Oman is ready for green business and hydrogen
Green hydrogen strategy and 1 million tonne target will drive the transition to net zero
Oman committed to reaching net zero emissions by 2050 at COP27. Green hydrogen will play a key role not only to achieve this target and reduce the country’s reliance on gas, but also to create new green industries and jobs. As part of its green hydrogen strategy, Oman has set an ambitious goal to become one of the largest green hydrogen producers and exporters globally, targeting production of one million tonnes annually by 2030. This will help address both global and local demand for green hydrogen and ammonia.
The maritime industry is already eyeing the opportunity to facilitate the transport and use of green fuels: an MOU was signed this week between OQ, Maersk, Sumitomo and Asyad to explore production of green fuel at the ports of Duqm and Salalah. Last month, Asyad presented an energy transition plan until 2030 aimed at greening its shipping business. The steel industry is also moving, with an investment announcement by Jindal Shadeed Group of over USD 3 billion to set up a green steel plant in Duqm. The plant will produce up to 5 million tonnes of steel a year.
Strong government leadership
At the Oman Green Hydrogen Summit on 5-7 December, the government’s commitment to becoming a green hydrogen leader was evident. The message from H.E. Minister of Energy and Minerals Salim al-Aufi said: “It takes courage to start a new market and to be a first mover. We need to be bold and move – we don’t have time to wait.” The minister urged industry players to put their money where their mouth is and put forward bankable project proposals.
The government has launched a competitive land auction for hydrogen production. Two blocks of an area of 50,000 km in Duqm are out for tender. The process is managed by Hydrom, a government entity established earlier in 2022 to structure and accelerate the development of the green hydrogen industry in Oman. The process is public and structured with clear timelines, offering predictability for market participants. The presence of key private sector players in Muscat demonstrated industry interest in this opportunity. A second bidding round is being planned for April 2023. Hydrom is also planning to develop shared infrastructure to be accessed by project developers.
Permitting, regulations and contracting practices
Industry stakeholders emphasized the need for clear approval pathways, with clarity on required permits and regulatory certainty repeated as key asks. While the government is developing such regulations, key terms related to the projects being put forward in the current tender processes will be determined in the contracts between the host country and project developers. The Omani government is emphasizing the need for the green hydrogen industry to generate in-country value, and projects that can offer high value will have a favorable consideration in the various tender processes.
The project “Green hydrogen contracting - for people and planet” has demonstrated how regulations and contracts must strike a balance between the needs for returns on risk-taking and investments by the private sector, the hosting government’s right to raise revenue, and the public expectation of economic opportunities There are emerging global practices that Oman and other host governments can draw on including on fiscal terms, local benefits and conditions for infrastructure access. The global Planning for Climate Commission launched at COP27 is developing a set of recommendations to accelerate approvals for renewables and green hydrogen.
Minister Salim al-Aufi wishes to move fast: “If there are showstoppers, my office is open. We’re ready to sign agreements today”. It is essential with this kind of government leadership to more quickly address the climate and energy crises. It will be equally important that legislation and contracting practices reflect good practices and create conditions for long-term stable investments.
We expect Oman will be a space to watch in its journey towards a green hydrogen economy.