Saudi Arabia’s Mega Neom Hydrogen Plant Struggles to Find Buyers

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(Bloomberg) — The world’s largest green hydrogen project being built in Saudi Arabia’s Neom is facing an uncertain future as it struggles to find international buyers for the fuel.

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All of the hydrogen from the project was originally intended for export as green ammonia, but with only one committed buyer lined up, it is shifting focus to local consumers to fill the gap, according to people with knowledge of the matter. But demand is still uncertain within the kingdom, and plans are under consideration to slow the full development of the facility, they said.

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The $8.4 billion project is the latest example of the challenges facing green hydrogen — a fuel billed as critical for net zero — because of a lack of buyers. The Saudi facility, with financing approved and without the bureaucratic delays that have beset projects elsewhere, was one of the few expected to succeed as co-developer Air Products & Chemicals Inc. had committed to buying the entire output and selling it onward to end users. 

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But it has yet to find customers for more than half of the supply, people familiar with the situation said, asking not to be named because the matter is not public.  

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Should the project eventually be scaled down, it would also be another setback for Neom, the centerpiece of Saudi Crown Prince Mohammed Bin Salman’s multitrillion-dollar plan to transform the economy. The kingdom has already curtailed some spending for Neom, amid a ballooning budget deficit and rising debt levels.

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Read: Saudis Scale Back Ambition for $1.5 Trillion Desert Project Neom  

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The Neom facility is an equal joint venture between Neom, Air Products and Acwa Power Co., the Saudi renewable energy firm backed by the sovereign wealth fund. The project website says the intention is to commission the plant next year with the capacity to produce as much as 600 tons of green hydrogen a day.

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Air Products said the facility is progressing well, and expects to start commissioning electrolyzers once renewable power units are completed by mid-2026, and sees products available in 2027. Neom referred a request for comment to the companies building the project. Neom Green Hydrogen Co. and Acwa Power didn’t reply to requests for comments.

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Rising Cost

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The project was one of the few green hydrogen ventures that was meant to go on full steam, even with costs rising from $5 billion initially to $8.4 billion when financial close was reached two years ago. Pennsylvania-based Air Products had signed a deal last year to sell 70,000 tons of fuel a year — equivalent to around one-third of the intended project output — to TotalEnergies SE between 2030 and 2045. 

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But no other buyers have been secured yet, people familiar with the matter said.

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Another route to potential customers was sending some volumes to Air Products’s receiving terminals in Europe, but the company has since opted to delay investments in these facilities, incoming Chief Executive Officer Eduardo Menezes said on a call with analysts on May 1.