Posco Group and the United Arab Emirates' Abu Dhabi National Oil Company will collaborate on blue hydrogen production facilities in Gwangyang, South Jeolla Province, Posco International said Wednesday.

Posco International, Posco Holdings and ADNOC signed a three-way strategic collaboration agreement at the UAE energy group’s headquarters in Abu Dhabi.

Under the agreement, the three companies will build blue hydrogen production facilities at Posco International’s liquefied natural gas terminal in Gwangyang.

Blue hydrogen refers to hydrogen produced from fossil fuels such as natural gas through a process called reforming. The production is also coupled with a carbon capture and storage (CCS) process to reduce carbon dioxide emissions by capturing and storing the carbon dioxide generated during the hydrogen production process.

The companies also agreed to build CCS facilities at the Posco LNG plant.

“ADNOC is one of the leading companies in the CCS sector. ADNOC will become a great partner of Posco Group,” an official from Posco International said.

Starting this year, the three companies will test the feasibility of the project involving hydrogen production and CCS facilities, with plans to start supplying blue hydrogen to nearby regions in 2029.

“The latest project is meaningful to the group as it will allow us to take the first step in the domestic supply of eco-friendly hydrogen,” said Lee Jeon-hyeok, head of the energy business unit at Posco International.