A blue future


News analysis

The “window” that former Alaska Gov. Bill Walker and his half-million-dollar Texas sidekick spent years suggesting had opened for an Alaska natural gas pipeline never did, and now it’s looking more and more like it might be bricked shut.

“Pipeline owners look to hydrogen as natural gas comes under attack,” Bloomberg reported at the end of January. 

“Three million miles of natural gas pipelines criss-cross the U.S., and the fight against climate change could render them all obsolete,” the website reported, suggesting a sooner than expected shift to the world’s cleanest burning fuel.

Those are pipelines already built, not structures existing only in someone’s imagination. Alaska’s proposed $38 billion gas line is a dream, and it is now faced by a presidential administration generally opposed to the use of established fossil fuels criticized for their contribution to global warming.

Enter hydrogen, be it grey, blue or green. Europe and Japan are already pushing toward hydrogen-powered economies primarily driven, at this time, by blue hydrogen. It’s the stuff made by stripping the hydrogen out of natural gas while capturing the carbon dioxide (CO₂) to prevent its release into the atmosphere.

Blue hydrogen is considered a bridge fuel to true green hydrogen produced directly from water by using the excess energy from wind and solar power plants that suffer from power outputs often out of sync with power demands. Using excess power to create hydrogen is one way to store that power.

Globally, hydrogen remains a relatively rare fuel, but the International Energy Agency (IEA) says the fuel is “currently enjoying unprecedented political and business momentum, with the number of policies and projects around the world expanding rapidly.

“Supplying hydrogen to industrial users is now a major business…. Demand for hydrogen, which has grown more than threefold since 1975, continues to rise – almost entirely supplied from fossil fuels, with 6 percent of global natural gas and 2 percent of global coal going to hydrogen production.

Were former Alaska Gov. Wally Hickel still alive, you’d probably now be reading about the potential for a railroad to the North Slope on which to run hydrogen-powered trains that could haul hydrogen tank cars and freight south from a natural-gas steam cracker and processing plant that would produce both hydrogen and olefin-carbon fiber yarn for use in the manufacturer of auto parts and more.

Hickel was a dreamer and a visionary, but first and foremost he was a businessman. And as a businessman, he understood success comes not from producing the prettiest product, the most advanced product or even the absolute best product, but from producing the product the market demands.

A changing world

Nobody can know what the market of tomorrow will demand, but Saudi Arabia has already announced a $5 billion investment in a green hydrogen production and offered the suggestion it could start piping hydrogen to Europe.

‘Powered entirely by sun and wind,” the Saudi operation “will be among the world’s biggest green hydrogen makers when it opens in the planned megacity of Neom in 2025,” Gulf News reported earlier this month, noting that the  European Union is committing $500 billion to building hydrogen infrastructure.

The project is a huge gamble in that green hydrogen is the most expensive hydrogen to produce. But the gamble would appear a sensible, long-term move for the Saudis, who today remain the world’s largest oil exporter.

That oil is going to run out someday, though there is considerable debate about when.

Midway through the last decade, it was estimated the Saudis could go on producing oil at the current rate for another 70 years, but Reuters reporter John Kemp at the time noted “widespread skepticism about the official estimates,” and observed that if the estimate is correct “the kingdom has managed the remarkable feat of exactly replacing each produced barrel with new discoveries or increased estimates of the amount recoverable from existing fields” for approximately three decades.

Whatever the case, the oil will run out because oil fields do not produce forever. They can only last so long before they are pumped dry. Alaska has witnessed how this works.

Alaska North Slope oil production peaked at more than 2 million barrels per day in February 1988, according to the U.S. Energy Information Administration (EIA), and has been falling ever since to current levels in the range of 450,000 barrels per day. 

Sunlight and wind, on the other hand, are unlimited, and Saudia Arabia has access to plenty of both. The Red Sea forms the country’s western boundary, the Persian Gulf its eastern edge.

“Saudi Arabia is one of the best-placed countries to harness solar energy, with some of the highest solar radiation levels in the world,” according to a report from the King Abdullah Petroleum Studies and Research Center. “In building a global hub for renewable energy, the Kingdom aims to future-proof its economy by relying less on oil export revenues and attracting new technologies into the region.”

