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Saudi Aramco bets on ammonia-hydrogen business with Japan

Oil giant to use natural gas and carbon capture to burnish green credentials

Saudi Aramco and Japanese companies including Mitsubishi Corp. and JGC took part in a demonstration project that shipped "emissions-free" ammonia to Japan last year.   © Reuters

TOKYO -- As Japanese companies look to build a supply chain to import clean energy rather than fossil fuels, Saudi Arabia is a promising partner. The oil-rich kingdom is now trying to take the lead in supplying hydrogen-based products as the world shifts to low-carbon energy sources.     

Rather than hydrogen itself, state-owned oil company Saudi Aramco is keen to export ammonia, a compound of hydrogen and nitrogen that can be burned in power stations without emitting carbon dioxide. The company can separate hydrogen from natural gas to produce ammonia, capturing the carbon dioxide emitted in the process. 

Aramco's "processing, pipeline and refining infrastructure, and expertise in carbon capture, means the company is well placed to contribute to a potential hydrogen-powered low-carbon economy," the company's chief technology officer, Ahmad Al Khowaiter, told Nikkei Asia in a written interview.

The world's largest oil company last year produced and transported 40 tons of "carbon-emissions-free" ammonia and sent it to Japan. The partners in the world's first such demonstration project included Japanese companies Mitsubishi Corporation, a trading house, and engineering company JGC. Japan's Ministry of Economy, Trade and Industry backed the project. 

The carbon dioxide created in processing hydrogen is treated using CCUS -- carbon capture, utilization and storage. The CO2 can be injected into oil fields to boost production and stored underground.

Saudi Aramco captures about 800,000 tons of carbon dioxide per year at its Hawiyah gas plant.

The ammonia can be used for carbon-free power generation and could serve as a way to transport hydrogen cheaply across the ocean.

It is difficult to store and transport pure hydrogen, which must be cooled to minus 253 C to be compressed into liquid form. Ammonia can be handled more easily and cheaply using existing infrastructure such as liquefied petroleum gas tankers. Importers such as Japan can use hydrogen separated from the ammonia to power fuel-cell vehicles and for other applications.

While Europe has mostly focused on producing hydrogen using renewable energy, "hydrocarbons are a reliable and affordable source of low-carbon hydrogen and ammonia," said Al Khowaiter.

He said hydrogen is an "inherent contributor" to the company's effort to reduce greenhouse gas emissions. Saudi Aramco "is presently evaluating a number of opportunities across the hydrogen value chain that ... could help us establish a sustainable and profitable hydrogen business," he said.

Al Khowaiter said that while the ammonia shipment demonstration was a "one-off test shipment," it showed "for the first time [that] hydrogen is transportable and is becoming a tradable commodity." Aramco "continues to work with partners across the world in the deployment of breakthrough technology to produce low-carbon energy," he added.

The company's partnership with Japan was "a natural choice," because Japan lacks suitable locations for CCUS, Al Khowaiter said. Japan sees hydrogen as a crucial part of its 2050 net-zero carbon emissions target. It is experimenting with a number of ways to import hydrogen from abroad. Energy-scarce Japan is a large importer of Saudi oil.

Saudi Aramco Chief Technology Officer Ahmad Al Khowaiter says the oil giant is well placed to lead the way in building a hydrogen economy.

A representative of Mitsubishi Corp. said the company "hopes to be part of the ammonia trade and logistics in the future." He said the trading house has decades of business experience with Saudi Arabia, not only importing oil and gas but participating in a large petrochemical project. He added that Mitsubishi sees the country as a potential partner for building an ammonia supply chain.

A JGC spokesperson also said the company "hopes to win projects when there are more solid plans for ammonia" to build facilities or plants.

Aramco held an initial public offering in December 2019 and raised nearly $30 billion -- a record.

However, the company faces stiff headwinds. Many governments have revealed net-zero carbon emissions goals and are beginning to shift away from fossil fuels, including oil and gas. Japan's Prime Minister Yoshihide Suga also announced in October last year that Japan will cut its overall greenhouse gas emissions to zero by 2050.

Saudi Arabia is backing hydrogen as it tries to diversify its economy, which depends heavily on oil and gas exports. It is also working to produce hydrogen using renewable energy at its Neom smart city.

Aramco currently captures 800,000 tons of carbon dioxide per year at its Hawiyah gas plant. The CO2 is stored underground, pumping it into oil fields to increase their yield.

On top of its project at the gas plant, Aramco is developing technology to capture carbon dioxide emitted from trucks. It is also exploring ways to use the collected carbon dioxide, such as injecting it into cement or transforming it into urethanes.

Under Saudi Arabia's presidency, the G-20 meeting last year pushed for a circular carbon economy, an effort to reduce, reuse and recycle emissions. While there has been skepticism expressed about the effectiveness and cost of CCUS in reducing carbon emissions, it "has the potential to be the cornerstone of Aramco's push for a circular carbon economy," said Al Khowaiter.

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