Germany and Saudi Arabia have inked a declaration to intensify energy cooperation during a visit by German Economy Minister Katherina Reiche to Riyadh on Sunday.
Reiche and Saudi Energy Minister Abdulaziz bin Salman also signed 10 letters of intent to expand cooperation between German and Saudi companies.
"The agreements cover key areas for the future," said Reiche, naming energy, artificial intelligence, hydrogen, industrial value creation and innovation.
She noted a Saudi deficit due to falling oil prices, adding that Riyadh was looking to diversify its sources of revenue.
"Diversification is therefore also a way of insuring against fluctuating oil prices, getting unemployment under control and giving the country's young generation prospects for the future."
The memorandum of understanding agreed between the two countries covers all areas of energy as well as the chemicals sector. It addresses the handling of the greenhouse gas carbon dioxide, digitalization in the energy sector and the establishment of reliable supply chains.
Cooperation between companies and the private and public sectors is also to be strengthened.
During Reiche's visit, German and Saudi energy companies concluded an agreement for exports of ammonia, as the two countries seek to expand their partnership on green hydrogen.
A memorandum of understanding was signed by Saudi company ACWA Power, the energy supplier EnBW Baden-Wurttemberg, the northern German port of Rostock and the gas importer VNG.
Hydrogen can be used as a clean source of energy if it is produced in a climate-neutral way, such as by using solar power. Saudi Arabia has been investing in production of the gas, while Berlin has in recent years begun expanding its infrastructure for hydrogen.
The gas could be used to generate electricity in new gas-fired power stations when insufficient wind or solar power is available. It can also be used instead of coke in blast furnaces for steel production, thereby avoiding huge amounts of carbon dioxide emissions.
However, transporting the gas from Saudi Arabia to Germany is a logistical challenge.
Under the plan, hydrogen is to be exported from the Red Sea port of Yanbu to Rostock in the form of the chemical ammonia, which is easier to liquefy, transport and store.
In Rostock, the ammonia is to be converted back into hydrogen using a so-called cracker developed by energy company VNG.
The hydrogen and ammonia production plant in Yanbu is scheduled to go into commercial operation in 2030.
According to the memorandum, ACWA is also considering participating in the development and possibly also financing of ammonia infrastructure in Germany.