[Hydrogen Korea] S-Oil looks to bring world's cheapest green hydrogen from Saudi Arabia

[Hydrogen Korea] S-Oil looks to bring world’s cheapest green hydrogen from Saudi Arabia
Lee Jeung-ik, vice president of the new business division at S-Oil, is seen during an interview with The Korea Herald at the company headquarters in Mapo-gu, western Seoul. (S-Oil)

With just one-fifth of its barren land, Saudi Arabia can generate sufficient renewable energy to produce 530 million tons of green hydrogen. That is equivalent to the entire world’s green hydrogen demand in 2050.

Ironically, the world’s biggest exporter of fossil fuels is gifted with the cheapest solar and wind power on Earth, as the sun shines reliably every day and the wind blows constantly every night in the desert.

Thanks to its almost unlimited sunshine and wind, Saudi Arabia is expected to produce the cheapest green hydrogen in the world. State-controlled oil giant Saudi Aramco, which aims to achieve net-zero emissions by 2050, announced in October that it would launch a green hydrogen production project in the country.

At this very moment, numerous South Korean companies are salivating over opportunities to import this cheap green hydrogen. Asia’s No. 4 economy is projected to consume 27.9 million tons of clean hydrogen in 2050, but only 3 million tons of green hydrogen will be produced domestically due to unfavorable natural conditions. Simply importing green hydrogen from Aramco and selling it here would generate massive profits.

During an interview with The Korea Herald, Lee Jeung-ik, vice president of the new business division at S-Oil, one of the top four refineries in Korea, says S-Oil has the best chance to import green hydrogen from the Middle Eastern country due to its special relationship with Aramco.

“Aramco is the largest shareholder and the parent company of S-Oil, and we’re maintaining close ties with each other. This will allow S-Oil to take the lead in importing green hydrogen from Aramco,” the 53-year-old executive said.

“To contribute to Korea’s hydrogen economy, price competitiveness is the key. By bringing Saudi Arabia’s cheap hydrogen through Aramco, S-Oil can serve as a gateway and make contributions.”

Green hydrogen is produced by passing electricity generated by renewables through water. It produces zero emissions and therefore is called green. The current price of green hydrogen stands at a little under $5 per kilogram, but Saudi Arabia is expected to bring that price down to $1.50 per kilogram by 2030, which would make its use feasible in the market, Bloomberg NEF predicts.

Until then, Aramco, which is under mounting pressure to address climate change, aims to produce blue hydrogen as an alternative. Blue hydrogen is extracted from natural gas and captures carbon emitted during the process. Currently, Aramco is funding a $100 billion project to develop a natural gas field and produce blue hydrogen there starting in 2024.

According to Lee, S-Oil plans to create immediate demand for Aramco’s blue hydrogen. S-Oil is reviewing whether to import Aramco’s blue hydrogen and use it to produce sustainable aviation fuel.

“S-Oil will source feedstock for SAF from Samsung Construction & Trading. Then, Aramco’s blue hydrogen will be used for the production processes of SAF,” said the S-Oil executive, who majored in chemical engineering at Seoul National University.

Sustainable aviation fuel, produced from sustainable resources such as waste oils, is a clean substitute for fossil jet fuels. The European Union is set to mandate flights taking off from European airports to use sustainable aviation fuel blends, starting with 2 percent of the total in 2025 and increasing to 63 percent in 2050. The global sustainable aviation fuel market, which was worth $72.1 million last year, is projected to reach $6.2 billion by 2030, according to Allied Market Research.

Also, S-Oil aims to maximize its connections with Aramco and make a foray into Saudi Arabia’s hydrogen fuel cell market.

S-Oil in March acquired a 20 percent stake in Fuel Cell Innovations, a joint venture between Korea and Saudi Arabia that holds 40 patents on next-generation fuel cells called solid oxide fuel cells. FCI develops fuel cells customized for power plants and buildings that suit the climate of the Middle East.

“FCI has sales routes in Saudi Arabia and we’ll create joint ventures with the company there to target the local market,” Lee said, adding that if Aramco purchases fuel cells, they are likely to be FCI’s. By winning orders in Saudi Arabia, S-Oil, though a latecomer, aims to overtake its competitors in the fuel cell market.

Fuel cells generate electricity through reactions between hydrogen and oxygen, leaving behind only pure water as a byproduct. FCI’s fuel cells are designed to collect leftover hydrogen and combine it with oxygen once again, which maximizes efficiency significantly, according to Lee.

By Kim Byung-wook (kbw@heraldcorp.com)

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