NEOM closes financing on $8.4 bln facility; Study warns against blue hydrogen

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Site of the city NEOM in northwestern Saudi Arabia stands empty in 2019 before development begins (Source: Reuters/Lucas Jackson)

NEOM Green Hydrogen Company (NGHC) has achieved financial close on a production facility in the Saudi Arabia region of NEOM at a total investment value of $8.4 billion, the company said in a statement.

NGHC, a joint venture between ACWA Power, Air Products, and NEOM, is being financed with $6.1 billion non-recourse financing from 23 local, regional, and international banks and financial institutions, it said.

The company said it has also concluded the engineering, procurement, and construction (EPC) agreements with Air Products as the nominated contractor and system integrator for the entire facility, at a value of $6.7 billion.

Separately, the non-recourse financing structured for the project has been certified by S&P Global as adhering to green loan principles, one of the largest project financings put in place under the green loan framework, NGHC said.

All green ammonia produced in the facility, a plant that aims to integrate up to 4GW of solar and wind energy to produce up to 600 tons of hydrogen a day by the end of 2026, will be taken by Air Products in an exclusive 30-year off-take agreement.

“This substantial financial backing from the investment community shows the unmatched potential of NGHC’s green hydrogen project. With the financial close announced today, we are taking a massive leap towards opening the plant, in line with NEOM’s vision to accelerate renewable solutions,” Chairman and Chief Executive Officer of NEOM Green Hydrogen Company, Nadhmi Al-Nasr said.

Study warns on blue hydrogen

Blue hydrogen - where hydrogen is produced using steam reforming of methane in natural gas with resulting carbon dioxide emissions captured and stored - creates more greenhouse gases (GHG) than burning natural gas or coal for heat, according to a new study.

The joint analysis, ‘How Green is Blue Hydrogen?’, from Cornell and Stanford Universities, examined the lifecycle GHG emissions of blue hydrogen while accounting for emissions of both carbon dioxide (CO2) and unburned fugitive methane.

“Far from being low carbon, greenhouse gas emissions from the production of blue hydrogen are quite high, particularly due to the release of fugitive methane,” the study said.

Total CO2 equivalent emissions for blue hydrogen are only 9-12% below than that for grey hydrogen, produced from fossil fuels such as natural gas or coal, with CO2 emissions being lower but fugitive methane emissions higher due to the increased use of natural gas to power carbon capture.

“Perhaps surprisingly, the greenhouse gas footprint of blue hydrogen is more than 20% greater than burning natural gas or coal for heat and some 60% greater than burning diesel oil for heat,” based on default assumptions, the study said.

Even when methane emission rates are reduced to a low value of 1.54%, GHG emissions are still greater than from burning natural gas and only 18-25% less than for grey hydrogen.

“Our analysis assumes that captured carbon dioxide can be stored indefinitely, an optimistic and unproven assumption. Even if true though, the use of blue hydrogen appears difficult to justify on climate grounds,” the study said.

Netherlands raising clean hydrogen subsidies

The Dutch government has increased subsidies aimed at the production of clean hydrogen by 1 billion euros ($1.1 billion) next year and another 3.9 billion euros in the years after, Reuters reported citing the government.

The Netherlands is targeting at least 4 GW of renewable capacity dedicated to hydrogen production by 2030 and double that by 2032, depending on availability of wind power, the strength of the power grid, and demand from industry.

The government has pledged 9 billion euros over the next ten years for the creation of a clean hydrogen industry, with 300 million euros reserved for stimulating imports and options for industrial subsidies under investigation.

Namibia, Netherlands sign MoU

Namibia and the Netherlands have signed a memorandum of understanding (MoU) to develop a cooperation agreement for hydrogen related infrastructure that will lead to new hydrogen supply chains from Luderiz to Rotterdam and its hinterland, the countries said in a joint statement.

The Letter of Intent is signed by the Namibian Implementation Authority Office, Namport, Nampower, The Port of Rotterdam, Invest International, Gasunie and Hyphen, the statement said.

“This cooperation shall support the development of a green economic zone in the Southern Corridor and will aim to create maximum socio-economic value for Namibia,” the statement said.

“We are convinced that further expanding the existing sustainable and equal partnerships between Namibian and Dutch governments, businesses and knowledge institutions will be essential to accelerate the green hydrogen developments in both countries.”

In particular, value will be added to the development of hydrogen and port infrastructure in Namibia, needed to develop the Southern African country’s hydrogen economy.

The signing took place during a visit to Namibia by Dutch Prime Minister Mark Rutte aimed at developing cooperation on energy transition and renewable hydrogen.

By Reuters Events Hydrogen