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Norwegian companies are mulling production of green hydrogen to
guarantee clean, economical, and secure fertilizer and steel
production in India and Brazil.
Norwegian renewable generator Statkraft and hydrogen producer
Aker Clean Hydrogen have signed collaboration agreements
to explore opportunities to produce renewable electricity-sourced
hydrogen and ammonia in the countries, according to a 26 April
statement.
Aker Clean Hydrogen is a hydrogen, ammonia, and methanol
production company owned by a subsidiary of Norwegian industrial
investor Aker Asa.
The pair want to grow hydrogen sales in the "two huge and
important energy markets," for use in fertilizer production in
Brazil and steel production in India.
The companies noted that India is already the world's
second-largest hydrogen consumer. It is also the third-largest
producer of steel.
Both the production processes for steel and the ammonia used to
produce nitrogen fertilizer require natural gas. These processes
also contribute 9% of global GHG emissions, the companies said.
Hydrogen can not only replace natural gas, but also replace
fossil fuel reducing agents needed for making steel.
Russia is the top exporter of fertilizers globally as well as a
key global player in markets for natural gas, a major input to
fertilizer production, according to a report from S&P Global
Commodity Insights.
While fertilizer supply in the Northern Hemisphere has not yet
been affected by the Russia-Ukrainian war, Latin America is highly
exposed and India is partially exposed, experts say. "Brazil's 2023
soybean harvest might be the first crop to experience direct
negative impacts from Russia's war in Ukraine," writes Dirk Jan Kennes, who
heads the agribusiness research division of Dutch banking group
RaboResearch.
Brazil and India are not alone. In the EU, he said, the
production of nitrogen for fertilizer is highly dependent upon
imported natural gas.
Brazilian fertilizer supply
In the Brazilian state of Bahia, the companies are collaborating
on potential power-to-X projects with German renewable developer
Sowitec.
In Bahia, the companies envision a project combining renewable
power generation, hydrogen, and ammonia production, and plan to
supply this to local fertilizer companies.
Brazil currently imports large amounts of fossil fuel-based
fertilizers, they noted. Brazil is the world's fourth-largest
consumer of fertilizers at 8% of the total, and imports 80% of its
demand.
Last month Brazil enacted a National Fertilizer Plan for 2050
that targets attracting foreign investments in local fertilizer
production to decrease import dependency.
Fertilizer is needed ahead of crop growing seasons in July and
August. "Russia's invasion of Ukraine is adding fuel to already
soaring fertilizer prices at a time when planting of major crops
critical to global supplies is getting underway around the world,"
said US-based agricultural data provider Gro Intelligence in a 3
March blog.
"Brazil relies heavily on Russia
for imports of nitrogen fertilizer, which will be needed in many
fields after the corn has emerged," the company said.
Brazil is also a net importer of natural gas, and its high
demand for LNG imports last year is likely to continue for the next
two-to-three years under the "New Gas Market" liberalization laws,
according to S&P Global analysts.
Brazil is looking to become a natural gas exporter, however, as
gas production could double before 2030. This is due to the ramp-up
of production in the Campos and Santos basins, according to a paper by Oxford
Institute for Energy Studies.
Brazilian state-owned energy company Petrobras said the costliness of imported
natural gas had impacted its margins in the third quarter of
2021.
Indian net-zero ambition
In India, the green hydrogen the companies want to produce is
intended to replace some of India's current demand for
natural-gas-sourced hydrogen.
For example, hydrogen, coal, and natural gas are used as fuel
and feedstock in the production of steel, an emissions-intensive
process.
India currently consumes about 7 million metric tons of
natural-gas-sourced hydrogen per year, but it pledged to reach
net-zero by 2070 during last year's COP26 climate change
summit.
Domestic hydrogen production, in the form of green hydrogen from
renewable energy, could not only curb emissions from natural gas
but also support India's energy security, according to Aker Clean
Hydrogen.
Higher spot prices for imports of natural gas in the form of LNG
in the first three months of 2022 led Asian importers to curb LNG
purchases and choose long-term contracts, according to S&P
Global.
After Russia invaded Ukraine, India RLNG Ahmedabad WIM LNG
terminal on 7 March saw a spike in prices to $88.68/MMBtu, however,
prices had fallen to $23.21/MMBtu by 28 April.
In August, Statkraft and Aker Clean Hydrogen partnered with Norwegian
fertilizer company Yara with the goal of decarbonizing and
electrifying Yara's ammonia production at its Herøya Fertilizer
factory in Norway. That was the ambition of the companies' Hegra
project.
While natural-gas-derived hydrogen is currently used in the
fertilizer process, they planned to use renewable electricity to
produce hydrogen instead, resulting in emission-free ammonia.
The companies said this was intended to give Norway "the
beginning" of a Norwegian value chain for green ammonia and
hydrogen.
Cleaning up ammonia production would have helped Norway in
reaching its climate targets. The country is aiming to be carbon
neutral in 2030, reducing emissions by 55% in line with EU targets,
and to rely on offsets for the remainder. It is the highest-ranking
country on net-zero readiness, according to big four
accounting firm KPMG.
But in March 2022, Statkraft and Aker Clean Hydrogen said they would exit the Hegra
project because a feasibility study showed there was no basis for
the project under their ownership, although they did not provide
any explanation at the time.
In September, Yara curtailed 40% of its ammonia production amid
record-high natural gas prices in Europe.
High electricity prices have also proved challenging for local
industry. Norway's government granted electricity bill subsidies as
prices reached new highs in December, but then offered consumers fixed-rate
schemes that replaced the subsidies in March.
On 27 April, day-ahead electricity prices spiked in continental
Europe as Poland and Bulgaria saw their Russian pipeline gas
supplies cut off after Russia required payment in rubles.
Posted 28 April 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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