Egypt Eyes Large Role in Green Hydrogen Production

Alan Mammoser - May 02, 2024,

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• Egypt’s rich solar and wind resources and its geostrategic location put it in a unique position to become a large producer of green hydrogen.
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• One bellwether to watch, from a company already deeply involved in Egyptian renewable power, is a project led by Dubai-based AMEA Power.
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• European and Middle Eastern companies are investing in hydrogen and/or ammonia production in Egypt.

As host of COP27 two years ago, Egypt saw a flurry of announcements for large scale green hydrogen production mostly in the huge Suez Canal Economic Zone (SCZone) that straddles the ship canal from Port Said to the Gulf of Suez. The proposals draw upon Egypt’s rich solar and wind resources to power electrolysis, anticipating ammonia and other hydrogen derivative exports.

At COP27, the government hailed the signing of eight framework agreements with companies including ACWA Power, Alfanar, Masdar, Scatec, TotalEnergies, and others.

The hydrogen project announcements have continued. In February, government agencies and the SCZone signed seven MoUs with developers. There are now nearly 30 project announcements for green hydrogen and derivatives production in Egypt.  

Given the emergent state of the industry, it is unlikely that all of these will materialize.

But among the plethora of proposals, a few of the more credible ones stand out. A handful of well conceived projects, launched by leading energy and infrastructure companies, are advancing through detailed feasibility phase to pre-FEED with ongoing discussion of financing.

Complementary power  

One bellwether to watch, from a company already deeply involved in Egyptian renewable power, is a project led by Dubai-based AMEA Power.

The company, with extensive experience in renewable power development throughout Africa and Central Asia, knows Egypt well. It is currently building a 500MW solar PV plant in Egypt’s southern Aswan Governorate, and a 500MW wind farm at Ras Ghareb in the Red Sea Governorate.Related: Norway’s Cash Flow From Offshore Fields Crashes Due to Low Natural Gas Prices

AMEA is now turning its experience to the production of green hydrogen in Egypt. It’s project, announced at COP27, will have a 500MW electrolyser and ammonia production plant built in the SCZone near Ain Sokhna. The ammonia production capacity will be 1200 tonnes per day with anticipated annual production of 350,000 tonnes. 

The upstream power production sites are being secured in the West Aswan and West Nile areas for a 550MW solar PV plant, a 700MW wind power plant, and approximately 500MWh battery storage. The complementarity will produce baseload power dedicated to the alkaline electrolysis plant and the ammonia plant. It is separate from the company’s other Egyptian projects.

The project is now close to pre-FEED stage, with a detailed feasibility study conducted by Worley. The FID is targeted for Q4 2025, with COD in Q4 2028.

A beautiful project

“We’re talking about a $2.3 bn project,” says Hussein Matar, Senior Director of Business Development at AMEA Power and head of the company’s green hydrogen team in Egypt.

“It’s a showcase project and the beautiful thing about it is that it was designed from the beginning with banks on board.

“EBRD (the European Bank for Reconstruction and Development) was consulting the Egyptian government during the process,” he says.

“When you ask, why we picked Egypt, a very good reason was that we saw a champion like EBRD coming in, guiding and providing the necessary infrastructure that will allow a private company like AMEA to come in and invest in a very large capacity project.”

“Now we are talking with banks. After pre-FEED, we will be in position to seriously pursue finance.

“We know the best banks to approach for a project like this, the DFIs such as EBRD, which knows this project very well.

“We will go to the IFC, to KfW, Proparco, FMO, and other DFIs providing concessional financing, to everybody who wants to support the green hydrogen sector and energy transition.”

As part of its detailed feasibility study, AMEA hired Norwegian certification company DNV, which undertook a full study on green hydrogen certification and compliance, looking at every type of regulation pertinent to the project including European and the Asian countries.

Matar says the company is looking at demand markets in Europe and Asia, speaking to potential off takers. “We’re seeking exclusivity, some kind of agreement, a take-or-pay arrangement because with this comes bankability,” he says.   

“We’re speaking to a lot of people, nothing signed yet.”  

