Can Ukraine Partake in Oman’s Future Hydrogen Economy?

|
Can Ukraine Partake in Oman’s Future Hydrogen Economy?

Recently, there had been speculation of Oman developing a national hydrogen economy. EJAAD, a collaborative platform where industry, academia, and government can interact and engage in energy-related research and innovation activities, is currently working on formulating a strategy for the implementation of this promising undertaking. 

 

Oman is a country that benefits from vast renewable energy resources as well as easy access to world-class ports and shipping routes. Whether using the Port of Duqm, a developed port enjoying a superior and open location serving a variety of business activities, or the Port of Khasab, a developing port seeing several developing projects and possibly serving the private sector for Oman’s evolving market of a broad spectrum of businesses. Oman’s strategic position offers excellent possibilities for exports and imports alike. All of this combined makes it a favorable candidate as a producer and exporter of renewable Hydrogen. 

 

EJAAD already organized a panel of 40 various stakeholders to discuss this business opportunity and outline a regulatory policy framework that would be required for its implementation. Most vocal during the talks, Salim bin Nasser Al Aufi, the Undersecretary of Ministry of Oil and Gas of Oman, is especially keen on looking at the possibility of Oman developing a hydrogen economy. The Sultanate’s promising future as a potential lead exporter of green hydrogen fuel had also been noted last year at the 1st Oman Hydrogen Symposium by two German organizations, the Technical University of Munich (TUM) and the Hydrogen Rise AG. Opening “Oman Hydrogen Centre,” Oman seeks to restructure its energy economy. 

 

Noting that on January 6th of this year, President Volodymyr Zelenskyy met with Abdulsalam Al Murshidi, the Executive President of the State General Reserve Fund of Oman, to discuss intensification of investment cooperation, Oman’s development of the hydrogen economy can potentially benefit Ukraine. At the meeting, the two parties discussed future intensification of trade, economic, and investment cooperation. Because of this, it is possible to assume that if Oman succeeds in developing a hydrogen economy, it may explore the possibility of exporting to Ukraine. 

 

In the face of estimated annual losses from transit costs of approximately $3 billion with the potential completion of the Nordstream II pipeline, Ukraine should explore the possibility of expanding into new energy markets, hydrogen being one of them. After all, although recent U.S. sanctions have stalled the completion of the pipeline, there is still a possibility of Gazprom finishing the job by itself by the end of 2020. Therefore, Ukraine should start monitoring the development of alternative energy markets not just within the private sector, but within the countries with which it has bilateral agreements and partnerships - countries like Oman.

 

 

1st Oman Hydrogen Symposium and Oman Hydrogen Center

 

On October 9th, 2019, the 1st Oman Hydrogen Symposium was held at the German University of Technology in Oman (GUtech). Organized by the OMAN Hydrogen Initiative, the symposium was much supported by H.E. Dr. Ahmed bin Mohammed Al Futaisi, the Minister of Transport and Communications in Oman, and H.E. Salim bin Nasser bin Said Al-Aufi, the Undersecretary of the Ministry of Oil and Gas in Oman. Titled, “The Diversification of Energy and Industry by Introducing the Hydrogen Economy,” the conference consisted of topics pertaining to the relevance of hydrogen-based production, storage, distribution, and application solutions for Oman as well as the rise of global demand for hydrogen. Furthermore, it discussed the future establishment of the “Hydrogen Competence Centre.” 

 

Speaker Olav Carlsen, Chief Financial Officer and Co-Founder of Hydrogen Rise AG, noted how hydrogen is a non-toxic and non-polluting energy source that makes it compliant with the strongest of safety regulations and makes it ideal for use. Already, that is exhibited by the use of hydrogen trucks in Chile instead of the old heavy ones and by the hydrogen trains going through the routes of Europe and Asia for better efficiency in transportation. He also noted that hydrogen has the potential to benefit the “deep tech” job sector and attract intensive industries offering the potential for a multitude of carbon-free industry certifications. 

