High transportation costs could drive industries such as steel manufacturing to move to regions where hydrogen is produced, according to Saudi Aramco’s chief technology officer, Ahmad al-Khowaiter.

Transportation costs for hydrogen are far higher than those for natural gas and oil because hydrogen molecules are volatile and difficult to liquefy.

"There’s a big incentive for industries like steel to move to where the source of the blue and green hydrogen is" Khowaiter, Aramco

“There’s a big incentive for industries like steel to move to where the source of the blue and green hydrogen is,” says Khowaiter.

Hydrogen-reliant industries could mirror the trend seen in primary aluminium smelting, which has migrated to regions with cheaper electricity sources such as hydropower, he told a panel discussion this week organised by the International Association for Energy Economics.

Saudi Aramco can produce blue hydrogen domestically for around $1/kg and green hydrogen for $2/kg. To transport this to Japan the hydrogen would have a delivered cost of $2/kg for blue hydrogen and $3+/kg for green hydrogen, says Khowaiter.

“The economics of this are not going to be I think as a traded commodity as much as hydrocarbons are—it is going to be much more limited,” Khowaiter adds.

He likens the transportation cost challenges for hydrogen to those faced in the early stages of the LNG market—which took decades to develop into a global trade.

 Natural gas suppliers in Russia and North Africa may, however, be able to use existing pipeline infrastructure to provide some hydrogen to industrial units elsewhere.

Blue vs green

The argument for green hydrogen over blue hydrogen has not necessarily taking into account the large in capital costs between the two, Khowaiter says.

Green hydrogen production could require five times the capital outlay needed for blue hydrogen, even taking into account the cost of carbon capture and storage (CCS) needed for blue hydrogen, he says.

$2/kg – Production cost of green hydrogen

Saudi Aramco is working hard to lower the costs of CCS, and the firm will soon publish new data to show improved economics for projects in the Mid-East Gulf. “There is a huge opportunity for CCS in the region,” he says.

The company is also working on lowering reformer costs for the conversion of natural gas to hydrogen. The process could see hydrogen retaining 90pc of the energy present in natural gas—up from about 60pc currently, according to Khowaiter.

Saudi Aramco is also interested in using ammonia as a form of transport for hydrogen molecules, Khowaiter adds. The company is already one of the biggest ammonia exporters following its acquisition last year of petrochemicals group Sabic.

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Author: Stuart Penson