Saudi Arabia's $8bn Neom green mega-plant is no vanity exercise, says project chief

Neom Green Hydrogen Company (NGHC) is well on the way to joining football club Newcastle United and rebel sports tour LIV Golf on a list of investments and projects that are presenting a new face of Saudi Arabia to the world.

NGHC is at its site near the Red Sea building a 4GW wind, solar and battery storage base that will power more than two gigawatts-worth of hydrogen electrolysers’ output, itself to be used to make green ammonia.

Like England’s Premier League and the lush grass of golf, it’s a world away from the fossil-rich Saudi Arabia that many have known for decades – and that sceptics say remains the kingdom's main priority, despite what critics brand as efforts at ‘greenwashing’ and ‘sportswashing’ of the world’s biggest oil producer and its global image.

David Edmonson, CEO of NGHC – a joint venture between global gases giant Air Products, Riyadh-based ACWA Power and Neom, a subsidiary of Saudi Arabia's Public Investment Fund (and also Newcastle United and LIV’s backer) – insists the green fuels plant is about changing energy not minds.

While Edmonson acknowledges that having Neom as a co-investor “legitimises” Middle Eastern claims to be investing heavily in both green power and hydrogen, he insists that NGHC is anything but a vanity project.

Electrolysers next

At the main hydrogen facility, the cell assembly house is virtually complete in readiness for the arrival of the first electrolysers from a 2.2GW order from Germany's Thyssenkrupp Nucera, and steel is going up for two 70,000-tonne capacity ammonia tanks.

When complete, the complex will produce 600 tonnes of green hydrogen per day to serve as feedstock for the production of 1.2 million tonnes per annum of liquid ammonia for export.

The entire offtake has been fully contracted for 30 years by Air Products, the US industrial gases company which ranks as the largest owner and operator of hydrogen plants globally. The pricing formula has not been disclosed.

“Is this project happening? We have got financing, it is in execution and we have to deliver it. There are investments made in the downstream by Air Products, and they wouldn't be doing that unless there was product coming off," says Edmondson.

"We are absolutely focused to be complete by the end of 2026. We'll probably be producing some ammonia before then,” he adds.

The chairs of the three companies hatched up the idea in 2019, kicking off initial studies. Early development was equity-funded to the tune of $900m by the time the project reached its financial close in May 2023.

"In April 2022, we officially issued a limited notice to proceed to Air Products, Edmonson recalls, describing the conclusion of an initial phase of configurations and optimisation. This led to the choice of some of several key technology partners and finalising the chosen blend of wind, solar and electrolysers."

"We locked in the configuration and tied in the technology partners very early on rather than going through a competitively bidding process where you'd end up having to reconfigure your plant based on the technology you eventually choose," Edmonson reflects.

Air Products' 30-year offtake agreement provided such a powerful fillip that the debt package was two-times oversubscribed in the end.

"This made the investment case much easier," says Edmonson of the Air Products' deal.

Air Products is also in charge of engineering, procurement and construction (EPC) for the Neom project, and started dishing out contracts after financial close.

In June it allocated $2.8bn in sub-contracts, giving India’s Larsen & Toubro group a key EPC balance of plant role in establishing renewable energy generation as well as battery storage and private grid infrastructure to connect wind and solar parks to the hydrogen facility. Athens-headquartered CCC was chosen as the main contractor for the hydrogen and ammonia plant.

Winner takes it all

"We are investing $8.4bn, and that means holding the right process, with competitive bidding, due diligence and satisfying lenders.... You've got all the well known suppliers out there such as Siemens [Gamesa] and Vestas, but the Chinese were there right at the end. Envision is relatively new in the marketplace, but they are a pretty impressive organisation, both in terms of what they are doing and how they're doing it," Edmonson says.

He responded to questions about guarantees about quality and availability by Chinese providers. "We've got basically a business model with economics built on 30 years, so [the turbines] have to last that long. We also have long term service agreements in place. There are guarantees, there are teeth in the agreements, to make sure that this is not all going to be our risk.

"At the end of the day, they are very credible suppliers, obviously very competitive, and increasingly successful in the marketplace," he adds

NGHC will deploy energy power monitoring system (EPMS) for the network, with some requirements for abating wind production during daytime when solar is at its most productive.

"We'll focus on the lowest cost of hydrogen, always maximising the hydrogen production. So fully integrated control systems are absolutely vital. The interesting things are the ramp up and the ramp down at the beginning at the end of each day," Edmonson says.

Virtually all production will be exported as green ammonia via NGHC's jetty at Oxagon.

Air Products already sells and distributes hydrogen products internationally and has announced investments in additional receiving facilities for liquid ammonia in Rotterdam, Hamburg and the UK, where it can be turned back into hydrogen and put into pipelines or supplied to transportation markets.

The EU's strategy for renewables includes a target to produce 10 million tonnes and import 10 million tonnes of green hydrogen by 2030, putting the NGHC's future production of 600 tonnes per day in perspective. "The demand is massive. If you look at the ability for others to put in production capacity by then it's going to be a real challenge," Edmonson observes.

"So certainly from this investment, we feel fairly confident there's going to be a huge pool and Europe is not the only location. There's still a lot of interest from the Far East."

A smaller investment in a 20MW electrolyser will feed Neom's transport demands from trucks and buses, but Edmonson acknowledges that this is to help seed a market that barely exists yet.

Even so, thoughts of later expansion projects are targeting future opportunities from demand for hydrogen in Saudi Arabia, as well as possibilities for an additional ammonia loop.

"We have capacity. There is abundant land and some spare capacity in facilities for water and nitrogen. We have the ability to add additional electrolysers on the same site and to take some of the additional power we have running during the day if we so desire," says Edmonson, , who is is due to step down from his role at the end of this year and return to his previous company, Air Products.

With COP28 underway, the Neom green hydrogen project is already emblematic for Saudi Arabia’s claim to be a protagonist of the energy transition.

It is also spearheading Saudia Arabia’s so-called Vision 2030 strategic vision that promises investments of up to $500bn to diversify the economy.

Targets include a domestic energy mix that is 50% from renewable sources and construction of The Line, Neom’s linear mega-city, stretching 170km eastwards from the Red Sea.

But Edmonson sees the project as a genuine contribution to the wider global energy transition.

“There are no companies right now other than us who are making this level of investment in trying to address the climate issue through an alternative (low carbon) fuel," he says, arguing that demand for green hydrogen can boom even if there is a parallel increase in production of the increase in focus on low carbon 'blue' hydrogen or ammonia produced from natural gas.

"Green hydrogen is a pure product, and there is absolutely a demand. If you look to some of the industries looking to reduce their emissions or make low emission products we will provide a mechanism for them to do that by 2027, when the product will actually be delivered in Europe," he adds.