Jazan green ammonia plan gathers pace

Saudi Arabian Refineries Company has moved to deepen its clean energy ambitions by signing a non-binding memorandum of understanding with China’s Ally Hydrogen Energy to develop a green ammonia production plant in Jazan Industrial City.

The agreement, signed on 15 May, places Jazan at the centre of another proposed low-carbon fuel project as Saudi Arabia seeks to build industrial capacity around hydrogen, ammonia and related equipment. The memorandum will remain valid for one calendar year unless both sides agree to extend or amend it.

The arrangement goes beyond a single production facility. It also covers plans to establish a local centre for assembling and manufacturing hydrogen production and purification equipment, alongside a research and development centre to be set up in cooperation with universities in Saudi Arabia. The research component is intended to support innovation in green hydrogen and ammonia technologies and strengthen technical skills linked to the kingdom’s energy transition.

SARCO said the transaction is expected to have a positive effect on its financial statements by the end of the third quarter of 2028, signalling that the project remains at an early stage and will require further approvals, technical work and commercial structuring before any measurable revenue impact is recorded. The memorandum is non-binding, meaning it does not by itself guarantee construction, financing or final investment approval.

The Jazan proposal builds on a sequence of clean energy agreements announced by SARCO over the past seven months. In October 2025, the company signed a non-binding memorandum with Go Energy Company to work on the development of a green hydrogen and ammonia project in Saudi Arabia. In February 2026, its wholly owned subsidiary Clean Energy Company signed another non-binding memorandum with UK-based AGR Renewable Energy for the purchase of the full output from a proposed green ammonia plant in Jazan Industrial City.

The latest agreement identifies Ally Hydrogen Energy as the final supplier linked to the green ammonia plant, adding a technology and equipment dimension to SARCO’s earlier commercial and development arrangements. Ally Hydrogen Energy, based in Chengdu, has positioned itself as a hydrogen technology company focused on production and purification systems, with experience in industrial hydrogen equipment and pressure swing adsorption purification.

Green ammonia is produced by combining nitrogen with hydrogen generated through renewable electricity rather than fossil fuels. It is viewed as a potential fuel for shipping, a low-carbon feedstock for fertiliser production and a carrier for hydrogen exports, though large-scale adoption remains constrained by cost, infrastructure requirements and the pace of demand from end users.

Jazan Industrial City offers strategic value for such projects because of its location on the Red Sea, its industrial infrastructure and its proximity to export routes linking Asia, Africa and Europe. The city has been promoted as a base for heavy industry, logistics and energy-related investment, making it a suitable site for ammonia production and equipment localisation.

Saudi Arabia is trying to use its energy infrastructure, low-cost renewable resources and industrial zones to become a major supplier of hydrogen-derived fuels. The kingdom has set a target of generating 50 per cent of its electricity from renewable sources by 2030 and has backed several large-scale hydrogen and ammonia ventures as part of its broader economic diversification programme.

Competition in the sector is intensifying. Major projects in the kingdom, including large integrated hydrogen and ammonia developments planned in western industrial hubs, are drawing in international engineering, technology and offtake partners. For smaller listed companies such as SARCO, partnerships with foreign technology suppliers and offtakers offer a route into the sector without carrying the full burden of development risk alone.

The commercial case for green ammonia remains dependent on three variables: renewable power costs, electrolysis efficiency and long-term buyers willing to pay a premium for low-carbon fuel. Global demand is expected to grow as shipping companies, fertiliser producers and industrial users face tighter emissions rules, but many projects still face delays because of uncertain pricing, certification standards and infrastructure bottlenecks.

SARCO’s project structure appears designed to address some of those risks by linking production, equipment localisation, research and offtake into a broader development chain. The planned manufacturing centre could support domestic content objectives, while cooperation with universities may help build technical capability for future hydrogen and ammonia projects.