 

H.E. Salim bin Naseer bi Said Al-Aufi spoke of the potential benefits which the hydrogen economy could bring Oman. He especially underscored how crucial it is in our modern-day to transform the ecosystem into a hydrogen society, stating: “There is no other way to meet the Paris Agreement and to decarbonize the industry. The potential is huge. We would like to contribute and shape the hydrogen economy.” At the same time, Thomas Friedrich Scheider, Ambassador of the Federal Republic of Germany, said his country would be a likely importer of renewable energy, stating, “This opens new opportunities for commerce and trade. Oman has a great potential to be an exporter of green Hydrogen.”

 

The Hydrogen Competence Center was opened on January 27th, 2020, as the “Oman Hydrogen Center” at the History of Science Center of the German University of Technology in Oman (GUtech). Dr. Hussain Al Salmi, Deputy-Rector for Administration and Finances at GUtech welcomed high-ranking guests to the ceremony, among whom were H.E. Azza Al Ismaili, Minister of Technology, and Communications, H.E. Mohammed bin Hamad al Rumhy, and Ambassadors of Germany and Japan. The Oman Hydrogen Center is a novel concept for the country which will work as a research center and competence hub, creating hydrogen expertise and knowledge for its future application in the relevant fields to support Oman’s fast-growing global hydrogen market. The center hopes that hydrogen, produced solely from renewable energies, would be noted as a critical energy source within evolving energy industries of the world and will first supplement, then replace, oil and gas altogether in the near future. According to the university’s website, the center will aid in the provision of “decisive impulses, guidelines, and roadmaps for industry and government and bundle forces for the development of a hydrogen economy involving the production, storing, transporting, utilizing and exporting of green hydrogen.” With cooperative research and bilateral exchange of knowledge, Oman hopes that eventually, the center would attain full competency in exploring technical innovations, new application scenarios, and economic models for the purpose of developing a hydrogen economy within the country within would sponsor immense job creation and lead the force of the renewable energy economy in the Gulf region. 

 

Oman’s Potential 

           

Oman benefits from a strategic geographic position and geological structure, which make it a primary candidate to become a lead global producer and exporter of green Hydrogen. The Sultanate of Oman is located in the Middle East between Yemen and the UAE. It is bordering the Arabian Sea, Gulf of Oman, and the Persian Gulf, all of which provide the country with plentiful access to maritime trading routes. To make better use of its potential as an exporting hub, Oman is increasingly investing in infrastructure. Partially adapting the country to tourism, but more importantly, for the increase of industrial production and the best exploitation of the country’s strategic location for international shipping, Oman is heavily investing in its ports located from Muscat to Duqm, Sohar, and Salalah. Already, it had allocated around ten billion U.S. dollars to the Duqm Economic Free Zone and is currently asking for another 10 billion U.S. dollars in the form of foreign investment by 2022. Partially, it is on its way to attaining that goal as Oman Wanfang, a Chinese state-run company, pledged 370 million U.S. dollars for the construction of roads, utilities, and other infrastructure projects. 

 

Additionally, Oman’s land consists of a range of viable natural resources, including petroleum, copper, marble, limestone, chromium, gypsum, and natural gas. Because of Oman’s vast access to natural resources, historically, the country largely depended on oil and gas exports for government revenue. In fact, according to some estimates and depending on fluctuations in commodity prices, oil and gas resources previously contributed 68% and 85% of revenue. In 2016, low global oil prices resulted in Oman’s deficit of $13.8 billion (20% of its GDP at the time). Realizing its past heavy reliance on these two resources, Oman is thus currently pursuing a diversification strategy, focusing on reducing the oil sector’s contribution to GDP specifically, which explains why in 2019, it slowly began investing in the development of the green hydrogen energy sector. 

