Oman to build world's largest hydrogen plant

The nation of Oman has recently announced its plans of constructing the worlds largest green hydrogen plant designed to cut emissions and to make the oil-producing nation one of the world leaders in green technology.

The construction of this power plant is set to begin in 2028, however, due to its construction being set in stages, the full project will only be complete by 2038.

Once completed and working at full capacity, the powerplant is predicted to have an output of 25 gigawatts of wind and solar energy.

The powerplants construction, which is valued at $30 billion, is funded through a large assortment of companies one of which being a state-owned oil and gas company known as OQ.

The firm will also work alongside the Hong Kong firm, InterContinental Energy, which develop hydrogen-based renewable energy as well as the Kuwait based energy investor, Enertech.

The assortment of these companies will allow the infrastructure project to have the skills necessary to ensure it is a likely success as InterContinental Energy’s experience in renewable energy combined with the funding from state-owned company OQ and Enertech will ensure that the project also has the necessary funding and skills to continue.

Furthermore, the involvement of private companies ensures that the project will be more efficient as state-owned companies may lean towards more inefficient practices.

An example of this is the UK’s NHS, which, despite receiving record funding prior to the pandemic, has still seen a decrease in its beds per 1000 as the service struggles to be efficient despite its inherent advantages due to monopoly and monopsony power.

Consequently, the involvement of private companies will help the project be done much more efficiently as private firms who are in competition with one another avoid X-inefficiency as they prioritise dynamic and productive efficiency to reduce costs to increase competitiveness and profits.

And there is a very high-profit incentive when it comes to constructing this project as oil and gas companies are eager to jump ship as they change their specialisation to accommodate for a cleaner future as oil and gas companies will see a structural loss of demand for their services in future.

This is due to changing tastes and fashions of consumer agents towards favouring renewability and the environment which is shown in the willingness of the UK’s ban on the sale of new petrol and diesel cars, a decision which will also decrease demand for oil and petrol.

Consequently, Oman is somewhat against the clock when it comes to constructing this project so that the nation does not fall behind in developing green technology which is essential as currently Oman’s economy relies on fossil fuels as 85% of GDP is attributed towards oil and gas, however, once complete, the infrastructure project will have massive economic benefits.

This is because, once the project is complete, it is estimated that it will be able to produce 1.8m tonnes of green hydrogen and up to 10m tonnes of green ammonia a year. This means that the project’s completion will allow Oman to diversify its economy, thus helping the nation accommodate a greener future which will help ease or prevent the structural loss of demand which the nation will see for its oil exports.

Consequently, as Oman develops a specialisation in green technology, which will likely replace its Oil industry, the nation will develop a comparative advantage, thus enabling excess production to be sold overseas as energy is exported to Europe and Asia, the Guardian reports.

This will help maintain Oman’s value of exports as rather than exporting fossil fuels the nation will opt for greener alternatives.

These sustaining exports, or perhaps a future increase in their value, will help drive economic growth in the short term within Oman as when exports rise, current account, a component of aggregate demand increases, thus yielding an expansion in aggregate demand and driving growth in the short term.

Additionally, due to FDI, Oman will also see an expansion in the productive capacity as these firms from Hong Kong organically expand into the economy creating new capital through Gross Investment which will help Oman achieve sustained, long-term economic growth as the economy moves towards a more sustainable future.


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Written by Hubert Kucharski


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