Gas Infrastructure Needs to be Ready for Clean Hydrogen
As green hydrogen becomes an ever more important clean energy source, governments and energy companies must prepare for a steep incline in production in the coming years and ensure they have the correct infrastructure to transport it. Some regions of the world are already establishing major hydrogen corridors, such as the Spain – Netherlands link in Europe. Adapting new natural gas developments to be suitable for hydrogen transportation could save companies money and time in the long term, as well as support the transition away from fossil fuels to renewable alternatives. This month, the CEO of Italgas, Paolo Gallo, emphasised the importance of constructing gas infrastructure that is capable of transporting hydrogen as a means of meeting decarbonisation goals. Gallo stated, “Today we are moving around natural gas, but tomorrow we will have biomethane [and] clean hydrogen that will be used to decarbonize the system… So, it’s extremely important that the infrastructures are ready to accept different kinds of gases in [a] blending situation.” Green hydrogen, produced using renewable energy sources rather than fossil fuels to power electrolysis, is being viewed as increasingly important for accelerating the global green transition. Unlike wind or solar power, green hydrogen is a versatile carrier that can be used in a range of ways, such as in fuel for transportation. While most hydrogen is produced using fossil fuels at present, favourable government policies and increased pressure on energy companies to decarbonise are expected to lead to a boom in green hydrogen production over the coming decades. Gallo is not the first to suggest the repurposing of existing infrastructure, with several energy companies around the globe exploring ways to adapt existing pipelines to make them suitable for transporting hydrogen. Many European countries are aiming to use existing gas infrastructure to transport hydrogen, with several recent studies and pilot testing phases showing positive results. The use of existing pipelines can reduce hydrogen transport costs but pipelines must be assessed to see whether they’re suitable for hydrogen transportation, taking into account issues such as leakage, leakage detection, effects of hydrogen on pipeline assets and end users, corrosion, maintenance, and metering of gas flow. The potential use of gas pipelines for transporting hydrogen is becoming an increasingly popular topic as many governments accelerate plans to increase their natural gas production and infrastructure. This is being seen in the U.S., which, controversially, has an LNG project pipeline of 13 facilities along the US Gulf Coast in Louisiana and Texas. Canada is also constructing its first LNG transport facility, after years of pressure from energy companies. This reflects the global sentiment that natural gas will be critical for achieving the green transition. The EU ruled last year that natural gas will be used as a transition fuel in the mid-term shift to green alternatives as a means of moving away from more polluting fossil fuels, such as oil and coal. This has driven many energy companies to announce new gas projects for the next decade. This regional production drive was further accelerated by gas shortages in Europe and North America following the Russian invasion of Ukraine and subsequent sanctions on Russian energy last year. As companies develop new natural gas projects with support from state governments – potentially at odds with national climate policies – they should consider the potential for new pipelines to be used for transporting alternative energies, such as green hydrogen and ammonia, to ensure new infrastructure does not go to waste as the demand for gas eventually wanes. In the U.S., the Department of Energy’s Hydrogen and Fuel Cell Technologies Office (HFTO) launched the HyBlend initiative in 2021 to address technical barriers to blending hydrogen in natural gas pipelines to support the DoE’s H2@Scale vision for clean hydrogen use across multiple sectors in the economy. The U.S. has around three million miles of natural gas pipelines and more than 1,600 miles of dedicated hydrogen pipelines. The HyBlend team will test gas pipelines across the country to see their suitability for transporting hydrogen in different blends. This year, Open Grid Europe (OGE) announced that the first long-distance gas pipeline in Germany is being converted for hydrogen use. The 46km pipeline in the northwest of the country will be ready to transport hydrogen from 2025. The project is part of the GET H2 Nukleus project and is being funded by the EU’s Important Project of Common European Interest (IPCEI) initiative. The adaption of the pipeline is expected to help companies in heavy industry and medium-sized businesses connect to the hydrogen supply. Several new natural gas facilities are being constructed to support mid-term energy security en route to a green transition. At the same time, many companies around the globe have announced plans to develop their green hydrogen production over the coming decade, with demand expected to rise significantly over the next few years. Energy companies and governments must now use this opportunity to develop pipelines that can be used for the transport of both natural gas and green hydrogen to save money and time in the future and better support a green transition.
Has the Energy Transition Hit a Wall?
