June 1, 2022
The oil frenzy has made Saudi Arabia one of the world’s richest countries in recent decades. After all, the kingdom is the largest exporter of fossil fuels in the world.
But this is also a serious problem. See: According to the business magazine “Forbes”, oil trade in 2019 accounted for 42 percent of Saudi GDP. Therefore, the economy of the Arab state is highly dependent on this raw material.
Saudi Arabia plans for the post-oil era
This could sooner or later fall at the feet of the state. After all, many experts assume that the importance of oil will gradually decline in light of climate efforts, especially in the West. Of course, this development could take decades.
However, Saudi Arabia must provide alternatives in time in order to remain a major player in the global economy even after the oil age. In any case, those in power in Riyadh are currently investing huge sums in such alternatives. The main focus is – you guessed it – on renewable energies and hydrogen.
The royal family has now realized the economic potential of producing climate friendly energy and wants to become one of the most important suppliers here in the near future. The focus is on the Neum lighthouse project – which, by the way, German companies are also involved in.
Blanstadt Neum: a giant hydrogen city
Before we look at a specific inventory, first some basic data for you: NEOM is a planned city to be built in the northwest of the country on the Red Sea and on the borders with Egypt and Jordan on an area of 25,000 square kilometers. So the city could be 32 times (!) larger than New York City (783 square kilometers).
Now comes the crux of the matter: NEOM is set to pave the way for the kingdom to exit the oil age and run entirely on green electricity and hydrogen. But not only that: the planned city will also become a huge green hydrogen export hub. Potential Buyers: Europe.
The royal family pays a lot for it. According to information from Riyadh, they want to invest up to $500 billion in the project – for example in huge solar collectors and electrolytic water analyzers. In the latter, green hydrogen is generated using green electricity.
Thyssenkrupp’s Nucera plays a big role
Calculation: Saudi Arabia wants to attract foreign investors through NEOM and the state’s high financing. Anyway, this actually worked. German steel group Thyssenkrupp and its hydrogen subsidiary “Nucera” (formerly “Uhde Chlorine Engineers”) have secured an order for a green hydrogen production plant.
The $5 billion electrolyzer will be built in cooperation with US gas company Air Products and Saudi company ACWA Power. From 2026, the green hydrogen produced there will be made into climate-neutral ammonia and exported to the global market. With a planned capacity of 2 gigawatts, the plant is likely to become one of the largest electrolyzers in the world.
NEOM’s potential to sweeten the IPO
In any case, thyssenkrupp has high hopes for the hydrogen city in northwest Saudi Arabia. Not least because the subsidiary Nucera wants to be listed on the stock exchange sooner or later. NEOM should then become one of the main selling points of this new stock due to its size and importance. A pilot project that aims to show how powerful the branch of Thyssenkrupp is when it comes to hydrogen.
Among other things, Nucera develops large modular modules and cells for electrochemical systems. Of course, it is not only about the electrolysis of water. The company is also active in the field of chlor-alkali electrolysis. In this process the important basic chemicals, chlorine, caustic soda and sodium chloride, as well as hydrogen are produced.
Nucera and Air Products: a strong team
But Nucera sees the future in the electrolysis of water. Just a few weeks ago, the company announced that it would supply electrolyzer components to Air Products’ hydrogen plant in the US state of Arizona.
Overall, the strategic partnership with the US group is a boon to Nucera, which gives Thyssenkrupp subsidiary huge potential. After all, Air Products, like its competitors Air Liquide and Linde, wants to become a leading supplier of hydrogen energy.
my conclusion for you
The planned NEOM hydrogen city embodies the next paradigm shift in Saudi Arabia. But the giant project is also a goldmine for foreign companies such as Thyssenkrupp. If the royal family is satisfied with the German technology, Nucera should receive more orders from Riyadh.
So Saudi Arabia could still have one or two positive surprises in store for Thyssenkrupp stocks. As an investor, you should never lose sight of NEOM. We will, of course, keep you updated on further developments related to this huge project.
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