Saudi Arabia’s Neom green hydrogen energy mega-project has had its budget increased by 70% this week. The development will generate enough green energy to power up to 5GW of solar, wind and hydro energy projects.
Neom, a US based industrial gases company, have said the new current budget is now $8.5BN for their project that is being developed in the northwestern desert of Saudi Arabia. This is an increase of $3.5BN from the originally projected cost of $5BN at its implementation.
The project itself would use 4GW of wind, solar and battery storage to produce 1.2 million tonnes of green ammonia per year from 2.2GW of electrolysers.
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When commenting on the increased budget, Air-Products (a co-developer of the project) CEO Seifi Ghasem states, “This increases the capital cost, but it decreases the operating cost, and we decided that was a better trade-off. But the key point was to make sure that the project is not dependent on other people… so that we have everything that we need for the project to be operated.”
Despite the increase in project investment, the price of ammonia from the Neom project has remained the same. Ghasem states that the price of this will remain as it was in 2020.
Looking at the $3.5BN price hike, Air Products attributes $500m to inflation, $1.8BN to project financing costs, upfront fees, interest during construction, additional joint venture costs, spares, and land; plus $1.2BN for additional scope to make the project more self-sufficient and lower operating costs.
This increase in development costs mean that whilst the upfront pricing is high, it allows greater future investment via increase energy generation and efficiency. Neom’s chief operating officer, Samir Serhan said that the Neom H2 project might be able to increase production compared to its previous estimates of 1.2bn tonnes per year.