Over the past five years, there has been a surge in proposals for Green and Blue Hydrogen projects in Australia. Technically, these projects are sound and feasible. However, despite their promise, a puzzling trend has emerged: many of these projects are stalling or getting halted altogether. What is causing this setback in an industry that appeared poised for growth?

Supply is Not the Issue

Various supply schemes have been proposed, including Blue Hydrogen produced from natural gas with carbon sequestered as CO2 and Green Hydrogen generated through the electrolysis of water using renewable sources like solar, wind, or hydroelectric power.

The Missing Piece – Demand

Numerous applications for Hydrogen have been proposed, from powering Fuel Cell Electric Vehicles (FCEVs) including cars, trucks, and trains to serving as a precursor for ammonia or methanol, which can be used in fuels, fertilizers, or petrochemicals.

Hydrogen could find application in power generation, particularly in Asian countries like Japan and South Korea, as well as in serving as a feedstock for Green Steel plants. Australia and Japan have collaborated on a demonstration hydrogen shipping run from Victoria to Japan to test the feasibility of hydrogen transportation.

No ambitious hydrogen supplier has secured a sales contract to underpin their projects thus far. What is holding back the hydrogen-consuming industry?

The Energy Cost Conundrum

At the 2022 AFR Climate and Energy Summit, Saul Griffith drew attention to a relatively unexplored issue with green hydrogen—it’s remarkably energy-inefficient. While modern batteries offer an overall efficiency of 90% or better in storing solar energy, hydrogen lags behind at less than 40% efficiency.

Hydrogen’s key advantage as an energy store is its longevity; it doesn’t lose charge over months like batteries do. However, while the cost of storing energy in hydrogen is cheaper than in equivalent batteries, that cost hasn’t yet offset the energy loss incurred during hydrogen production.

The Profit Challenge

The high energy cost directly impacts profit drivers. For hydrogen to gain rapid and widespread industrial and commercial adoption, businesses must find it more profitable than existing energy sources. Currently, that’s not the case. As Saul Griffith points out, why convert your solar power into hydrogen and lose half of the energy before it powers your vehicle or AC units when direct solar offers 95% efficiency and solar-to-batteries-then-use exceed 90% efficiency with fewer moving parts and safety concerns? Few individuals and businesses are willing to pay a significant premium for hydrogen-based power.

Historically, energy transitions have been driven by inherent profit drivers, whether it’s the reliability of supply, lower capital or operating costs, or ease of use. The advent of modern energy sources of coal, oil, natural gas, LNG and nuclear fission were all driven by strong profit and operating advantages over the incumbent sources. Think diesel power trains vs wood fired steam versions or steam powered ships vs sailing ships.

The only precedence for the world’s industries absorbing an additional cost to transition on behalf of climate has been the elimination of CFC refrigerants to protect atmospheric ozone.  And why was that possible? Because in large part no country’s economy was based on producing CFCs, the cost impact was marginal and CFC users were able to easily pass the cost onto end consumers.

Hydrogen needs to demonstrate a clear commercial advantage over incumbent fossil fuels or battery alternatives to drive uptake. And one that is palatable to end consumers, the energy consuming public.

Safety and Regulation

Safety is a significant concern with hydrogen, as it is inherently more dangerous than natural gas. Hydrogen can self-ignite when leaking, is prone to detonation, burns with a clear flame, and can easily permeate solid materials. As the industry matures, safety and regulation standards for hydrogen manufacture should be developed, similar to existing standards for storage, piping, transport, and fuel dispensing. It’s worth noting that current electric vehicles (EVs) are not without safety issues, primarily related to fires, which are expected to improve with advancements in battery chemistry.

Navigating the Hurdles

For hydrogen to thrive it must demonstrate a clear commercial advantage over fossil fuels and battery alternatives. How can this be achieved? Here are some potential pathways:

• Government incentives, such as CO2 penalties or subsidies, like those offered by the USA via the Inflation Reduction Act.
• Technological breakthroughs in hydrogen production and storage that improve round trip efficiency, closing the gap with batteries.
• Development of robust safety standards and technical solutions that make hydrogen as safe, or safer, to handle than petrol (gasoline) or battery charging.
• Mass adoption of fuel cell vehicles to create economies of scale and drive infrastructure development.
• Maintaining a competitive advantage over battery-based transport.
• Implementing strict city regulations on air quality that favour hydrogen (or electric) solutions over diesel-fuelled transport for trucks, buses, and trains.
• A shortage of battery metals that increases the cost of FCEVs, home batteries, and grid batteries, making hydrogen-based solutions more attractive.
• Development of a close to zero-cost energy supply to negate the impact of energy losses in producing hydrogen. The Nuclear Fusion promise.

BE&R’s view on further considerations

Here is an overview of the challenges related to hydrogen projects, specifically in the context of blue and green hydrogen:

• Availability of Carrier Ships: The availability of carrier ships is a critical factor for transporting hydrogen, especially for export or long-distance transportation. The demand for carrier ships may outstrip the shipbuilders’ capacity to construct them. This can pose a logistical challenge for the efficient transportation of hydrogen to markets.
• Finding Skilled Personnel: Hydrogen projects require specialised knowledge and expertise in handling hydrogen production, storage, and transportation. Finding individuals with prior experience in these areas can be challenging, as the hydrogen industry is still evolving.
• Regulatory Approvals: The production and distribution of hydrogen involve new technologies and processes. Consequently, obtaining regulatory approvals and navigating the regulatory landscape can be complex. Regulators may not have established guidelines or standards for certain aspects of hydrogen production, which can lead to delays and uncertainty in project development.
• Supply Chains for Electrolysers and Hydrogen Equipment: The production of green hydrogen often relies on electrolysis technology, which requires specialised equipment such as electrolysers. Establishing reliable supply chains for these components can be challenging, particularly when there is a surge in demand for green hydrogen projects. Ensuring a stable supply of electrolysers and other hydrogen-related equipment is crucial for project success.
• Customers Receiving Facilities: To bring hydrogen to end-users or customers, there must be facilities capable of receiving, storing, and utilizing hydrogen. This includes not only industrial facilities but also infrastructure for hydrogen refuelling stations in the case of hydrogen for transportation. Developing a network of facilities that can handle hydrogen safely and efficiently is essential for the widespread adoption of hydrogen as an energy carrier.

