “clean ammonia” to South Korea.

The blue hydrogen for these shipments was produced by Aramco subsidiary Sabic using the traditional steam reforming process, with an unspecified proportion of the emitted CO2 — estimated to be 78.5% by Hydrogen Insight — being captured and utilised at Aramco’s oil refinery in Jubail, Saudi Arabia, raising questions as to how “clean” it really is.

Aramco had also sent a test shipment of 40 tonnes of blue ammonia from Saudi Arabia to Japan in September 2020.

Saudi Arabia is still progressing plans to produce 2.2 gigawatts of green hydrogen at its Neom project in the north of the country.