30/01/2019 | 16:53 GMT |
By Yousef Alshammari |
Saudi Aramco has unveiled its plan to launch a hydrogen refuelling station in Dhahran in partnership with Air Products, an initiative which will be the first of its kind in the Middle Eastern region. Many questions may arise as to what could that mean for the future of the oil industry, since Saudi Aramco is known as the world’s largest supplier of crude oil, holding 10% of global oil reserves. Hydrogen is a colourless non-toxic gas and it is the most abundant element on earth. Though it does not exist on its own in nature, and it is produced from steam reforming of natural gas, or electrolysis of water. Steam reforming involves the high-temperature reaction between natural gas and steam while electrolysis is an electrochemical process where water is split into Oxygen and Hydrogen by supplying an electric current. The electricity supplied for electrolysis may be supplied via renewable sources of energy including solar and wind technologies which creates a new approach for renewable production of hydrogen without emitting any carbon emissions.
For the current Aramco initiative, hydrogen will be produced from hydrocarbons via reforming natural gas or gasification of hydrocarbon liquids, which may include carbon capture and storage for enhanced oil recovery (EOR). The feature of this process is that it will certainly lead to reducing emissions and local pollution from road transport in the Kingdom, and it will enable obtaining more hydrocarbons at lower carbon emissions. Each oil barrel obtained via injected CO2 carries 25% of carbon emissions of those produced conventionally as most of the injected CO2 remains underground.
It is worth mentioning that this is not the first H2 station of Aramco, as a previous initiative was made in Japan around 2010, where the company partnered with Japanese companies to produce hydrogen via gasification of diesel, without CO2 capture, supplied to fuel cell vehicles. The initiative now is expanding locally in Saudi Arabia, and if it is successful, it will certainly open the door for Saudi Aramco to explore future avenues of investments in hydrogen energy which could be a game-changer for the future of the oil industry. Future investments may include the production of hydrogen from underground gasification of low productivity hydrocarbon resources, solar production of hydrogen, onboard hydrogen storage, and nuclear hydrogen. This will ultimately feed into establishing Aramco as an integrated energy company.
While there are many opportunities, there are certainly many challenges ahead, given the fact that hydrogen technologies are not mature enough and well-established compared with conventional technologies, from an economic perspective. However, Saudi Aramco may have fewer difficulties compared with other hydrogen producers in terms of capturing carbon from hydrogen generation given the fact that it could use it for enhanced oil recovery, currently the only method of economic implementation of CCS. New hydrogen production technologies are also still at the beginning of its phase and the industry has less experience of including the gasification of heavy hydrocarbons, especially under high-pressure high-temperature conditions. Johnson Matthey, UK, has decommissioned its reactor used to run for high-pressure-high-temperature gasification due to severe corrosion challenges leading to high capital requirements. Other challenges will certainly include the high costs of fuel cell vehicles, which currently need subsidies, and the hydrogen infrastructure including distribution and storage, which needs large investments. On the other hand, hydrogen production could offer an excellent opportunity for diversifying exports especially to countries where hydrogen infrastructure is available including Japan, Germany as well as China. In 2011, Iwatani Corporation, Japan’s largest hydrogen producer, and Saudi Aramco established an agreement to work together on exploring the possibility of extracting hydrogen from crude oil, via gasification, so that it can be transported to Japan in the form of ammonia.
What it means to the IPO
Saudi Aramco is preparing for its Initial Public Offering (IPO) in 2021 as stated by CEO Amin Alnasr, during the last Davos meeting. The hydrogen initiative would feed into the 2030 vision in diversifying the Kingdom’s economy reducing its dependence on oil exports while acting as a back-up fuel if peak oil demand happens before or after 2040. Current global demand for hydrogen is estimated at 300 bcm and it is expected to reach 480 bcm by the year 2040. Hydrocarbons are still the cheapest and most conventional approach of obtaining hydrogen for many decades to come. Hence, it is expected that the Aramco hydrogen initiative is the first step towards a long-term plan of diversifying the kingdom’s economy, expanding as an integrated energy company, while maintaining the competitiveness of hydrocarbons resources. That may lead to a global transformation in the oil industry, where Saudi Arabia economy is dependent on chemical manufacturing, electricity exports, minerals, and more importantly foreign investments.
About the Author
Dr. Alshammari is the Editor in Chief at UCERGY Analysts. He is a former research fellow at the Organisation of Petroleum Exporting Countries (OPEC), and a member of the Group of Experts on Sustainable Energy at the United Nations Economic Commission for Europe (UNECE). He obtained his PhD in Hydrogen Production from Oil Fields from Imperial College London, and he was a winner of the World Energy Congress Prize for top 20 papers in 2016. He is the developer of the Inergygram app, a new tool for energy professionals to stay updated about global energy insight, available on iPhone, iPad, Android, and Tablets in more than 140 countries. Dr. Alshammari is a member of the App Developers Programme at Apple [read more]
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