Power-to-X in the Middle East: Building a Dual Market for Europe and Domestic Industrial Transformation

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Overview

Power-to-X (P2X) is redefining the global energy map. By converting renewable electricity into storable, transportable molecules like hydrogen, ammonia, methanol, and e-kerosene, P2X offers a credible pathway to decarbonise sectors where direct electrification falls short, such as steel, aviation, shipping, and chemicals. Europe, in particular, is betting heavily on these molecules to reach its net-zero targets, and it is looking beyond its borders to secure supply.

The Middle East has become a central part of that equation. With its exceptional solar and wind resources, access to capital, and deep experience with large-scale energy exports, the region is emerging as a cost-effective production and export hub for green fuels. Yet, something deeper is taking shape: alongside the ambition to export to Europe, countries like the United Arab Emirates (UAE), Saudi Arabia, and Oman are creating domestic markets for hydrogen-based fuels, supporting national industrial strategies, economic diversification, and low-carbon development.

This article explores how the Middle East is positioning itself as both a supplier and consumer of P2X fuels. We examine the relevance of this dual market for Europe, the underlying renewables base, the distinct approaches of the Gulf’s leading hydrogen players, and the opportunities and trade-offs surrounding infrastructure, water, certification, and policy.

Europe’s Need for Imports and the Middle East’s Strategic Response

Europe’s own production targets for renewable hydrogen under the REPowerEU plan are ambitious, 10 million tonnes annually by 2030, but so are its import targets, also set at 10 million tonnes. Yet bottlenecks around land availability, permitting, and infrastructure make it increasingly clear that external partners will be essential to deliver secure volumes of low-cost, low-carbon fuels.

This is where the Middle East matters. The region lies close to Europe’s southern border, with direct maritime access through the Red Sea and Suez Canal. It already hosts major industrial ports like Sohar, Jebel Ali, and Yanbu, many of which are undergoing adaptation for green fuel exports. Most critically, the region’s renewable energy potential is among the highest globally, enabling it to produce green hydrogen at costs well below those of Europe.

In short, for Europe, the Middle East offers something few other regions can: a reliable supply of competitive green fuels delivered through existing maritime routes and backed by political commitment at the highest levels.

A Region of Solar Abundance and Growing Wind Assets

The economic logic behind P2X in the Middle East begins with renewables. Solar photovoltaic (PV) generation in countries like the UAE and Saudi Arabia consistently reaches capacity factors above 25%, with daytime irradiance among the best in the world. Utility-scale solar plants in the region have set record-low levelised costs, with recent bids as low as USD 0.0135 per kWh.

While wind is less ubiquitous, it is gaining ground. Oman’s southern and eastern coastlines benefit from steady monsoon winds, while northern Saudi Arabia also shows promise with average wind speeds exceeding 7 m/s. Oman has already incorporated wind into several hydrogen tenders, and Saudi Arabia’s Renewable Energy Project Development Office (REPDO) includes wind as part of its future capacity auctions.

These conditions provide the foundation for multi-gigawatt renewable hubs, enabling countries to produce hydrogen, ammonia, and other derivatives at scale. Combined with falling electrolyser costs and growing policy coordination, the economics of P2X in the Gulf are increasingly compelling.

One Region, Three Distinct Approaches

While the Middle East is often treated as a monolith in energy discourse, national strategies for hydrogen and P2X development differ significantly in pace, scale, and scope.

The UAE: Green Steel and Aviation Driving Local Demand

The UAE is positioning itself as a first mover in low-carbon industrial applications. Emirates Steel Arkan is developing hydrogen-ready DRI (direct reduced iron) facilities, aiming to supply green steel to European buyers sensitive to CBAM-related costs. The country is also investing in local demand for e-fuels, particularly for aviation, given the strategic role of Dubai International Airport as a global transit hub. With Emirates Airline seeking SAF (sustainable aviation fuel) solutions and ADNOC exploring e-kerosene production, the aviation sector is set to become a major offtaker.

Masdar, the UAE’s flagship renewables company, is scaling solar and wind assets both domestically and abroad to feed into hydrogen projects, while port authorities in Fujairah and Khalifa are developing ammonia handling and bunkering infrastructure.

Saudi Arabia: Export-Led Vision Anchored in NEOM

Saudi Arabia has taken a bold export-first approach, exemplified by the NEOM Green Hydrogen Project. ACWA Power, Air Products, and NEOM form the core consortium, and the project’s scale has already positioned the Kingdom as a serious player in global hydrogen trade.

Yet, Saudi Arabia is also investing in domestic decarbonisation. SABIC and Ma’aden are exploring green feedstocks for petrochemicals and fertilisers, and Aramco has signed MoUs around e-fuels, especially for heavy transport and maritime sectors. While export remains the dominant narrative, domestic use cases are beginning to surface.

