Russia has embraced the current uncertainty over hydrogen demand and commercial viability, hoping to transform the sector in the coming years with the help of western partners as pressure from importers for cleaner fuel intensifies.
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The country's hydrogen strategy sees Russia as one of the world leaders in production and exports of hydrogen, targeting 20% of the global market by 2030 with hydrogen exports of 2 million mt/year by 2035 and 15-50 million mt/year by 2050.
The end-goal of 50 million mt/year of hydrogen exports would be equivalent to around 160 Bcm/year of natural gas.
"This would in essence replace all natural gas exports from Russia to Europe today with hydrogen," S&P Global Platts Analytics said.
With European gas spot prices having surged to record highs, all eyes at the Tyumen oil and gas forum in mid-September turned once again to the development of the hydrogen sector as a potential alternative for natural gas.
Russia is considering developing hydrogen projects based on nuclear, natural gas and renewables, and plans to capitalize on domestic resources, existing energy supply routes, and proximity to potential future consumers in Europe and Asia.
At least three hydrogen clusters are planned to be created -- in the northwest for European exports, the east for Asian supplies, and the Arctic for domestic use of hydrogen and potential exports.
While Russia is currently mainly focusing on production of gas-based grey and blue hydrogen, the question remains whether European customers, which may prioritize green hydrogen because of its environmental benefits, will buy it.
At present, the cost of blue hydrogen in Europe is lower than green. S&P Global Platts assessed hydrogen produced from gas with CCS, including capex and carbon, at Eur4.21/kg on Sept. 16, while the assessment for hydrogen produced from renewables using electrolysis was higher at Eur9.75/kg.
The Russian energy ministry argues that with carbon capture, up to 90% of emissions from gas-based hydrogen can be eliminated.
"We need a dialogue [with Europe] on this plan. It could be possible to negotiate that this de facto green hydrogen is recognized as de jure one," Gazprom Neft CEO Alexander Dyukov said Sept. 15 at the Tyumen forum.
Russia has vast gas resources, and Platts Analytics said the Russian government and large Russian gas producers support the idea of blue hydrogen exports.
"But economics and acceptability of blue hydrogen in the long term are yet to be resolved," it said.
Russian deputy energy minister Pavel Sorokin said during a hydrogen-focused session in Tyumen that there could be a "breakthrough" at some point for gas-based hydrogen. "We need to be ready for this," he said.
Russia's targeted 15-50 million mt/year export market share would be worth $30-$100 billion to the Russian economy, compared with about $70-$120 billion in total economic value from today's 5 million b/d of oil exports, according to S&P Global Platts Analytics.
"It does seem like there are some tangible numbers that backstop their national goal of becoming a major player in the hydrogen market," it said.
Moreover, in 10 years the Nord Stream 2 pipeline should be ready to blend hydrogen into one or both lines and transport it, resolving the transport issue that doubles hydrogen prices, according to the energy ministry.
Nevertheless, President Vladimir Putin earlier this month said Russia should also look into production of green hydrogen and ammonia in Russia's Far East, aimed at Asian customers, mainly China and Japan, "where demand will steadily grow in the next few decades."
In a bid to attract foreign investments and technologies, Russia has been considering incentives for foreign companies willing to participate in joint projects on climate change and clean technologies in Russia.
"We do not want to be 100% dependent on our Western partners, so the whole process should be implemented jointly," Sorokin said at the forum.
Earlier this year, Russia and Germany signed a joint declaration of intent designed to encourage cooperation on sustainable energy, including hydrogen.
Russia and the UAE are also preparing to hold their first meeting of a joint working group on hydrogen in the next two months.
Meanwhile, Japan announced this month it would work with Russia's Rosneft and Novatek on lower-carbon projects, including hydrogen and ammonia, as well as CCS.
Officials from western companies with long-standing involvement in the Russian energy sector have also expressed interest in joining hydrogen projects in Russia, including BP and TotalEnergies.