Between the Red Sea and the Persian Gulf, much of Saudi Arabia is barren desert. By investing petrodollars in the development of water wells and coastal desalination plants, the country has been able to use irrigation to boost its agricultural production, but the country is never going to become a major, global food supplier,  although it could become a Bristol Bay size salmon producer by 2030 if and when its Vikings Label salmon farm reaches full production.

Given limited economic opportunities and sure to decline oil supplies, hydrogen looks like a good bet on the future for the desert kingdom if, of course, hydrogen becomes the energy of the future.

Resurrected dreams

This isn’t hydrogen’s first ride on the bandwagon. It was here before and fizzled. Former President George W. Bush was pushing hydrogen aggressively in the early 2000s.

“Both President Bush and European Commission President Prodi have made the development of a hydrogen economy a major priority,” a statement from the Office of the Press Secretary at The White House trumpeted at the time.

“President Bush’s Hydrogen Fuel Initiative announced on January 28, 2003, envisions the transformation of the nation’s transportation fleet from a near-total reliance on petroleum to steadily increasing use of clean-burning hydrogen.”

The Bush plan never caught fire. And there is debate as to just how much has changed since then, but there are growing signs of a move to a fuel for which Bloomberg estimates there could be a $700 billion, international market within two decades. 

TECO 2030, an alternative energy company, last week announced plans to build a hydrogen fuel-cell plant in Narvik, Norway to produce powerplants for ships. The Norwegians have been at the forefront of countries trying to end their emissions of carbons.

“We also note that Narvik has a positive attitude towards industry and business development, and we hope and believe that this initiative will create significant ripple effects in the city and region related to hydrogen, an energy carrier recognized to have great potential,” company CEO Tore Enger told The Maritime Executive. “While the neighboring city of Harstad is the oil capital of Northern Norway, our goal is now that Narvik becomes Norway’s hydrogen capital.”

Alaskans have sometimes harbored visions of mimicking Norway – an oil, gas and fish producer with a wealth fund now worth $1.3 trillion or about 20 times the value of the Alaska Permanent Fund.

Alaska is not, however, viewed as sharing Norway’s “positive” attitude toward industry and business. Norway bills itself as a global leader in slowing global warming but appears to be just as interested in making money.

The country’s four-year-old pledge to go “carbon neutral” by 2030 hasn’t been making much progress, according to the Climate Action Tracker.

“Norway’s long term, 2050 goal of becoming a ‘low-carbon society’ was engrained in the Climate Change Act in 2017, described as an 80 to 95 percent reduction below 1990 levels,” according to the Tracker, which expects Norway to be less than a quarter of the way toward that goal, at best, by 2030. 

The worst-case scenario puts Norway only 15 percent of the way there. Climate Action rated Norway’s carbon-cutting actions “insufficient,” and said it’s not meeting the standards of the Paris Agreement of 2016.

Norway is good at talking the climate change talk while walking the business walk. Alaska appears bad at both. Whether the state could in this case benefit from copying Norway is hard to say.

The future is impossible to accurately predict. Hydrogen fuel could again go bust, but at the moment former Secretary of State and former U.S. Sen. John Kerry, now President Joe Biden’s special envoy for climate, has been pressuring U.S. oil and gas companies to invest in the development of clean-burning hydrogen.

The big attraction is that the main waste product from hydrogen combustion is water.

“There is still some resistance to this transition and that’s something we can’t afford anymore,” Kerry said at the start of the month as he envisioned a world where hydrogen “could eventually be used to power factories, cars and even planes” as CNN reported the story.

Grey, green, blue

Green hydrogen produced as a by-product of wind and solar power plants is the big dream of environmentalists. But the economics of the moment are not favorable.

“Gray hydrogen can be produced at a cost under $1 per kilogram, even assuming a natural gas price at $3.50/MMBtu,” according to S&P Global Platts, an energy consultancy. “Adding carbon capture to make blue hydrogen raises the cost to roughly $1.40 per kilogram. Making the fuel green through a PEM (proton exchange membrane) electrolysis production method,…more than triples that cost to an estimated $4.42 per kilogram – assuming a renewable power cost of $65/MWh.