Oman: Regulation-Led Market Creation

Oman is pursuing a hybrid strategy with strong institutional clarity. Through Hydrom, a state-owned entity coordinating hydrogen zone auctions and infrastructure access, the country has awarded multiple land blocks for hydrogen projects linked to both export and local demand. Oman’s long coastline, wind-solar complementarity, and proximity to Asian and European markets make it an ideal location for green hydrogen and ammonia development.

Oman is also developing a clear strategy around industrial offtake. Its SEZs in Duqm and Salalah are attracting global manufacturers with the promise of green inputs. The integration of renewable power, desalinated water, and hydrogen-ready pipelines into these zones reflects a whole-system approach.

Export Opportunities: Maritime Infrastructure and Green Corridors

The Middle East’s long history as an energy exporter gives it a head start in developing logistics for hydrogen derivatives. Ammonia, in particular, is a preferred carrier due to its higher volumetric density and existing shipping infrastructure. Green ammonia from NEOM is already contracted for offtake in Europe and Asia, and port upgrades across the Gulf are enabling handling of chilled ammonia and methanol.

Dubai, Sohar, and Yanbu are actively positioning themselves as transshipment hubs for green fuels. The region’s proximity to the Suez Canal enhances its competitiveness relative to Latin American or Pacific exporters, enabling shorter shipping times to European ports.

These ports are also increasingly involved in green corridor initiatives, which aim to decarbonise maritime trade routes through cooperation between origin and destination ports. For Europe, this creates a reliable supply chain for hard-to-decarbonise sectors like shipping and fertilisers. For Gulf countries, it cements their relevance in a future energy landscape where molecules, not just megawatts, matter.

Global Hydrogen and Hydrogen Derivative Trade Map: 2050 (IRENA)

Certification, CBAM, and the Green Premium

Access to European and Asian markets increasingly depends not just on cost, but on compliance. The EU’s Delegated Acts under RED II require renewable hydrogen to demonstrate additionality, temporal and geographic correlation, and a minimum 70% GHG reduction versus fossil benchmarks.

This regulatory push is compounded by the EU’s Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon price on imports of steel, fertiliser, and chemicals from 2026 onward. The UAE’s green steel strategy is a direct response to this policy, offering CBAM-compliant materials that can command premium pricing in Europe.

To ensure market access, Gulf countries are investing in certification infrastructure. ADNOC, Masdar, and Oman’s Hydrom are exploring partnerships with CertifHy and ISCC to enable traceability. Without certification, even the cheapest hydrogen may be locked out of key markets. With it, Gulf producers can access green incentives and secure long-term offtake.

Managing Water Stress in Line with the SDGs

Water use is a legitimate concern in the Middle East, especially in regions dependent on desalination. Electrolysis requires approximately 9–18 litres of water per kilogram of hydrogen, and this can rise when considering cooling systems.

However, desalination powered by renewables offers a scalable solution. Co-locating electrolysers with desalination plants, as planned in Oman and the UAE, can mitigate water risk while aligning with UN Sustainable Development Goals, particularly SDG 6 (Clean Water) and SDG 12 (Responsible Consumption and Production).

Emerging practices such as zero-liquid discharge, brine valorisation, and industrial water reuse are already being incorporated into project planning. As the hydrogen economy matures, water-positive project designs may become not just viable, but competitive.

Conclusion: A Dual Market Is Emerging

The Middle East is not only preparing to fuel Europe’s decarbonization, it is preparing to decarbonise its own industries. The region’s P2X landscape is expanding beyond exports to encompass local demand from steelmakers, airlines, and chemical producers. Certification and compliance are now as important as cost. And strategic positioning, logistical, industrial, and diplomatic, is determining who will lead in the global hydrogen economy.

This is not a story of transition; it is a story of transformation.

Let’s Talk

If you are developing a P2X project and want to build a strong, strategic partnership, Poly Consulting is here to help.

We operate across both Europe and the Middle East, with deep knowledge of regulatory frameworks, business cultures, and energy market dynamics in each region. We support clients with:

Project development and feasibility
Partner identification and consortium building
Strategic advisory and certification alignment
Risk-sharing structures and stakeholder engagement

Let’s build the partnerships that power the energy transition—together.

Elisabeth Hasselström

Head of Power, Utilities and Renewables

Elisabeth brings over a decade of expertise in the renewable energy sector, specializing in corporate strategy and in-house project development. Her journey began as an M&A advisor in banking for renewable companies, where she honed her insights before transitioning into consulting roles directly focused on Wind, Solar, Energy Storage (BESS), and Power-to-X projects.
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Additionally, she is connected to an extensive network of highly skilled professionals within the Energy sector, enhancing her ability to support and drive impactful partnerships and projects.

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