INTERVIEW - Petrofac sees green matching blue, even grey H2 by 2030

As the topic of decarbonisation gradually engulfed the corporate world over the past few years, more and more oil and gas majors are ready to use their expertise to support the growth of what is universally referred to as "new energies". Petrofac, a leading international service provider to the energy sector is one such example. While it believes that hydrocarbons will still be needed for the time being, to meet a majority of energy demand, the company is ready to deploy its services and experience to support the growing demand for cleaner energies and to support its own Net Zero goals.

In present days, Petrofac is engaged in the design, construction, management and maintenance of oil, gas, refining, petrochemicals and new energy infrastructure. For the company, its new energy activities revolve around offshore wind, carbon capture, utilisation and storage (CCUS), hydrogen and waste-to-value sectors and projects focused on reducing emissions from operating industrial and energy assets. Petrofac’s capabilities span all phases of the project lifecycle, from initial design through to greenfield and brownfield engineering, procurement and construction (EPC), operations, maintenance and training.

In an interview with Renewables Now, Jonathan Carpenter, Petrofac’s Vice President, New Energy Services, talks about the opportunities and challenges that come with green hydrogen development, one of the hottest topics in energy today, and the company’s expectations for the future of the sector.

Petrofac has historically delivered grey hydrogen scopes as part of refinery projects. It has recently combined this experience and its High Voltage experience delivering EPC projects for the offshore wind market, to win the front-end-engineering (FEED) for the first phase of Infinite Blue Energy’s Arrowsmith project in Western Australia. This project will produce 25 tonnes per day of green hydrogen from around 80 MW of onshore wind and 90 MW of solar PV generating assets. Petrofac is also exploring several other hydrogen opportunities, which would involve combining its grey hydrogen delivery capability with its experience delivering CO2 removal scopes in natural gas processing.

How much do you expect your hydrogen services business to grow over the next 10 years? How fast is the volume of “green” opportunities expanding?

We are already seeing growth in this market. In 2020, new energy projects accounted for around 22% of our order intake and for 2021, 13% of our E&C bidding pipeline due for award by 2022 is comprised of new energy opportunities. And this is continuing to grow strongly during 2021, where we have secured 10 contracts covering CCUS, blue and green hydrogen and waste-to-fuels in the first half of the year. These are early-stage concept and FEED contracts and have the potential to develop into material project awards, leveraging our differentiated life-of-asset client offering.

In the UK we are seeing major blue hydrogen projects attached to each of the CCUS clusters. Here the focus is on injecting hydrogen into the grid to decarbonise heating. Meanwhile, we are also seeing small green hydrogen projects emerging in the 1 MW–30 MW range. These are being driven by councils looking to decarbonise their buses and municipal vehicles, and businesses that require high heat input which are looking to quickly reduce their emissions. This includes breweries, distilleries, and food production. In the UK again, but more so overseas in Australia and the Middle East, we are also seeing mega-scale green hydrogen projects of 1 GW–25 GW, which are being designed to create hydrogen for export, normally as ammonia, to Asia.

We expect that by the end of the decade, green hydrogen will at least be competitive to blue hydrogen and probably even grey hydrogen, with project economics determining the one that dominates.

Which are your hydrogen markets today? What have you learned there?

Blue hydrogen requires CO2 storage and, as such, will need to be concentrated around markets that already have this infrastructure or are presently developing CO2 storage hubs. This includes the UK, the Middle East and the US Gulf Coast which aligns well with Petrofac’s core markets. Of course, green hydrogen can be deployed anywhere, although it is most economic where there is abundant solar and wind, such as Australia, parts of the Middle East and Chile. Aligned with this, our blue hydrogen experience is concentrated in the UK, on industrial cluster projects attached to CCUS projects.

To date, our green hydrogen experience at a large scale is in Australia. But we are also building small scale green hydrogen project experience in the UK and targeting the Middle East too. We have learned that for green hydrogen projects there is a significant degree of integration needed between the renewable energy generation assets, the hydrogen production systems, and the hydrogen storage/offloading system – we see optimisation as key in reaching the best value outcome for our clients.

What can the hydrogen industry learn from oil and gas?

The process safety management from oil and gas projects will be critical to the emerging hydrogen industry. By applying lessons learned from the oil and gas sector, the hydrogen sector can ensure its plants are designed and operated in a way that manages the challenges around hydrogen. Commercially, the hydrogen industry can also learn from the oil and gas sector about how to create a gas value chain, much like an LNG project, that maximises the value of the commodity produced. In addition, project execution processes for oil and gas can be applied to large scale green hydrogen projects to add surety to the project delivery phase.

Which is more challenging today - working on green or blue hydrogen projects? How do you see this changing in the future?

They bring different challenges. For blue hydrogen, the challenge is the integration with the CO2 storage and therefore the scale of the project needed to make this economic. For green hydrogen, it is how to drive the cost down and optimise the performance of the renewable generation and electrolyser systems.

Of course, today – for either blue or green hydrogen projects – there are challenges in finding and securing the off-takers for the hydrogen; the market is still small which, in turn, means the project financing is challenging.

In the future, these challenges will diminish. When CO2 stores are operational, blue hydrogen projects will form around them to drive hydrogen volumes into gas grids. For green hydrogen, once manufacturing capacity increases and we increase the number of these projects we deliver, particularly at mega-scale, we anticipate being able to drive the cost down quickly and support decarbonisation across a much wider range of sectors.

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