Green hydrogen: the Middle East’s new energy frontier

The tides are turning for fossil fuels, and one region is emerging as a powerhouse in clean energy: the Middle East. Its next big export is green hydrogen.

By Khalid Qarooni, Technical Sales & Business Development Engineer at COPA-DATA

From the cradle of ancient trade routes to the forefront of tomorrow’s energy economy, the Middle East is reclaiming its historic role — this time as the world’s dominant green hydrogen powerhouse.

The Middle East has a long history as a leading global player, first as a vital hub of ancient trade, and more recently as a major oil exporter and global energy center for over a century. Iran's first major oil discovery in 1908, followed by a post-World War II production boom, transformed the region into an energy powerhouse — and reshaped global politics for decades.

But times are changing.

Countries like Saudi Arabia, the United Arab Emirates (UAE), Oman and Qatar are redefining their long-term energy and economic futures and positioning themselves as up-and-coming leaders in the growing green hydrogen economy. We’re seeing a shift away from fossil fuel dependency, and towards diversified, sustainable exports that better support global decarbonisation goals.

Green hydrogen is emerging as a key export in the energy transition. Its versatility spans electricity, heating, transport and industry, and it offers a decarbonisation pathway for hard-to-electrify sectors like steel and logistics.

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According to the International Energy Agency (IEA)’s 2024 Global Hydrogen Review, global hydrogen demand reached 97 megatonnes (Mt) in 2023 (up 2.5% compared to 2022). However the majority of this was produced from unabated fossil fuels.

Green hydrogen production only becomes sustainable when powered by renewable energy sources, and a low-emission production remains under 1 Mt.

Electrolysis capacity has surged to nearly 520GW, with potential output of 49 megatonnes per annum (Mtpa) by 2030, but scalability and infrastructure remain challenges.

Still, green hydrogen is gaining traction in the Middle East. Strategies like Saudi Vision 2030 and the UAE’s National Hydrogen Strategy highlight hydrogen’s role in reducing oil dependence and attracting global investment.

Lowest hydrogen production costs

The Middle East produces some of the cheapest renewable energy in the world, thanks to its high levels of solar irradiation and steady, consistent wind conditions. It has seen solar power purchase agreement (PPA) rates as low as $0.0104/kilowatt hour (kWh) in Saudi Arabia in 2021, a world-record setting price.

The upcoming Al Sadawi Solar PV Project is set to continue this trend, with a levelised cost of electricity (LCOE) of just $0.012926/kWh — highlighting the region’s sustained potential for ultra-low-cost renewable energy.

The Middle East is well-suited for large-scale hydrogen production, with established infrastructure, abundant undeveloped land and low-cost renewable resources. These advantages contribute to some of the world’s lowest hydrogen production costs — $6.54 to $12.66 per kilogram — compared to $9.88 to $14.31 in Europe.

Beyond its natural geography, the Middle East benefits from established energy infrastructure and expertise. Key ports like Dubai, Sohar and Yanbu are already adapting for green fuel exports. Its proximity to Europe, with direct maritime access via the Suez Canal and Gulf ports, offers shorter, more efficient routes.

Crucially, green hydrogen also benefits from strong government backing, with Saudi Arabia, the UAE and Oman incorporating targets into national strategies to spur financing and local production — reinforcing its political advantage.

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Projects and partnerships

The Middle East’s hydrogen ambitions aren’t just a pipe dream — they are well underway, backed by ideal conditions and major projects.

The $8.4 billion NEOM green hydrogen plant — supported by power investor, developer and operator ACWA Power and Air Products — is set to begin full-scale production by 2026. The UAE’s Hydrogen Leadership Roadmap also outlines ambitious production goals by 2050.

NEOM Helios, the world’s largest planned green hydrogen facility, aims to produce 600 tonnes daily. In the UAE, Masdar is collaborating with Siemens Energy and Lufthansa to scale hydrogen for transport. Meanwhile, Oman plans a 25GW wind-solar electrolyser cluster as part of its own Vision 2040 energy diversification strategy.

Strong competition

Despite the Middle East’s clear advantages and ambitions, scaling any new development brings challenges. It’s unlikely to be all plain sailing — and that includes developments with green hydrogen.

NEOM’s budget has risen 70% from its original budget of $5 billion due to inflation, financing costs and supply chain pressures.

Water scarcity in the region also presents a major hurdle, and will likely require innovative solutions like advanced desalination or air-cooled electrolysers. It will also need to be integrated into existing infrastructure and grid networks.

One of the most effective ways to achieve this is through the use of specialist smart software that can help to manage this process and to manage and control generation, distribution and storage for a reliable, consistent supply.

In a young and unstable market, political and geographic risks are inevitable. Immature demand and regulation leave strategies vulnerable to policy shifts, while geopolitical tensions could disrupt transport routes — as history has shown.

The Middle East also faces strong competition.

Australia plans to be a top hydrogen supplier by 2050 and leads in project development, while Chile aims to become the global low-cost leader by 2040, targeting 1800GW of capacity. With the market growing crowded, the Middle East must move quickly, scale efficiently, and prioritise cost and sustainability to stay competitive.

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Environmental footprint and sustainability

While green hydrogen is often viewed as a climate solution, there are concerns that some of its benefits could be offset. For hydrogen to be genuinely "green," the electricity used in electrolysis must come exclusively from additional renewable sources. Significant energy losses during conversion, compression, storage and transport have raised concerns about its overall efficiency.

Tackling water scarcity through desalination comes with its own environmental footprint. What’s more, building the infrastructure for large-scale hydrogen deployment isn’t clean by default. It demands vast quantities of steel, concrete and critical minerals, each carrying its own carbon cost.

Without strict sustainability standards and credible third-party certification, green hydrogen’s reputation risks being undermined by upstream or overlooked emissions. These are not minor issues — they will determine which producers gain lasting global trust.

This is where the Middle East could really make its mark and set itself apart as not just a low-cost producer, but a dominant force in the global hydrogen economy.

Saudi Arabia, the UAE and Oman are already locking in export deals with major markets like Europe and Asia, where domestic supply may struggle to meet demand.

NEOM’s agreement with Germany’s SEFE — a state-owned energy company partnering with ACWA Power to supply green hydrogen to Europe — is one example of how the Gulf could help power industrial decarbonisation abroad through hydrogen derivatives like ammonia and methanol.

The global race to lead the hydrogen economy is on, and the Middle East has the scale, resources, and ambition to compete. But success isn’t assured. To lead the value chain, the region must support its goals with credible investment and prove it can meet global standards.

This is a pivotal chance to shift from a fossil-fuel legacy to clean energy leadership. With transparency, investment, and technical credibility, the Middle East can shape the emerging hydrogen economy. The momentum exists — now it must deliver.

ABOUT THE AUTHOR

Khalid Qarooni is Technical Sales & Business Development engineer at energy software specialists COPA-DATA Saudi Arabia. He holds a degree in Process Operations and Maintenance from Glasgow Caledonian University. Khalid has been part of the COPA-DATA group since 2023 and is responsible for the Middle East region.