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Saudi Arabia announces billion-dollar investment in fuel of the future. Country plans to create its own company focused on green hydrogen market.
Saudi Arabia is surprising the entire market and is preparing to make a billion-dollar investment in the green hydrogen sector, creating a new company to produce the low-carbon fuel of the future, according to sources close to it. Find out why the oil sector leader will focus on the clean energy market.
Saudi Arabia's investment in green hydrogen tops $10 billion
The kingdom's sovereign wealth fund, chaired by the crown prince Mohammed bin salman, created a company called Energy Solutions Co. to finance the production of green hydrogen, according to these sources, who asked not to be identified because the information is confidential.
The Public Investment Fund (PIF) expects the new company to invest at least $10 billion in the fuel of the future, although that figure could grow significantly in the coming years depending on demand for hydrogen and its investment pipeline.
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Some of the investment will be made in partnership with state-owned oil producer Saudi Aramco, the sources said. The new Saudi company, which is expected to be led by the former CEO of Thyssenkrupp Uhde, Cord Landsmann, could be officially announced later this month.
The company will be owned and financed by the PIF, the powerful sovereign wealth fund that is driving many of Saudi Arabia’s economic diversification efforts. PIF officials declined to comment on the matter.
Saudi Arabia is seeking to become one of the world's biggest producers of green hydrogen, a fuel that burns without releasing carbon, as it tries to reduce its dependence on oil sales while remaining a global energy supplier.
Advantages and disadvantages of the fuel of the future for Saudi Arabia
Green hydrogen, on the other hand, is produced using only water and renewable energy, offering an attractive solution for countries looking to reduce emissions from electricity-intensive industries such as metals production and aviation, which cannot easily be electrified.
However, the production of the “fuel of the future” is extremely expensive, and critics point to the high costs and long time needed to build the infrastructure in importing countries. Furthermore, its transportation is complicated and risky. Few potential buyers are willing to sign long-term contracts for the fuel, and many planned projects face delays as a result.
Saudi Arabia is home to one of the few large-scale green hydrogen projects in the world that has already begun construction. One of the partners in the $8 billion project has agreed to buy all of its output, overcoming a major hurdle to moving forward with the plans.
Aramco has already declared its interest in investing in the production of blue hydrogen, produced from fossil fuels, capturing and storing emissions to prevent their release into the atmosphere.
Saudi Arabia aims to supply 15% of blue hydrogen
As governments and industries seek cleaner alternatives to hydrocarbons, the world's largest oil exporter does not want to lose out to China, Europe or Australia on the chance to tap into the emerging green hydrogen market and forgo a potentially massive source of revenue.
Saudi Arabia plans to provide 15% of global blue hydrogen productionl, in addition to investing in green hydrogen, according to the PIF governor and president of Aramco, in February, Yasir Al Rumayyan.
It is worth noting that in 2023, the Minister of Mines and Energy, Alexandre Silveira, signed a memorandum of understanding with the Ministry of Energy of Saudi Arabia. The countries will work together with a focus on oil and gas exploration and also on the development of renewable energy.
