Three South Korean companies have signed an agreement to build a $1 billion green hydrogen and ammonia production plant in the United Arab Emirates, their UAE partner said on Friday.

Korea Electric Power Corporation (015760.KS), Samsung C&T Corporation (028260.KS) and Korea Western Power, alongside the UAE's Petrolyn Chemie, will build a plant that can produce up to 200,000 tonnes of green ammonia a year, Petrolyn said.

Green hydrogen - obtained by passing renewably-produced electricity through water to split the element from oxygen - has been touted by some as a key fuel for energy users looking to cut greenhouse gas emissions.

Both the UAE and neighbour Saudi Arabia have set out ambitious plans for hydrogen, amid a deepening economic rivalry between them.

The plant will be built in two phases in the KIZAD Industrial Area near the capital Abu Dhabi, with the first phase producing 35,000 tonnes before the second phase takes the project to full scale.

"Participating companies will achieve their respective Net-Zero vision through the Project. They are expected to...expand the drive of future growth in the global green hydrogen market by expanded reproduction of their future business model," Petrolyn said.