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INTERVIEW: New CCS, hydrogen firm Lapis Energy gains private equity funding for low-carbon projects

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INTERVIEW: New CCS, hydrogen firm Lapis Energy gains private equity funding for low-carbon projects

Highlights

Company to partner with emitters across the globe

No need to wait on Congress for 45Q expansion

  • Author
  • Brandon Mulder
  • Editor
  • Richard Rubin
  • Commodity
  • Energy Transition Natural Gas Petrochemicals

A new Texas-based carbon sequestration and hydrogen development company, Lapis Energy, recently received origination funding from the private equity firm Cresta Fund Management to launch clean hydrogen and low carbon projects across the globe.

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The investment enables Lapis to begin partnering with emitters to achieve decarbonization strategies through utilizing carbon capture and sequestration technologies and hydrogen production opportunities, Vice President Reg Manhas said in a Jan. 18 interview.

"We can take active roles to help identify [carbon] sinks, identify emitters, and pair them together to create these full lifecycle CCS projects," said Manhas.

Manhas said Lapis is actively looking for project partners in the US, the UK, the EU and Southeast Asia. The company is currently in active discussions with potential partners in the US, he said, declining to provide specifics.

"We feel like we're hitting the space at the right time in terms of interest and momentum in CCS, and we think what we bring to the table is pretty compelling," Manhas said, adding that his team's technical prowess will be able to nimbly navigate the Environmental Protection Agency's regulatory processes.

CCS

Lapis will be pursing hydrogen and CCS projects no matter the outcome of the Build Back Better Act, which contains several provisions designed to boost hydrogen production and CCS projects in the US.

For CCS projects, the bill would increase the 45Q tax credit to $85/mt from $50/mt for projects that permanently store captured CO2 and to $50/mt from $35/mt for projects that use captured CO2 for enhanced oil recovery.

But Lapis is intent on demonstrating to its investors and partners that it can bring projects to fruition under the current 45Q framework, especially for projects in sectors where CCS can be implemented relatively inexpensively, like fertilizer and ammonia production and gas processing.

"We don't have to wait for 45Q to go to $85 or $100," Manhas said. "We can give you a solution today that works under today's pricing."

Hydrogen

The US Build Back Better Act would also create a new hydrogen production tax credit that would offer $3/kg of hydrogen produced with 95% fewer emissions than that produced with fossil fuels – also known as 'green' hydrogen – and between 60 cents/kg and $1.02/kg for hydrogen produced with between 40% and 95% fewer emissions than fossil fuels – known as "blue" hydrogen.

The provision is intended to reduce the cost of hydrogen production as an initial step to building out a robust hydrogen economy. According to Platts price assessments, the cost of producing green hydrogen using PEM electrolysis (including capex) in Southern California was $4.73/kg on Jan. 16, while the cost of producing hydrogen using fossil fuels (including capex) without carbon capture was $1.48/kg on Jan. 13, the latest price assessment available.

Although Manhas said he expected Lapis to focus on blue hydrogen projects in the near-term, that focus could shift to greener production methods as more companies adopt long-term green hydrogen strategies.

"This is such a dynamic space," he said. "I think that we can position ourselves today and get ready for what's going to happen tomorrow."

Lapis Energy was formed in 2021 through the merging of Viridis Resources, a CCS sub-surface exploration company founded by members of the deepwater exploration and production company Kosmos Energy, and BluEnergy, a low carbon consulting company. Kosmos founder and former CEO Brian Maxted is the company's acting chairman.