Saudi Arabia’s climate policy is ever more oriented towards green mega projects and high-profile investments in hydrogen, but is it a mere rebranding of existing energy policies? The kingdom is positioning itself as a leader in the global energy transition, with hydrogen at the heart of its strategy.
Since Crown Prince Mohammed bin Salman’s accession to power in 2017, Riyadh has showered the region with announcements of high-profile “green” mega projects. The NEOM giga project, a region the size of Belgium being built in the kingdom’s western desert, is the crown jewel of this portfolio. Designed to host a ski facility, an industrial zone, a shipping port and over 9 million residents, NEOM is also presented as a 100% carbon-neutral initiative.
Saudi Arabia’s new stance on climate policy is also illustrated by the changing communication strategy of Saudi Aramco, the kingdom’s state-owned oil giant. The company announced its intention to achieve “net-zero scope 1 and scope 2 gas emissions across our wholly owned and operated assets by 2050.” This target, however, leaves out “scope 3” or end-user emissions, which in the case of Aramco, are estimated to make up at least 85% of overall emissions.
Hydrogen Economy Ambitions
Riyadh has declared its ambition to turn into one of the largest exporters of hydrogen, presented as a sustainable alternative to oil and gas. It has since taken steps toward that transition and invested massively in export-oriented hydrogen projects, unveiling plans to open the world’s largest green hydrogen plant in NEOM.
The kingdom remains the second-largest oil producer globally and is intent on pumping its hydrocarbons down to the last drop. Saudi leaders have recognized they don’t plan to immediately divest from oil, which generates up to 70% of state revenues. Instead, Riyadh hopes that winning the hydrogen race and becoming the most efficient producer of hydrogen globally will help it reduce emissions domestically.
The state-owned Saudi Aramco is investing in blue hydrogen and grey hydrogen as ways to extend the lifespan of its extensive oil and gas assets. The company aims to position itself as a leader in what it calls “lower-carbon” hydrocarbons — using controversial carbon capture technology to partially abate emissions associated with extraction or producing hydrogen from hydrocarbons.
Renewable Energy Investments
With its 100% renewables-based production, the NEOM Green Hydrogen Company is the main showroom of Riyadh’s expanding hydrogen strategy. The project, a joint venture between NEOM, the partly state-owned Saudi energy giant ACWA Power and US-based Air Products, reached financial closure last May, attracting over $8 billion in investments from over 23 financial institutions.
Saudi Arabia’s aggressive push into the hydrogen market is driven by determination to maintain a central role in the evolving global energy landscape. The kingdom is actively trying to shape future hydrogen markets and lobbying policymakers to promote its interests. Its influence extends to Europe through overseas subsidiaries and partners, several of which are members of Hydrogen Europe, which lobbies for public subsidies for hydrogen infrastructure across the continent.
Sustainability Initiatives
Saudi Arabia remains the world’s largest corporate greenhouse gas emitter through its oil and gas activities. Critics warn that through symbolic projects like NEOM’s green hydrogen plant, Riyadh is projecting the illusion that it is transitioning away from oil while promoting alternatives that could be equally dirty.
The kingdom’s current investments in the sector will not replace oil production, at least not before decades. Rather, the colorful palette of potential hydrogens offers the kingdom endless possibilities to maximize revenues from existing oil and gas assets — which it can market as temporary lower-carbon alternatives to current fossil fuels.
Despite recently announced setbacks in some of NEOM’s other high-profile initiatives, the green hydrogen plant seems to remain on track for completion by 2026. But with nine liters of fresh water required at the very least for every kilogram of hydrogen produced, it seems legitimate to question where the 5.4 million liters required daily to operate the plant will come from in one of the world’s driest regions.
Collaboration and Partnerships
To achieve its ambition of becoming a key hydrogen exporter as demand for fossil fuels wanes, Saudi Arabia needs a global market. The kingdom is actively trying to shape future hydrogen markets and lobbying policymakers to promote its interests. Its influence extends to Europe through overseas subsidiaries and partners, several of which are members of Hydrogen Europe, which lobbies for public subsidies for hydrogen infrastructure across the continent.
One of the aims is to connect Europe to potential producers in the Middle East, such as NEOM. “Imports will undoubtedly be needed to fulfill European demand,” Jorgo Chatzimarkakis, CEO of Hydrogen Europe, told Al-Monitor. “Morocco, Egypt and Saudi Arabia are committed to delivering high volumes of renewable hydrogen and ammonia, with European users of hydrogen their most likely buyers.”
Challenges and Obstacles
Despite the hype, the future of green hydrogen as a global commodity is more than misty. Saudi Arabia’s aggressive push into this market is driven by determination to maintain a central role in the evolving global energy landscape, but the bet could well devolve into unfulfilled promises.
Whether European demand will grow as projected by industry players remains to be seen. Multiple ambitious green hydrogen projects were recently rolled back in Europe due to a lack of market demand, with some European industries warning green hydrogen is still too expensive for them to use, despite massive subsidies.
The world is watching as regional powers in the Gulf navigate a shifting energy landscape fraught with green promises and often unrealistic targets. As the European Future Energy Forum explores Europe’s transition to clean energy, Saudi Arabia’s hydrogen strategy offers a cautionary tale of the perils of greenwashing and the challenges of building a truly sustainable energy future.