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Blue ammonia to comprise bulk of hydrogen transportation due to lower costs: HSBC

Highlights

Ammonia more energy-dense, easier to liquefy

Several blue ammonia projects in pipeline

  • Author
  • Jeffrey McDonald
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  • Manish Parashar
  • Commodity
  • Coal Electric Power Natural Gas Metals Petrochemicals
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  • Hydrogen: Beyond the Hype

Gas-based "blue" ammonia will comprise the bulk of future hydrogen transportation given its lower production costs compared with renewable ammonia and the ease in transport compared with liquified hydrogen, equity analyst HSBC said in a Jan. 18 research note.

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A key challenge in developing the hydrogen economy comes from the high cost of transportation, which could be as much as three times the cost of production, HSBC said. Methods of storing hydrogen for transportation include conversion to methanol, in metal hydrides, and in pressurized or liquefied form.

"Ammonia is, in our view, the most likely vehicle of choice for hydrogen transportation because of its high storage density," HSBC said. "Ammonia is easier to liquefy -- it liquefies at minus 33 degrees Celsius -- and contains 1.7 times more hydrogen per cubic meter than liquefied hydrogen."

Ammonia can be used directly as a fuel for ships or in power plants or it can be reconverted into hydrogen.

The HSBC report also noted the higher cost of producing ammonia from renewable sources compared with producing gas-based ammonia.

Air Products' NEOM project in Saudi Arabia, which will produce "green" ammonia from renewable sources, is estimated to cost $5 billion to produce 1.2 million mt of ammonia. By comparison, converting an existing 1.2 million mt plant to blue ammonia via carbon capture and storage would cost $500 million, HSBC said.

"We estimate that a combination of CCS (carbon capture and storage) + renewable power would yield a carbon footprint comparable to green hydrogen and be far cheaper than green hydrogen costs," HSBC said.

The higher cost of green ammonia in the NEOM project is due largely to capital costs required for constructing an electrolyzer plant for hydrogen production, and the capital costs for renewable electricity production.

Another project, Yara's Norvay project in Norway, will be two-four times as expensive as conventional ammonia production, the company has indicated.

"Yara is seeking public funding to bridge the cost gap and make the project viable," HSBC said.

Blue projects in pipeline

Reconfiguring the projects to grid-based electricity would "significantly reduce" capital costs, HSBC said.

"These costs can be significantly reduced if one were to reconfigure existing natural gas-based ammonia plants to drastically cut the carbon intensity," HSBC said. "That could provide an opportunity for natural gas-based ammonia companies to participate in the 'lower-carbon' hydrogen economy by taking steps to cut the carbon footprint of their ammonia production."

Several projects are transforming existing ammonia assets into "blue" ammonia with carbon capture, including a Saudi Aramco and Sabic project to ship blue ammonia to Japan, along with Air Liquide's project aiming to capture the CO2 from its hydrogen units in Antwerp and join up with the new Northern Lights CCS project in Norway, HSBC said.

S&P Global Platts launched separate Netherlands SMR with carbon capture and storage and Electrolysis assessments in April 2020, and later launched additional "Grid-Only" assessments for PEM and Alkaline Electrolysis in September.

Platts assessed the Netherlands SMR with CCS including Carbon and Capex price at Eur1.8269 Jan. 18, and assessed the PEM Electrolysis Grid Only price including Capex at Eur4.2481.