Costs only go up if the renewable power cost is higher, or down if it is lower. Blue hydrogen costs could also be reduced if captured carbon dioxide (CO2) – the greenhouse gas blamed for global warming – were, for instance, used to pressurize aging oil wells to produce more oil.

The EIA says U.S. oil production could witness a significant boost if producers utilized “CO2 enhanced oil recovery technologies to extract additional crude oil from existing producing fields.” 

But as with all business propositions, this is a numbers game. The value of the recovered oil has to be high enough to cover the costs of capturing and reinjecting the CO2 to make such projects feasible.

The technology itself is well proven.

“The injection of CO2 gas into oil reservoirs at high pressure forces the CO2 to mix with oil. This reduces the oil’s viscosity and causes the oil to increase in volume. The result is an increase in the total cumulative volume of oil produced and in the percentage of oil-in-place that is recovered,” according to the EIA.

The geophysical properties of some oil reservoirs might make the process impossible, but the main impediment is with costs. And as Alaskans well know, or should, costs have always been the big issue in Alaska’s Arctic oil fields where remoteness and extreme weather do nothing but drive costs up.

Arctic oil development is agreed to be the most costly in the world, though industry officials do not publicly release production costs. But high costs were believed to be behind the lack of interest in a long-awaited sale of oil leases in the Arctic National Wildlife Refuge (ANWR) in January.

“Oil companies largely snubbed the controversial lease sale, while the highest bidder on nine out of the 11 tracts was Alaska Industrial Development and Export Authority (AIDEA), a company held by the state of Alaska. The two other takers in the lease sale were Knik Arm Services LLC and Regenerate Alaska, Inc.,” reported Oil Price, which labeled the sale a “flop.” 

Per Magnus, an analyst for Rystad Energy, had earlier predicted a lack of interest on the part of the oil majors.

“ANWR could be a very expensive zone to start in. It has little infrastructure,” he told CNN Business. He predicted breakeven production costs of around $80 to $85 a barrel, which is more than the oil is worth at this time and about twice the costs of production in the Permian Basin in the U.S. Southwest.

The ANWR sale raised serious questions about the odds of increasing North Slope oil production to maintain the diminishing flow of crude through the Trans-Alaska Pipeline System (TAPS). That has raised new questions about how to best utilize proven reserves of oil and gas, especially the 45 trillion cubic feet (TCF) of gas now stranded there.

A gas line is still under consideration. Natural gas-fueled power plants sending electricity south to the rest of Alaska and on to the rest of North America have been raised as a possibility. And the production of blue hydrogen with the CO2 stripped out and reinjected to boost North Slope crude production might be worth a look.

One can only wonder what Hickel would think.


11 replies »

  1. If I did the math right, 1kg of hydrogen has the energy equivalent of 124 cubic feet of natural gas, the Henry Hub price is currently $2.52 per MMBtu or 973 cubic feet. For $2.52 I can buy the equivalent of 7.85kg of grey hydrogen that cost $1 per kg or $7.85. Maybe when natural gas prices rise more in a few decades or the costs to make hydrogen drops substantially.

    Of course with the rates we pay for natural gas in AK this is already a competitive price point…

  2. One of the things learned in Texas last month was on-site availability of fuel. Coal and nuke facilities generally have weeks to months of fuel stored on-site. Natural gas is supplied in near real time via pipeline. And wind / solar only generate when wind is blowing or the sun is up. Hydro generates as long as there is something in the reservoir behind the dam. Obvious, right?

    Problem in Texas was they lost one of 4 reactors because cooling lines weren’t freeze protected. They retired a lot of coal-fired generation over the last decade. None of the natural gas was freeze protected at the wellhead or distribution, so it was unable to meet the demand spike. And the windmills were frozen / ice encrusted. Not enough solar or hydro in Texas to matter much.

    I don’t know of any natural gas facility that stores an appreciable amount on-site. We certainly don’t do it up here in SouthCentral. Everything comes in via pipeline. It is well freeze protected, though massive quakes would pose a problem.

    Whatever we end up with needs to consider (encourage?) months to weeks of fuel available on-site. Cheers –

    • Massive quakes could indeed cause a problem. It is why everyone in the Cook Inlet basin should have a realistic contingency plan. How many do?

