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Saudi Arabia Announces Billion-Dollar Investment in Future Fuel. Country Plans to Create Its Own Company Focused on the Green Hydrogen Market.
Saudi Arabia surprises the entire market and is preparing to make a billion-dollar investment in the green hydrogen sector, creating a new company to produce low-carbon future fuel, according to sources close to the matter. Understand why the oil sector leader will focus on the clean energy market.
Saudi Arabia’s Investment in Green Hydrogen Reaches US$ 10 Billion
The kingdom’s sovereign fund, chaired by Crown Prince Mohammed Bin Salman, has created a company called Energy Solutions Co. to finance the production of green hydrogen, according to these sources, who requested anonymity as the information is confidential.
The Public Investment Fund (PIF) expects the new company to invest at least US$ 10 billion in future fuel, although this amount could grow significantly in the coming years, depending on the demand for hydrogen and its investment pipeline.
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Part of the investments will be made in partnership with the state oil producer, Saudi Aramco, according to the sources. 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 controlled and funded by the PIF, the powerful sovereign fund that leverages many of Saudi Arabia’s economic diversification efforts. It is worth noting that PIF representatives declined to comment on the matter.
Saudi Arabia aims to become one of the largest producers of green hydrogen in the world, a fuel that burns without releasing carbon, while trying to reduce its dependence on oil sales, remaining a global energy supplier.
Advantages and Disadvantages of Future Fuel for Saudi Arabia
Green hydrogen, in turn, is produced only with water and renewable energy, offering an attractive solution for countries looking to reduce emissions from energy-intensive industries, such as metal production and aviation, which cannot easily be electrified.
However, the production of the “fuel of the future” is extremely costly, and critics point to high costs and the lengthy time required to build infrastructure in importing countries. Furthermore, its transport is complicated and risky. Few potential buyers are willing to sign long-term contracts for the fuel, and many planned projects are facing 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 US$ 8 billion project agreed to buy all its production, overcoming a major hurdle to advancing the plans.
Aramco has already expressed interest in investing in blue hydrogen production, 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 less polluting alternatives to hydrocarbons, the world’s largest oil exporter does not want to lose to China, Europe, or Australia the chance to explore the emerging green hydrogen market and forgo a potential massive source of income.
Saudi Arabia plans to provide 15% of the global blue hydrogen production, in addition to investing in green hydrogen, according to the governor of the PIF and president of Aramco, Yasir Al Rumayyan, in February.
It should be noted 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 focusing on oil and gas exploration as well as renewable energy development.
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