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Severstal explores options for low carbon hydrogen at competitive costs

Highlights

Hydrogen production in Russia likely to hinge on natural gas

Decarbonization an opportunity to develop additional business

London — Russia's lack of wind and solar power generating capacities means the country needs to find technologies for special processing of natural gas to mass produce green or blue hydrogen, an executive from Russian steelmaker Severstal told S&P Global Platts.

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"In case with hydrogen -- Industries need to hit three targets at once -- produce it in large quantities, at low cost and without a carbon footprint," Andrey Laptev, director of business development and corporate venture projects at Severstal told Platts in an interview.

Hydrogen is currently available either in large quantities at a low cost, but with a carbon footprint, or without a carbon footprint and even in large quantities, but at a high cost, he said.

Natural gas

Severstal's research aims to answer the questions related to the regional steel industry obtaining competitive hydrogen in the conditions of Russia, which would allow it to produce steel at prevailing costs.

Currently, it costs $5-$7/kg to produce green hydrogen, Laptev said. However, mills need the fuel at $1.5/kg in order to contain steel prices, even though these estimates are just for Europe, said Laptev.

Electricity is the main cost component of green hydrogen production. In Europe, hydrogen is planned to be produced using carbon-free wind and solar power as the continent has large respective capacities. In Russia, green hydrogen production is not yet possible on a large scale due to a lack of renewable energy generation.

Russia's renewable wind and solar power generation is nowhere near comparable to Europe, and hydrogen production via water electrolysis is unlikely to be equally applicable in the country, according to Laptev.

"We will need other solutions, those most likely to be associated with special processing of gas, with the production of hydrogen from natural gas, only it is necessary to solve the problem of its decarbonization," he said.

Laptev said that hydrogen produced from natural gas was not 100% green and Severstal was teaming up with companies with expertise and equal interest to find a solution.

"It is indeed a big challenge that existing technologies do not allow us to be sure if we will be able to produce hydrogen in sufficient volumes and at reasonable cost so that the green fuel can totally replace other energy sources," he added.

Ventures

Severstal has recently signed memorandum of understanding, or MoUs, with Russia's third largest oil producer Gazprom Neft and its second largest natural gas producer Novatek to address the green hydrogen challenge. The MoUs will also allow Severstal to also draw on the energy companies' CO2 capturing and disposal practices.

Pumping CO2 under the ground requires certain geological conditions, and the key is to find locations meeting those requirements. "CO2 can be collected and transported to be disposed in suitable sites. In the US, this is already a standalone business," said Laptev.

With its new partners, the steelmaker agreed to conduct geological studies, especially in the regions of its presence, to explore the possibility of subsurface disposal.

Besides its co-operation with Gazprom Neft and Novatek, Severstal expects innovative solutions to be supplied by Severstal Ventures -- its subsidiary set up to team up with domestic and foreign startups. The venture is, among other things, experimenting with producing green and blue hydrogen variants in the lowest cost possible.

The steelmaker invites these startups to launch their pilot projects using its industrial sites as well as equipment and considers investing in those most useful to its goals.

Three milestones

Severstal sees decarbonization as an opportunity to develop additional business within the next five to ten years.

To sell steel and solutions for hydrogen projects, the company is conducting research looking at steel properties needed for pipelines to transport hydrogen and at steel solutions needed for the infrastructure to make and transport hydrogen.

Severstal has three milestones for its decarbonization path.

The first is the announced target of 3% cut in CO2 emissions by 2023 that will be achieved through operational improvements. Secondly, the company is also preparing a medium-term target to be shared in the coming months. This will be a more ambitious goal underpinned by substantial investments, but the one also based on available technologies.

Meeting that medium-term target, preliminary in 2030, will help Severstal retain its position among the steelmakers with the lowest carbon intensity.

Severstal is looking beyond 2030 and considering more radical decarbonization options than those provided by existing technologies.

To achieve this, the company will be relying on consortia and partnerships with other businesses and institutions such as those with Gazprom Neft and Novatek.