The Arab region stands at the threshold of a transformative opportunity to become a global leader in green hydrogen production, exports and investment. Leveraging its abundant renewable resources, strategic location, major global sovereign wealth funds (SWFs) and international partnerships, the region can drive both its own transition and the global transition to a sustainable and low-carbon energy future while addressing water scarcity and building a more diversified economy.

But achieving this potential will require substantial investments, robust policy frameworks and a commitment to technological innovation. By embracing green hydrogen, the Arab region can play a pivotal role in shaping the global energy landscape, creating a new comparative advantage, phasing out its dependence on oil rents and contributing to a more sustainable and environmentally responsible world.

The potential of green hydrogen

The region is blessed with an abundance of solar and wind resources. Countries like Egypt, Morocco, Saudi Arabia, the United Arab Emirates (UAE) and others have some of the world’s highest solar irradiance and wind potentials, providing a robust foundation for green hydrogen production.

But the region also faces significant water scarcity challenges. It is here where green hydrogen assumes its most important rationale: it can be produced through the desalination of seawater by electrolysis, offering the dual benefit of producing hydrogen and fresh water simultaneously.

Unlike other forms of green energy, green hydrogen is easily transported. This is primarily in the form of cost-effective seaborne shipments of green ammonia, which is a promising and versatile carrier for the export of renewable energy. Green hydrogen may also be used directly as a fuel or feedstock for industrial manufacturing processes. In addition, it can provide on-demand, climate-smart power by reversing the electrolysis process in a fuel cell, which generates an electric current by recombining green hydrogen and oxygen back into water.

Recently, potential Arab developers of green hydrogen (Egypt, Morocco, Saudi Arabia and the UAE) have successfully formed international partnerships in investment and production, and are already on their way to developing profitable green hydrogen projects.

Collaborations with European countries and Japan, among others, have the potential to attract substantial investments and wider access to export markets. The richly endowed SWFs in the region’s oil-exporting countries have substantial funds that could be tapped to support investments in this potentially very profitable sector. Indeed, the Saudi and UAE SWFs already have plans to invest in multiple projects spanning the entire five continents.

Green industries in Morocco

At the forefront of the Arab thrust into green ammonia is Morocco. One of the country’s highest priorities is a transition of its fertiliser production away from using ammonia synthesised from natural gas to produce grey hydrogen, to using green ammonia produced by OCP, a leading Moroccan entity, using the country’s solar energy and wind energy resources.

In 2023, OCP announced plans to construct its own $7 billion green ammonia plant to help the company replace its annual imports of $2 billion of grey ammonia with domestically produced green ammonia. With an anticipated initial annual production capacity of 200,000 tons by 2026, OCP is aiming to raise its own green ammonia production to one million tons by 2027 and to three million tons by 2032. In February 2024, InnovX launched its Hydrojeel subsidiary to develop OCP’s green ammonia production, in a move to ensure the sustainability of OCP’s fertiliser manufacturing.

In addition to fertiliser production, Morocco and its European partners are eyeing the export of green ammonia to Europe for industrial manufacturing processes and as fuel ammonia. TotalEren green ammonia project is one project in this area; there are several other private sector development projects backed by the European Union (EU), the Netherlands and Portugal.

The largest green ammonia project currently under development in Morocco is the Irish-Portuguese HEVO facility, which is slated to have an initial annual capacity of 183,000 tons by 2026, equivalent to around 10% of OCP’s production input requirements. Morocco recently signed a memorandum of understanding with the Dutch oil trading giant Vitol to market the green ammonia in Europe.

The Netherlands, which is the world’s second largest food exporter and the EU’s largest consumer of fertilisers per hectare, provided loan guarantees in 2022 for the Dutch green hydrogen firm Proton Ventures to build a green ammonia plant at Morocco’s Jorf Lasfar port. This is in addition to the fact that in 2022, the Netherlands initiated the development of a new terminal in Rotterdam’s Maasvlakte port to handle green ammonia imports to Europe starting in 2026.

With the completion of the projects currently under development, Morocco is preparing to export over three million tons of green hydrogen or its green ammonia equivalent to Europe annually. Since fertilisers and hydrogen imports form two of the six initial sectors targeted under the EU’s carbon border adjustment mechanism (CBAM), the development of green ammonia capacity assumes a matter of urgency for both Morocco and its EU state customers to ward off any future complications that could arise from applying the CBAM.

