Oman's HyDuqm GH2 project targets $7-8bn investment
MUSCAT, MARCH 1
Investments in HyDuqm – a major green hydrogen (GH2) project envisaged for implementation in Oman's Al Wusta Governorate – are estimated to total around $7 – 8 billion at full capacity, according to a key executive associated with the mega-scale venture.
An international consortium, jointly led by global low-carbon energy developer ENGIE and Korean steel conglomerate POSCO, has secured a 340 km2 concession block in Duqm for the project – one of eight land blocks awarded by Hydrom, the country's GH2 orchestrator, to international developers so far.
The project will include up to approximately 5 GW of new wind and solar capacity, and a renewable hydrogen plant with a capacity of up to 200,000 tonnes per annum (tpa). The hydrogen will then be transported by a hydrogen pipeline to an ammonia plant at the Port of Duqm. Green ammonia of around 1.2 million tpa is proposed to be shipped to Korea starting in 2030.
Speaking at the Oman Climate Week forum held in Muscat last week, Hyerin Park, Vice President, Hydrogen Business Development, ENGIE AMEA, shared insights into financing and bankability challenges associated with the global green hydrogen industry.
Taking part in a panel discussion, Park, who is also Chief Financial Officer, HyDuqm, underlined the complexities involved in funding large-scale hydrogen projects. Duqm alone, with a target to produce 1 million tpa of renewable hydrogen by 2030, will necessitate an estimated $35 billion in investment. HyDuqm, contributing 200,000 tpa of hydrogen to be converted into 1 million tpa of ammonia, carries an approximate cost of $7-8 billion. Given these figures, securing financing is not just a matter of capital availability but also ensuring appropriate risk allocation, she noted.
According to the ENGIE executive, project risk is distributed across various stages of the hydrogen value chain, from renewable energy production to hydrogen conversion, transportation, and offtake. Investors are hesitant to fund projects where risks are overly concentrated, making public-private partnerships (PPPs) and policy-driven risk mitigation essential for bankability. Government-backed incentives, such as loan guarantees and subsidies, play a crucial role in bridging the financing gap, she said.
Significantly, a project's bankability can also be enhanced by securing offtake agreements, Park stressed. HyDuqm, for its part, aims to supply green ammonia to Korea to decarbonize coal-fired power plants, ensuring a long-term demand base. However, the broader hydrogen market remains in its early stages, with pricing mechanisms still evolving. Greater clarity on hydrogen pricing structures and long-term contracts will enhance financial predictability, making projects more attractive to investors, she explained.
Also weighing on a project's bankability is the cost of electrolysis technology. HyDuqm will require 2 GW of electrolyzer capacity, whereas the largest operational projects today operate at only 100-200 MW. This gap necessitates further investment in advancing electrolyzer technology to scale up capacity while reducing costs. Without such advancements, projects remain vulnerable to high capital expenditure (CapEx), affecting financial viability, she warned.
Beyond CapEx, operational expenditure (OpEx) subsidies are also critical. Contract-for-difference mechanisms, wherein governments subsidize the cost gap between hydrogen production and market price, can enhance financial feasibility, Park noted
Citing HyDuqm's experience thus far in the project's development, the executive underlined the important role of collaboration among stakeholders—governments, financial institutions, and industry players—in addressing financing challenges. Risk-sharing frameworks, innovative funding models, and strategic public-private cooperation will be instrumental in accelerating green hydrogen development in Oman and beyond, she added.
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