Hydrogen power plant plan for UAE

Hydrogen Energy, a joint venture of BP and Rio Tinto, is in talks to build what would be the world's first hydrogen power plant in the United Arab Emirates.

The $2bn (£1bn) project, which is being studied by the BP–Rio venture and Abu Dhabi Future Energy, the Government-owned alternative energy company, is seen as a possible answer to the emirate's rapidly rising energy needs. Demand for oil and gas in the Middle East has skyrocketed in recent years as massive profits derived from rising oil prices – Brent crude closed yesterday at $88.72 per barrel – has fuelled a construction boom.

The hydrogen power plant, which converts natural gas into hydrogen that can be burned to generate power while the resulting carbon dioxide is pumped underground using carbon capture and sequestration technology, would be the first of its kind in the world. It could produce up to 7 per cent of the power needs of the emirate, which is expected to announce Hydrogen Energy as its partner next week.

The initiative comes ag-ainst the backdrop of rising oil demand globally. Despite fears that a US recession could dent demand, the International Energy Agency yesterday left its 2008 oil demand projections steady. The Paris-based watchdog said demand would rise by 2.3 per cent, or 2 million barrels a day, to 87.8 million barrels per day this year. Abdullah al-Badri, the secretary-general of Opec, the cartel of oil-producing nations, reiterated the group's position that the recent near-record price of oil was not due to a lack of supply, despite government stockpiles remaining at historic lows and pleas from President George Bush for more oil. The high price has actually led to a decrease in demand from big importers such as America and Europe, which have begin to use the fuel more efficiently.