Meed | Oman must crack hydrogen offtake challenge

Oman must crack hydrogen offtake challenge

11 December 2024

Commentary
Jennifer Aguinaldo
Energy & technology editor

Salim Bin Nasser Al-Aufi, Oman’s minister of energy and minerals and chairman of Hydrogen Oman (Hydrom), sent clear market signals during the Green Hydrogen Investment Day held on 11 December in Muscat.

First, the sultanate is seriously pursuing a green hydrogen strategy that will deliver a production capacity of 1.4 million tonnes a year by 2030 as part of its net-zero emissions and Vision 2040 targets.

Second, it is enabling a platform to allow private sector companies, many originating from countries with which it has strong existing trade relationships, to independently design and develop substantial swathes of land according to the results of their feasibility studies.

Third, Oman will pursue the localisation of industrial production, which will help lower overall costs.

Conference attendees on the developer side of the value chain are especially pleased with the plan to localise the hydrogen value chain.

Others, particularly bankers and investors, remain cautious, perhaps for good reason.

They are keeping a close eye on every development within the nascent sector, intending to jump in once the first offtake agreement – an end-user agreeing to buy the final product at a premium price over 20 to 30 years – has been signed.

However, as a senior executive with a European development bank said, there is a need to assign every possible risk to a suitable partner or entity before an offtake agreement is signed and before banks come on board.

This remaining challenge is the most important and difficult one, and the sultanate appears to recognise its urgency, hence the well-attended investor-supplier matchmaking event in Muscat.

Continuous dialogues with potential offtakers, typically energy traders and aggregators, a clear framework for subsidies where necessary and new technologies that can improve hydrogen production efficiency could help unlock the first offtake.

But until then, the wait-and-see attitude is expected to prevail.

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Jennifer Aguinaldo