More recently, on 8 April 2024, OCP signed a joint venture agreement with Fortescue Energy, the green hydrogen arm of the Australian energy, mining and metals processing giant Fortescue. The intention is to partner in the development of ‘large-scale integrated green ammonia and green fertiliser production capacity’ in Morocco to supply the local economy, Europe and other international markets.

The agreement also aims to develop facilities in Morocco for ‘manufacturing of green technology and equipment’ with the involvement of OCP-affiliated InnovX. Observing that the agreement ‘intend[s] to create in Morocco one of the world’s leading integrated renewable energy, manufacturing, and technology enterprises’, Fortescue Energy’s chief executive asserted that the joint-venture partnership will create ‘thousands of jobs and industries in Morocco.

Green industries in the UAE

Another example of the Arab drive to develop an export hub for green hydrogen is the UAE. Despite its enormous fossil fuels wealth, the country is already home to one of the most rapidly developing green energy ecosystems in the entire region. Its cumulative investment in clean energy projects from 2005 to 2023 now totals over $40 billion.

Outside the country, the UAE has invested in renewable energy projects in 70 countries with cumulative value exceeding $16.8 billion. The UAE’s extensive foreign investments reflect the Emirati approach, which regards its own green energy ecosystem as a central node in a nexus of international green energy ecosystems. The ultimate objective of the UAE is to position itself to become a hub for inter-regional and international, renewable energy supply chains.

An important coordinating role has been played through the country’s various SWFs, such as the state-owned holding companies Mubadala Investment Company and the Abu Dhabi Developmental Holding Company (ADQ). Masdar has also emerged as one of the premier developers of clean energy projects and green hydrogen. Active in the UAE and over 40 countries, Masdar’s cumulative global investments in 2022 totalled over $30 billion.

The Arab region as a hub for green hydrogen

Egypt, Jordan, Tunisia and a few other Arab countries are planning to expand their production of green hydrogen. This is why the region is poised to become a hub and leader in the production and export of green hydrogen.

With its strategic location at the juncture of three continents, its well-developed energy infrastructure and its long experience in energy exports, the Arab region is well situated to export green hydrogen to meet the growing global demand. Europe, in particular, has shown interest in importing green hydrogen from MENA countries to support its decarbonisation goals.

Several other regions in Asia and Africa have shown interest in importing green hydrogen from their Arab neighbours. The fact that green hydrogen is transportable and other green fuels are less so means that potential exports are credible opportunities.

Research and development (R&D) is of particular relevance and a critical area of investment. It is this area of development that can lead to technological advances that enhance the efficiency and cost-effectiveness of green hydrogen production.

Public and private sector partnerships can drive innovation in electrolysis technologies and infrastructure development. But establishing favourable policies and regulations is also crucial for attracting private sector investments in green hydrogen projects. Governments in the MENA region can provide incentives, subsidies and clear frameworks to encourage investments and tap into international finance to promote the transition to renewable energy.

Investing in green hydrogen not only helps to reduce the region’s dependence on fossil fuels but also supports economic diversification by creating new industries and job opportunities.

The Arab region will face stiff competition from other global players in the green hydrogen market. Maintaining a competitive edge will require continuous innovation, efficiency improvements, large investments, and regional and international partnerships. The privileged position of the region on account of its geographical proximity to large markets in Europe, Africa and Asia, and its rich green energy endowments, confer a potential competitive edge, but this needs to be realised by ensuring cost-effective production and pricing.

Note: The section above on Morocco draws heavily on the contribution of Michael Tanchum’s study for ERF: ‘Renewable Energy and Morocco’s New Green Industries: How Morocco’s Green Energy Ecosystem can Expand Women Youth Employment through Sustainable Development’.

The work has benefited from the comments of the Technical Experts Editorial Board (TEEB) of the Arab Development Portal (ADP) and from a financial grant provided by the AFESD and ADP partnership. The contents and recommendations do not necessarily reflect the views of the AFESD (on behalf of the Arab Coordination Group) nor the ERF.