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INTERVIEW: World's largest green hydrogen project eyes Australian ammonia exports

Highlights

26-GW solar, wind project to supply H2 at $2/kg

Green ammonia exports expected from 2027

Sales to target utilities, industry, shipping

London — The world's largest developer of renewable hydrogen projects, InterContinental Energy, is targeting ammonia exports on a massive scale from its pioneer project in Western Australia, the company's chief strategy officer, Sacha Thacker said May 4.

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InterContinental Energy and its partners in the Asian Renewable Energy Hub plan to build a 26-GW solar and wind project in East Pilbara, Western Australia, to produce hydrogen via electrolysis, and convert the hydrogen to ammonia for export.

The company has received environmental approval for the first 15-GW phase, and expects first production and exports in 2027-2028. It is the largest development of its kind anywhere in the world.

"Nobody had planning approval for a mega project over 10 GW as far as we've seen," Thacker told S&P Global Platts in an interview.

The company is targeting hydrogen production costs of below $2/kg on a full project basis.

"Once you start to have meaningful large-scale production, then we suspect the cost reductions are something on the order of 2% a year," Thacker said.

A final investment decision is expected in 2025. Around 3 GW of the electricity produced could be used locally, but the bulk will be fed into electrolyzers to produce hydrogen and ammonia. The full first phase, which would be around a third of the total capacity, should produce around 3 million mt/year of ammonia by 2031-32, Thacker said.

Size matters

InterContinental's strategy is based on producing large volumes of green ammonia from sites where there is a potential surplus of renewable energy with higher utilization rates, thereby reducing costs. These locations, in the main, are coastal deserts where there is plenty of wind and sun, have ready access to water and few competing land uses.

Western Australia is the company's first project, though it has signaled further announcements soon for an additional Australian project of around 50 GW and another project in the Middle East of 25-30 GW, both in "advanced" stages of development.

Thacker also identified Latin America as a potential mass exporter of green hydrogen and ammonia.

"If you want to import on the seaborne market, you are likely to import from a low-cost exporter and those low-cost exporters are likely to be focused in these three regions," he said.

The company is playing the long game, and while it recognizes the role of small-scale pilot projects in the energy transition, "massive gross reductions are needed everywhere in the long term" to meet net-zero CO2 targets, Thacker said.

Export strategy

InterContinental Energy plans to initially target growing demand for ammonia from the Japanese and South Korean utility and fertilizer sectors, as companies switch to greener fuel supplies to meet net-zero carbon emissions targets in the coming years.

Thacker said utility companies in the region plan to switch to burning ammonia from coal, blending increasing volumes of the renewable gas into the mix.

"The price premium to grey [fossil-fuel-derived hydrogen] is irrelevant for new users because they have never considered using grey," Thacker said. "Once you are going green then your choice is primarily based on, let's look at all the green alternatives and weigh up the cost and benefits of which price is going to be the cheapest. And for that, we think green ammonia is likely to be the cheapest when sourced from our types of geographically-advantaged mega projects."

Ammonia could be the end product, or used as an efficient carrier for hydrogen, Thacker said. Ammonia has a greater energy density per unit volume than hydrogen and does not require such low temperatures to store it as a liquid, so can be more easily transported by ship.

Green marine fuels

Thacker sees the potential for ammonia to displace fuel oil and diesel in the marine fuel segment.

"To run a ship, you need a fuel that doesn't take up a huge amount of space and has high density, which is why you can't do it on hydrogen," he said. "You certainly can't do it on battery. But you can do it on ammonia.

"You can also do it on natural gas, but natural gas probably reduces carbon intensity 30%-40% versus marine diesel. It's quite helpful for your 2030 ambition, but it is grossly insufficient for your 2050 ambitions," Thacker said.

S&P Global Platts Analytics puts the size of the global marine fuels market at around 5.3 million b/d in 2020 -- in the region of 250 million mt/year -- growing to 6 million b/d by 2030.

Thacker said there were increasing orders for ammonia-ready vessel deliveries, with the first expected in 2023-24, and significantly more from 2026. Given the long lead-in times for vessel orders and long lifespans, shipping companies were planning for the future, he said.

The leading shipping companies have said "we're not going to put another dollar of capex into something that could become outmoded and doesn't meet our long-term goals, even if it might meet our medium-term goals," Thacker said.

The International Energy Agency has said that ammonia, biofuels and hydrogen could meet more than 80% of shipping fuel needs by 2070, using about 13% of the world's hydrogen production.

Market development

The existing global infrastructure for ammonia trade, encompassing around 300 ports, would also help the development of the market, Thacker noted.

The modular nature of renewables projects means InterContinental Energy will be able to start exports early in the development, and ramp them up as demand increases.

Thacker thought the green ammonia market would develop along similar lines to LNG, with early supply going to dedicated offtakers.

"If you're a buyer, you need security of supply, and if you're a seller, you need security of revenue without which you can't finance the project and because of the size and cost of the project, they need low-cost financing otherwise the economics don't work.

"Some of those contracts will allow things like redirection of cargoes, and that is how a spot market begins," but that would take time, he said.

Thacker thought green ammonia would be priced in dollars per ton, as there was no suitable alternative reference price. He expected early market prices in the low $400s/mt, quickly falling to the mid-$300s/mt.