Saudi Arabia has the resources, energy infrastructure, fiscal strength, and political commitment needed to become one of the world’s leading producers of low-carbon hydrogen and hydrogen-based fuels. But instead of relying heavily on exports — a market that is still developing — the Kingdom should prioritise building a strong domestic demand base.
If Saudi Arabia focuses on using low-carbon hydrogen across local industries such as chemicals, cement, steel, and transport, it can accelerate national decarbonisation and establish itself as a regional leader. Once export demand grows in Europe, Asia, and beyond, the Kingdom will already be well positioned to supply it.
Based on recent research and strategic analysis inside the Kingdom, three policy priorities stand out.
Export Demand Is Still Developing
Many Gulf economies expected rapid global demand for clean hydrogen, but international markets remain slow and uncertain.
Major planned projects in the region have already shifted direction due to unclear export opportunities. The world’s largest green hydrogen project in Saudi Arabia, for example, has secured only a portion of its expected off-takers, highlighting the risks of depending solely on export-driven models.
In contrast, some regional strategies already emphasise the importance of serving domestic markets first — a more resilient and realistic approach.
Domestic Demand Is Already Strong
Saudi Arabia currently consumes around 2.5 million tonnes of grey hydrogen annually, mostly in refining, methanol, and ammonia production. As industries transition toward decarbonisation, low-carbon hydrogen will replace fossil-based hydrogen in priority sectors such as steel, cement, and petrochemicals.
Future forecasts suggest demand could reach more than 3 million tonnes per year by 2034 — and potentially much higher by 2050 if aligned with climate goals and the Kingdom’s target of net-zero emissions by 2060.
To unlock this potential, policy support is essential.
Three Strategic Policies to Build the Market
1. Introduce Carbon Pricing
A domestic carbon price — even a modest one — could make low-carbon hydrogen more competitive by discouraging emissions from traditional fossil-based industrial processes.
Studies from regional research institutions indicate that pairing carbon pricing with renewable energy expansion and carbon capture could significantly accelerate decarbonisation in hard-to-abate sectors such as refining and petrochemicals. Additionally, reforming fossil fuel subsidies would help level the economic playing field and prevent artificially low natural gas prices from holding back cleaner alternatives.
2. Use Public Procurement to Create Guaranteed Demand
Saudi Arabia’s ongoing industrialisation and large-scale infrastructure projects under Vision 2030 represent a major opportunity. By requiring low-carbon materials — for example, green hydrogen-based steel — the government could create early market demand and give investors confidence.
Even a small premium on low-carbon construction materials can rapidly stimulate industry growth if procurement policies guarantee long-term demand.
3. Invest in Local Innovation and Technology Transfer
Saudi Arabia is already engaging in international cooperation to develop local expertise in electrolysers and hydrogen-related technology.
Strengthening this innovation ecosystem — through partnerships with universities, technology firms, and manufacturers — could create new intellectual property, attract foreign investment, build the workforce of the future, and support local supply chains.
A Strategic Beginning
Transitioning to a national hydrogen economy will involve balancing energy costs, industrial competitiveness, and environmental goals. However, establishing a strong domestic market now will attract investors, support the Kingdom’s long-term climate commitments, and enable future export opportunities once global demand matures.
The Kingdom has a rare window of opportunity: to lead the region, spur local innovation, reduce emissions, and build a future-proof hydrogen economy.