Wind power stocks are tanking. So are solar power stocks. Germany’s government just agreed to underwrite a 15-billion-euro bailout for Siemens Energy after its wind power subsidiary booked massive losses. The list could continue. The movers and shakers in the energy space are finding it increasingly hard to move and shake. It was easy to anticipate this development, yet, many choose to ignore the signs, and now the sector may suffer more before the growing pains ease. One common theme in the wind, solar, and EV space is the theme of rising costs. This was perhaps the easiest development to anticipate in the progress of the energy transition. After all, everyone was forecasting a massive surge in the demand for various raw materials and technology to enable that transition. There is one guaranteed thing that happens when demand for something rises: prices also rise before the supply response kicks in. This is a universal truth for all industries and there was no reason to expect that the transition industry would be an exception. Indeed, demand for raw materials necessary for solar panels, wind turbines, and EV batteries rose, but supply was slow to catch up, which led to higher prices. For a while, many pretended this was not the case, possibly hoping the cost inflation would blow over before investors noticed it. Denmark’s Orsted, which suffered some of the worst market cap losses in the transition space, just this June published an upbeat outlook for the year and the medium term, expecting strong capacity additions growth and a return on capital employed rate of an average 14% for the period 2023 to 2030. The same month the head of the company complained loudly about the rising costs of building offshore wind in Britain and asked for more subsidies. Five months later, Orsted had booked $4 billion in impairment charges from its U.S. business and had canceled two offshore projects there. CEO Mads Nipper called the situation in wind power “a perfect storm”. Many have blamed the higher costs on the legacy of the pandemic lockdowns—broken supply chains, delays, and other obstacles to the smooth movement of goods and materials. Yet when it comes to the transition, the current state of affairs is more likely part of the same vicious circle that is holding back the EV revolution that fans of Tesla keep predicting. This circle is best illustrated in the case of EV chargers. Since range anxiety is one of the biggest concerns of prospective buyers, there must be enough chargers for this anxiety to subside. But charger companies wouldn’t build chargers unless they are certain there will be enough EVs on the roads to make these chargers profitable. The situation is similar in copper mining—perhaps the most fundamental industry for the energy transition. After all, the transition is conceived of as a shift to almost full electrification and you cannot have electrification without a lot of copper. Instead, copper miners are reluctant to splurge on new exploration. Miners don’t have enough certainty about future demand, despite all the upbeat forecasts. Whatever market prices show, if the transition gains momentum as planned, the copper shortage will only be a matter of time. Another obstacle is demand. There seemed to be an assumption among transition planners that demand would be given; but it hasn’t been. EV makers now find themselves revising their plans as demand falls short of targets. In June, forecasts for Germany were that demand for solar installations would surge by double digits in 2023. Two months later, an inverter maker warned that demand had actually dropped in the third quarter, and the outlook for Q4 was not particularly encouraging. In wind, projects are being canceled because project leaders are asking for much higher prices than previously agreed with funding governments. Many are blaming higher interest rates for the cost inflation that sank their shares. But interest rates are something that all industries have to deal with, and those other industries don’t have the privilege of counting on generous government subsidies. Yet wind, solar, and EVs can’t take off even with those subsidies. This puts the future of the transition in a new perspective: something that many observers foresaw but were dismissed as climate deniers. The transition will be neither as fast nor as smooth—or as cheap—as initially expected. It will take a long time; it will be uneven, and it will be expensive. “There’s this notion that it is going to be a linear energy transition,” Daniel Yergin, S&P Global vice chairman and a veteran energy chronicler, told the Wall Street Journal. “It’s going to unfold in different ways in different parts of the world.”
“I am waiting for Thank You”: S Jaishankar On India Softening Oil Markets
Asserting India’s role in stabilising global oil and gas markets through its strategic purchase policies amid the Russia-Ukraine war, External Affairs Minister S Jaishankar noted that the purchase policies of India managed “global inflation”. During a conversation hosted by the High Commission of India in London, titled ‘How a billion people see the world,’ Mr Jaishankar discussed India’s impactful position in global affairs. EAM Jaishankar said, “So we’ve actually softened the oil markets and the gas markets through our purchase policies. We have, as a consequence, actually managed global inflation. I’m waiting for the thank you.” The minister explained that India’s approach to oil purchases prevented a surge in global oil prices, preventing potential competition with Europe in the market. He elaborated, “When it comes to the purchase…I think the global oil prices would have gone higher because we would have gone into the same market to the same suppliers that Europe would have done and as we discovered Europe would have outpriced us.”
GAIL India issues swap tender for 24 LNG cargoes in 2025
GAIL (India) Ltd has issued a swap tender offering 24 liquefied natural gas (LNG) cargoes loading out of the United States next year in exchange for 24 other cargoes for delivery to India in 2025, said two industry sources on Thursday. India’s largest gas distributor is offering two cargoes per month, from January to December, for loading from Sabine Pass on a free-on-board (FOB) basis. It is seeking the cargoes for delivery to the Dhamra terminal for the same months on a delivered ex-ship (DES) basis.
India’s CNG infra development in high gear
India’s auto industry is about to see a big increase in the use of compressed natural gas (CNG) over the next three to four years. One of the reasons for this optimism is the infrastructure of the city gas distribution (CGD) network that has reached over 88 percent of the country’s land mass. In terms of reach, it is equivalent to about 98 percent of the population, according to government statistics. At the same time, the government has a goal to bump up the number of CNG stations from 6,000 to 17,700 by 2030. To further bolster this momentum, the government recently launched the 12th CGD bidding round in early October, aiming to bridge any remaining gaps in the gas infrastructure. Where does it come from? India obtains its CNG from a combination of sources. Some of it is produced within the country, while the rest is imported. Roughly 35-40 percent of the natural gas used for CNG production comes from domestic sources. The remaining is imported in the form of liquefied natural gas (LNG) from different countries. For clarity, LNG, which is in a supercooled liquid state, is heated to convert it back into its natural gaseous form. The regasified (process of converting liquefied natural gas (LNG) at −162 °C (−260 °F) temperature back to natural gas at atmospheric temperature) natural gas is then compressed at a higher pressure, using specialised compressors, reducing its volume and making it suitable for storage and transportation as CNG. The country is also exploring other ways to produce CNG. For example, there are special plants called bio-CNG plants that create renewable CNG from agricultural waste. These plants help produce CNG in an environmentally friendly manner. India produced about 34,450 million standard cubic metres (MMSCM) of natural gas during the fiscal year 2022–2023, according to data released by the Ministry of Petroleum and Natural Gas. However, the total consumption of natural gas in the country was much higher, reaching about 60,311 MMSCM during the same period. To meet the demand, India imported approximately 26,647 MMSCM of LNG from other countries. The import bills for LNG amounted to around US$ 17.9 billion during that time.