  3. Ken/Ag,
    We may get there eventually, but the story is not all a bed of roses at this point.
    A good primer for those of us not uptodate,I knew a small bit about the VC Summer project by way of public util investment, this was a bit more of a long shadow on how not to do things on a ginormous scale.
    I suspect the basket approach will be with us for along time, and thats probably good, from a risk management point of view.
    It would seem that either the price of conventional energy will get exceptionally expensive to change our current power generation balance,or
    A radical change in thinking to justify the expense(which has other implications).

  4. Remember that electric is only responsible for about 1/3 of total energy use in AK. Heating is another 1/3. Vehicle fuels is the final 1/3. Diesel (AvGas / kerosene / RP-1 / JP8) is well known, easily transportable, easily storable, usable down to -70F, and best of all can be produced by CTL / GTL Fischer – Tropsch techniques. We can do that here in AK for centuries based on what we know is in the ground today. Can burn it in existing vehicles.

    H2 is nice, but really difficult – and expensive – to handle today. I could see methane (CH4) being used for vehicular fuel before H2. Of course, technology keeps moving, and we will likely see some real improvements in battery tech (Tesla has at least one design that looks really promising) shortly. Agree with KenS that GenIV nuke is probably the Next Big Thing. Cheers –

  5. Sun and Wind may be unlimited, but wind turbines and solar cells are limited.
    They have a limited life span of between 10 and 25 years.
    If the Saudi’s build turbines now, they will be worn out and gone or replaced several times before oil and gas production diminishes to the point that replacing them with hydrogen makes economic sense.

    Hydrogen does burn clean, but every source of power required to create it has environmental problems. Burning things emits chemicals. Wind and solar create huge volumes of difficult to recycle worn out turbine blades and solar cells. Their construction and maintenance require mining rare earth minerals, lots of carbon emitting cement and other emissions.

    Since approximately 30% of the original energy is expended creating green hydrogen, the environmental problems of the original energy source are increased by the same 30%.

    It is more efficient to use the energy directly. Transportation is one of the few uses where electrical energy cannot be used directly, except for trains. For free range vehicles, the electrical energy must be stored in a battery or in hydrogen for later use.
    Hydrogen and batteries are competing against oil and natural gas for the transportation niche. They are going to require a lot of improvement both in price and function before they can win that competition.

    Building batteries requires a fair amount of environmental degradation to acquire the rare earth elements. We may not be willing to mine enough rare earths to go all battery.

    We need to get over the fantasy we can have the energy we need to reduce much of the poverty and misery in life, without any impact on the environment. Accept there are trade-offs, figure out the best match for each energy requirement, and go for it. Free markets can go a long way in sorting this out by utilizing the collective intelligence of our entire population as expressed through their individual decisions.

    My money is on the 4th generation nuclear.
    Melt down proof. Smaller less expensive modular factory construction. Some 4th generation reactors are small enough to be sited where existing reactors are and utilize the waste stored there as their fuel.
    Install enough of those and there will be plenty of excess energy to make all the hydrogen and desalinated water the world might need with very few emissions.
    If you want to capture carbon, there would be plenty of energy available for that also.

  6. I think Hickle would have done his absolute best to get North Slope gas to market … but, as a businessman, there would be several thick folders on his desk titled “Hydrogen-Energy”, plus a 3-person task-force implementing extensive research on the subject.

    What the heck, someone should take the time, grab a psychic, go over to Anchorage Memorial Park and ask Wally … remember he’s standing there “fighting for Alaska and what he believed-in, forever”!

    Yep, Alaska could sure use another great visionary like Hickle!!!

    Someone not supported by soros, bloomberg, steyer, etc …

  7. Blue Hydrogen and Alaska LNG aren’t mutually exclusive and in fact one will eventually dovetail into the other. LNG is demand is destined to double according to every credible forecast and is the clean bridge fuel. The subsurface formations underlying Cook Inlet are a premier carbon sink and eventually the North Slope natural gas delivered to Nikiski will have its carbon removed and sequestered within them. From there, either as liquified hydrogen or as ammonia, this carbon free fuel will be exported to Asia. The opportunities that the Alaska Gasline will bring are at our fingertips.
    Alaska LNG is economic but is highly capital intensive and so require the necessary statutes to provide stability for the investors. It’s time to move forward with the Gasline.

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