Name of the game

“We know, two-thirds of the cost of this project will be the cost of producing electrons,” says Matar. “That’s over the 25-year life, including CapEx and OpEx.”

“If you look at that pie chart of total cost, you will see two-thirds, or at least 60 percent, is cents per kWh in OpEx.”

“So the name of the game in terms of cost is not the electrolyser, because the electrolyser cost today represents perhaps 12-13% of that pie chart.

“But if we can drop the price of electricity by 10%, we will see a significant impact, because it’s 10% of 60% versus 10% of 12%.” 

“So we’re looking at pennies on the electrolyser. The big bucks are on the electrons, the power. If we can work out lower cost there, we have a project.”

We know Egypt

The framework agreements signed two years ago included the Sovereign Fund of Egypt, the Egyptian Electricity Transmission Company (EETC), the New and Renewable Energy Authority (NREA), and the SCZone to deliver the projects.     

AMEA Power knows them well, having worked with them to develop its large renewables projects. The company is now positioned to leverage the government’s tax incentives for green hydrogen and derivatives, authorized in a new law this year, including generous tax credits, exemptions and reduction of fees.

“We know Egypt,” says Hussein Matar. “It was a natural choice for us.”   

“The largest wind power project in Africa is the one we’re developing now – it’s the lowest tariff in Africa, just over 3.1 cents per kWh.  

“We put our first wind turbine in Egypt a few days ago, 6.5MW, 100m tall, 180m in diameter, it’s absolutely amazing this turbine for our plant at Ras Ghareb.”

Matar sees advantages in the company’s deep experience in renewable power development encompassing utility-scale solar and wind, battery storage, transmission infrastructure, and so forth. The company manages a complex ecosystem of EPC and OEM suppliers.

“We don’t know electrolysis but we’ll produce the electricity, that’s the more complex part, how we get a baseload profile  to come into that production system from combined wind and solar and battery storage,” says Matar.

A key to controlling cost will be development of shared services to convert capital expenditure to operating cost, for example for water desalination. The company is working with SCZone to develop shared services including a water desal plant. Power transmission will be provided by Egyptian utility EETC, with the company negotiating the wheeling charge.

“They’re looking to make it as economical as possible to produce hydrogen and ammonia,” says Matar of the SCZone. “This is a key piece.”  

Hydrogen cluster

Several other major developers in framework agreements with the SCZone are advancing studies of large projects for green hydrogen-based ammonia or methanol. Should these reach construction, they will create a large hydrogen production cluster centered on Ain Sokhna.  

The Saudi water and power developer ACWA Power entered a framework agreement with the Egyptian government late last year to develop a $4bn green ammonia facility, with plans to produce 600,000 tonnes annually in a first phase, scaling up to two million tonnes.

TotalEnergies and the Egyptian investment company Enara Capital have partnered to explore production in the SCZone, beginning with a modest capacity to produce 30,000 tonnes of green hydrogen per year.

The Abu Dhabi clean energy company Masdar is part of a consortium with its Egyptian joint venture Infinity Power and developer Hassan Allam Utilities to build a 2GW green hydrogen production system in the SCZone.

The Norwegian renewable energy company Scatec is leading the development of a project with 100 MW of electrolysis capacity for green ammonia production for a nearby facility of EBIC, a unit of ADNOC’c Fertiglobe. The project will also seek to provide ship fuel to shipping on the nearby trade route. Scatec has partnered with Fertiglobe and Egyptian contractor Orascom Construction.

Hydrogen production is also envisioned on the country’s west Mediterranean coast, where Egypt wants to stimulate economic development. Last fall, the government announced that Belgian marine engineering company DEME is leading a $3bn green hydrogen production project at the new Gargoub Port on the Mediterranean.

“We want to see more projects come into the country, there’s more than enough land,” says Hussein Matar of AMEA Power. “And we hope everyone is serious enough to take this to the next level, to pre-FEED and FEED phases.

“The more serious players the better for all, because they will be party to the water desal plants and to the large transmission lines we’re building with the government.”

By Alan Mammoser for Oilprice.com