Kazakhstan's ambitions in producing and exporting green hydrogen to the EU may never come to fruition because of infrastructure, logistical hurdles and other challenges but the Central Asian country should look hard at using the clean commodity in producing higher-value green industrial products both for domestic use and export, according to an analytical article published by Carnegie Endowment’s Carnegie Politika think tank.

The EU and Kazakhstan in November 2022 signed a strategic partnership on the production of green hydrogen (hydrogen produced by the electrolysis of water powered by renewable electricity) and critical raw materials (CRM) and in March 2023, Germany opened a Hydrogen Diplomacy Office in Astana.

In her article, Yana Zabanova, a PhD candidate at the University of Groningen and research associate at the Research Institute for Sustainability, Helmholtz Centre Potsdam (RIFS Potsdam), focuses on developments that have occurred since the partnership was sealed amid the EU’s plans to import up to 10mn tonnes of green hydrogen by 2030 and various challenges Europe has so far faced in achieving this goal.

For Europe, cross-border hydrogen infrastructure has remained expensive (and the EU has a very limited budget to finance such infrastructure links with third countries), the pace of hydrogen cost reductions has been slower than anticipated and demand from industry for clean hydrogen has been weaker than expected. In July, the European Court of Auditors highlighted these issues and called for a "reality check" as regards the European bloc’s hydrogen policy, raising doubts about the production and import targets.

Geoeconomics and geopolitics analyst Zabanova argues that for potential producers like Kazakhstan, the current situation with the infrastructure bottleneck and other difficulties raises the question of whether they should focus more on using hydrogen to decarbonise their domestic economies rather than prioritising exports.

Kazakhstan’s hydrogen potential first gained international attention in June 2021, when Swedish-German energy company Svevind announced a $50bn green hydrogen project in the country. Known as HyrasiaOne, this project aims to install 40 gigawatts of wind and solar capacity in the Mangystau region near the Caspian Sea to produce 2mn tonnes of green hydrogen or 11mn tonnes of green ammonia by 2030. Despite some scepticism about feasibility, an official investment agreement was signed with the Kazakh government in October 2022, and the project is now in its conceptual engineering phase. A final investment decision is expected by 2026.

Green hydrogen is produced by the electrolysis of water powered by renewable electricity (Credit: Parent55, cc-by-sa 1.0).

The potential for exporting hydrogen to Europe has been a key factor in attracting investors like Svevind to Kazakhstan. However, challenges such as the high cost and lack of transport infrastructure are significant obstacles to exporting hydrogen from Kazakhstan to Europe, Zabanova writes.

Moreover, uncertainties remain regarding the scale and timeline of upcoming EU hydrogen demand. While the EU has set binding quotas for green hydrogen use in industry and transport that kick in in 2030, initial demand may largely be met by European suppliers, the analyst says. Although Germany is a strong advocate for hydrogen trade, other EU member states prefer to focus on domestic production. 

“Prior to the war in Ukraine, it might have been conceivable to transport Kazakh hydrogen to Europe through Russian territory via retrofitted gas pipelines,” Zabanova notes. “But that is no longer a palatable option, and the alternatives are complicated. One possibility would be to construct an offshore hydrogen pipeline crossing the Caspian Sea and continuing to Southern Europe through the Caucasus and Turkey. However, Russia has strongly opposed the construction of any trans-Caspian pipelines in the past and would likely raise objections on environmental grounds this time as well.”

Zabanova believes that the export of clean hydrogen is not Kazakhstan’s only opportunity when it comes to the green commodity. Increasing global interest in using clean hydrogen to produce higher-value industrial products—such as green fertilisers, steel and e-fuels—both for the domestic market and export customers offers a promising avenue for the country, she says.

This approach aligns with recommendations from the Central Asian & European Hydrogen Diplomacy Forum held in Astana in May 2024, which sees potential for hydrogen to decarbonise Kazakhstan’s economy.

Projects like HyrasiaOne have indicated a willingness to supply the domestic market, potentially decarbonising industries such as refineries, steel production and chemicals, though that would require substantial investment, the analyst posits.

“Kazakhstan could use green hydrogen to decarbonize its refineries, steel production, and the chemical industry, although that would require significant levels of new investment,” Zabanova says. “So far, only Kazakhstan’s national oil and gas company KazMunayGas (KMG) has made tentative steps in this direction. In 2022, its subsidiary KMG Engineering launched the Hydrogen Energy Competence Center and the Hydrogen Technologies Research Laboratory in Atyrau. KMG is currently planning pilot clean hydrogen projects as part of its low-carbon development strategy.”

Neighbouring Uzbekistan’s efforts to produce green ammonia with Saudi Arabia’s ACWA Power provide an example Kazakhstan could follow, according to Zabanova.

Despite the potential, Kazakhstan currently lacks a developed hydrogen policy framework. Although the country’s 2060 Net Zero Strategy references hydrogen for decarbonisation, there are no specific targets or policy instruments to stimulate hydrogen demand. 

The only progress worthy of note was the April 2024 draft Hydrogen Development Concept for 2040 published by Kazakhstan’s Energy Ministry. It prioritises economic diversification, R&D and a pilot blue hydrogen project by 2030.

While the concept sets ambitious targets, including 10 gigawatts in electrolyser capacity and 10 gigawatts of renewable generation capacity, it lacks clear priorities and remains largely aspirational, Zabanova concludes.

Only time will tell whether Kazakhstan's hydrogen ambitions have realistic prospects.