 

According to one German researcher, already, Oman’s current production of 17 million tonnes of hydrogen equates to its current export industry of oil that is equivalent to about 1,900 trillion BTU per annum in calorific value. If Oman continues to develop a hydrogen-based economy, expanding its green hydrogen fuel potential, it would yield much higher numbers in exports – about ten times the current oil exports equivalent to 20,000 trillion BTU a year. To attain such potential in hydrogen production, Oman would be required to procure around 200 gigawatts of renewable energy capacity and 150-300 million cubic meters of desalinated water for the electrolysis process. Additionally, it is important to note how the P.V. and CSP resources could potentially guarantee full load hours (FLH) for Oman, generating electricity at highly competitive costs from a continuous H2 generation. Overall, the costs of green hydrogen production in Oman are predicted to average $3 per kilo of Hydrogen – lower than a global average. Combined, this puts Oman onto a competitive stage when it comes to renewable energy exports.

 

Omani-Ukrainian Diplomatic Relations

 

In January of this year, President Volodymyr Zelenskyy flew to Oman, where, in multiple meetings with top officials, he discussed future bilateral trade and economic cooperation, enhancement of diplomatic relations, and the possibility of attracting private investment to Ukraine. Speaking with the Executive President of the State General Reserve Fund (SGRF) of the Sultanate of Oman Abdulsalam Al Murshidi, Zelenskyy encouraged future collaboration and stressed the importance of continuous privatization in Ukraine. 

 

These bilateral cooperation talks began in November of 2019 when Myroslava Shcherbatik, Director-General for the Middle East, and Africa of the Ministry of Foreign Affairs of Ukraine was received by the H.E. Khalifa Al-Harthy, an Undersecretary at the Foreign Ministry of Oman for Diplomatic Affairs. She attended a meeting with the Executives of State General Reserve Fund of Oman and the members of the Board of Oman Chamber of Commerce and Industry to discuss the initiation of the strengthened partnership between the two countries in terms of trade and investment. The two sides especially agreed that the cooperation needs to extend into the political sector as well as showcase itself in terms of humanitarian aid. 

 

This positive outlook on increased bilateral cooperation between Ukraine and Oman in the areas of mutual interest may be beneficial to Ukraine as it looks to diversify its energy sector as well, combating the effects of lost money in transit costs with the potential end to the construction of Nord Stream II and the finished construction of the TurkStream pipeline.

 

Nord Stream II Pipeline

 

In the recent years, the domestic gas production of the European Union (E.U.) has been in decline. In order to meet the rising demand, therefore, it needs a new source of a consistent and reliable supply of natural gas. To meet such demand, Russia began the construction of the Nord Stream II pipeline, a direct gas pipeline running through the Baltic Sea which would provide Russian gas directly to the E.U., avoiding Ukraine in transport and avoiding Ukrainian transit costs for gas.

           

            Covering approximately 1,200 kilometers and having a total capacity of 110 billion cubic meters of gas per year, the Nord Stream II pipeline would completely circumvent Ukraine and directly carry Russian gas to Germany. If the construction of the pipeline is fully complete, it would cost Ukraine 3 billion U.S. dollars in transit costs annually and completely eliminate Gazprom’s reliance on Ukrainian pipelines. Already Kyiv halted the importation of gas directly from Russia in 2015, outsourcing and bringing gas in from Slovakia, Hungary, and Poland instead. Filling approximately a third of Ukrainian demand, this imported gas replaced the Russian one, and Ukrainian domestic production satisfied the rest. However, the 3 billion dollars lost in annual transit costs would nonetheless be a massive hit for the Ukrainian economy.

