Pivoting to hydrogen to drive de-carbonisation of industry
Hydrogen is increasingly seen as providing the pathway to a decarbonised
energy sector.
Currently, global demand for hydrogen is around 70 million tonnes and is produced using six per cent of the world’s natural gas and two per cent of the world’s coal.
It’s utilised in oil refining and ammonia, methanol and steel production.
Less than two per cent of hydrogen is produced with zero carbon emissions; the rest is referred to as grey hydrogen and releases 830 million tonnes of carbon dioxide emissions, or around 2.5 per cent of all global emissions.
So how is this fuel going to help drive down global emissions?
Pinsent Masons renewable energy expert George Varma and Wood Energy & Technology Director Steve Yeardley explored this topic as part of a Petroleum Club
of WA webinar last month.
Mr Varma said that companies were coming under increasing shareholder and consumer pressure to de-carbonise their operations and conduct business in a socially responsible manner. He said growing numbers of countries pursuing net-zero carbon emissions in 20 to 30 years time were driving the oil and gas sector to look at alternative ways to reduce carbon emissions.
“Australia is a leading LNG exporter of the world, and hydrogen is peaking interest in this sector as there is an opportunity to transfer the skills, expertise and infrastructure in the LNG industry to the new hydrogen sector,” he said. “There is a level of nervousness creeping into minds of oil and gas participants as they face being stuck with stranded or un-utilised assets, decommissioning costs, lost revenue, redundant equipment which may flow from the emergence of the hydrogen.”
The Australian Government is putting considerable funds into building a renewable hydrogen production industry, recently allocating $370 million in new funding.
The National Hydrogen Strategy plans to remove market barriers, improve regulatory consistency, and build international trade partnerships, with a view to establishing significant domestic supply and competitive hydrogen exports by 2030.
Mr Varma said WA had an important transitional role to play with its substantial gas reserves and flourishing LNG export market.
“Experts believe that LNG production is key to reducing emissions in the short term, but more players are looking to hydrogen to effect this change. As momentum is growing in this sector, a decline of the oil market is inevitable,” he said.
Companies are looking for new ways to remain relevant, and increasingly operators are partnering with renewable energy developers to decarbonise their business. For instance, Orsted and BP are working together on the development of a large-scale renewable hydrogen project at a refinery in north-west Germany and closer to home Pilot Energy and Triangle Energy are developing a 1,100MW offshore wind project alongside onshore wind and solar farms utilising established oil and gas infrastructure in WA.
Mr Varma pointed out a number of potential opportunities for oil and gas participants:
- the production of blue hydrogen,
- the blending of hydrogen in existing gas pipelines,
- partnering with renewable energy developers (particularly relevant for offshore oil producers and onshore oil processing facilities),
- the overhaul of the transport sector to decarbonise the supply chain,
- repurposing shipping and heavy haulage vehicles to move hydrogen,
- work in the manufacturing sector to produce all the components for repurposed assets.
The key challenges facing the creation of a green hydrogen sector remains electrolyser cost, operational efficiency, and access to low-cost renewable energy.
Mr Yeardley said from his perspective there were questions about the economics of green hydrogen projects, in a scaled environment, which required vast amounts of low-cost energy to make them economic. He believes that blue hydrogen would likely be the interim solution, with ammonia as the preferred transport vector.
“Hydrogen liquefaction is 30 per cent parasitic energy load, which means 30 per cent is lost as part of the process, this is three-time the LNG parasitic load,” Yeardley said. “The only way it will work commercially is with a very low-cost energy source, using the parasitic load to liquefy,” he said.
Mr Yeardley said while there were a number of small-scale technologies for ammonia cracking, which allows the use of hydrogen as a fuel, large-scale options were yet to be created. However, the utilisation of existing technology such as Steam Methane Reforming (SMR) could be an advantage.
“We see hydrogen has a unique position encompassing natural gas and renewable energy,” he said. “Though it has some way to go in terms of how it will inform decarbonisation future.”