           

Because of this, European Union officials have proposed a 10-year contract with a special provision that would require 60 BCM of gas be shipped each year through Ukraine. After all, despite German Chancellor Angela Merkel’s support for Nord Stream II, Germany still voices its continuous expressed support for Ukraine as well, noting the potential significant volumes of Russian gas lost in transit from the construction of the Nord Stream II pipeline. Much like Chancellor Merkel, the U.S. Congress stated its support to Ukraine by laying a series of sanctions to halt the construction of the pipeline altogether. Fearing that the pipeline could potentially deepen Europe’s reliance on Russian gas, jeopardizing its political dependence on the U.S., the committees in both houses of Congress had passed legislation to sanction companies involved in the pipeline’s construction. In particular, the companies engaged in shipping and laying the pipes for the project withdrew. However, Gazprom still claims that it would finish the pipeline by the end of 2020, even without several companies that aided it in the past. Because of this, Ukraine, even with the continuous support from both the E.U. and the U.S. alike, should look toward the opportunities to diversify its energy sector and explore the possibility of investing in a cleaner, cheaper, and more efficient green hydrogen energy further.

 

Ukrainian Hydrogen Economy 

 

In the last few years, Ukraine saw the development and construction of renewable energy facilities in the country. In the first quarter of 2019 alone, facilities with more than 860 MW capacity were put into active operation – a number more substantial than the total amount installed in 2018. Plans for the future development of the hydrogen energy specifically in Ukraine were discussed at the Hydrogen + Fuel Cells Europe Conference in Hanover, Germany, last year as well. The conference focused, in part, on Ukraine’s support of its European partners in their goal of increased utilization of cleaner energy sources in the future. The Ukrainian Hydrogen Council, the German Hydrogen and Fuel Cell Association (DMV), European Hydrogen Association (EHA), and the Latvian Hydrogen Association (H2LV) have all signed a Memorandum of Partnership in Hydrogen Energy Sector at the conference to further develop strong cooperation in the attainment of the goal.

 

In 2020, the Regional Gas Company plans to test blends of Hydrogen and natural gas in Ukraine’s network – testing which mixture is best suited for a network of pipes and how the technologies hold out with new energy supply. To clearly understand which concentrations work best and whether the dilution of hydrogen gas into the gas distribution systems poses any risk to consumers, the plan is first to add 2%, then 5%, and eventually move to a 100% hydrogen concentration within the country’s gas blend.

 

Understanding the eventual necessity to keep up with its European partners, Ukraine is soon to start looking  for ways to offset the negative environmental impacts it currently is imposing from the use of fossil fuels. Hydrogen is among the most attractive alternatives to fossil fuels, which could serve as Ukraine’s solution. Already, in 2019, 4.5 GW of renewable energy equivalent to the output of almost five units of a nuclear plant was put into operation. However, Ukraine lacks balancing capacity. It matches each gigawatt of solar and wind power to a gigawatt of gas and coal generation. In the future, this practice has to change if Ukraine hopes to keep up with the rest of Europe. At the same time, looking replace gas generation with hydrogen could also be favorable to its future development. The Ukrainian Hydrogen Council is currently working to do just that. It hopes to integrate modern renewable energy technologies into a Ukraine’s economic model, modernize the energy complex of Ukraine, and implement a stable development of a global transition to renewable hydrogen energy sources.

--

Kate Boyko is a student at American University and an intern with the U.S.-Ukraine Foundation.

Sources:

·         https://mfa.gov.ua/en/news/75822-ukraine-and-oman-to-activate-business-contacts-between-two-states-and-further-expansion-of-trade-and-economic-cooperation

·         https://www.cia.gov/library/publications/the-world-factbook/geos/mu.html

·         https://www.export.gov/article?series=a0pt0000000PAucAAG&type=Country_Commercial__kav

·         https://businessgateways.com/news/2019/10/13/Oman-has-potential-to-be-global-hydrogen-exporter

·         https://www.gazprom.com/projects/germany/

·         https://www.brookings.edu/blog/order-from-chaos/2019/11/12/congress-nord-stream-ii-and-ukraine/

https://eng.uatv.ua/ukraine-looks-enter-hydrogen-energy-market/