In summary, these challenges represent key considerations in the development and scaling of blue and green hydrogen projects. Addressing these issues effectively is essential for the growth of the hydrogen industry and its role in the transition to a more sustainable energy future.

Conclusion

The path to a hydrogen-powered future is filled with challenges, but with the right combination of innovation, regulation, and market incentives, the industry can overcome these hurdles and realize its full potential.

Let’s start this conversation and explore the possibilities together. How good can hydrogen efficiency get, and how can we get there?

References

Green Hydrogen, chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Nov/IRENA_Green_hydrogen_policy_2020.pdf, International Renewable Energy Agency (IRENA), 2020.

Saul Griffith – https://www.afr.com/companies/energy/an-investment-opportunity-the-likes-of-which-we-ve-never-seen-20221012-p5bp77, October 2022.

The difference between green hydrogen and blue hydrogen, https://www.petrofac.com/media/stories-and-opinion/the-difference-between-green-hydrogen-and-blue-hydrogen/, Petrofac, 2023.

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Contaminants such as mercury, Naturally Occurring Radioactive Materials (NORMs), and tank bottoms pose potential environmental and health risks if not handled appropriately. In this article we delve into some of the complexities of decontamination and decommissioning in the oil industry, focusing on the contaminants of concern and the strategies for their safe removal and disposal.

Contaminants of Concern

Mercury (Hg)

Mercury is a persistent issue in the oil industry, often present in hydrocarbons at concentrations ranging from 1 to 100 nano-grams per kg of oil or m3 of gas (ηg/kg liquid or ηg/m3 gas). Some recent gas projects have even recorded significantly high concentrations exceeding 1100 ηg/m3.

Mercury absorption onto steel surfaces, including pipelines, vessels, and storage tanks, accumulates over the lifespan of a field. During decommissioning activities involving metal heating processes like angle grinding, hot-cutting, or welding, toxic mercury vapor can be released. Additionally, abandoning subsea pipelines raises concerns about the long-term impact of corroding pipes on oceanic mercury levels.

NORMs (Naturally Occurring Radioactive Materials)

Although produced fluids typically contain trace concentrations of radioactive elements like radium, strontium, and cesium, the levels are usually low and of minimal concern during production operations. However, during decommissioning, there is a risk of workers being exposed to radioactive dust when dismantling tanks, which can lead to health concerns.

Tank Bottoms:

The sludge and heavy hydrocarbons that accumulate at the bottoms of FPSO tanks can be challenging to manage. FPSO tanks may contain up to two meters of this viscous material, requiring solvents and/or steam for mobilization.

Decontamination Methods

The primary decisions in addressing contaminants during FPSO decommissioning revolve around whether to decontaminate in situ or relocate the facility to a specialist location. Decontaminating mercury adsorbed onto metal surfaces is a subject of ongoing research, especially concerning pipelines’ treatment before abandonment. Chemical washing is a commonly considered method for removing mercury from metal surfaces.

This process typically involves the use of chemical solutions or reagents that can bind to and remove mercury from the contaminated surfaces. Various types of chelating agents, such as EDTA (Ethylenediaminetetraacetic acid) and thiourea, have been investigated for their ability to complex with mercury and facilitate its removal from metal substrates. Specialist shipyards and piping fabrication yards may employ vacuum and fume recovery systems to protect workers and the environment during decontamination activities.

Disposal Routes

Mercury on absorbents can be recovered by specialized processors, potentially being converted into e.g. a pure liquid for sale as a commodity. Alternatively, it can be disposed of in registered landfills in a stable and insoluble chemical form.

NORMs can not be neutralized like toxic chemicals. Safe disposal options for materials emitting radiation levels above background include injecting them into wells as part of abandonment activities, sending them to registered landfills, or encasing them in concrete.

Tank bottoms often find their way to refineries equipped with processes to transform them into marketable products such as bitumen, lube oils, or cosmetics. In some cases, they are used in road sealing materials, albeit with the drawback of producing slippery roads until breakdown occurs under UV light.

Costs

Managing contaminants during FPSO decommissioning is a complex and costly endeavour. Contaminants in this context can refer to a wide range of substances, such as hazardous materials, pollutants, and waste products that need to be properly handled and mitigated to minimize environmental harm and ensure worker safety. These contaminants can significantly increase the overall cost of the decommissioning process, with labour costs being a major contributing factor. Here’s an expanded discussion on these cost components:

1. Environmental Impact Assessment (EIA): Conducting a comprehensive EIA is essential to identify potential environmental risks and impacts associated with the decommissioning process. This involves studies, data collection, and assessments carried out by environmental experts.
2. Labour Costs: Managing contaminants during FPSO decommissioning is a labour-intensive task. Skilled workers are required to handle hazardous materials, operate decontamination equipment, and ensure proper waste segregation and packaging. Labor costs can be two to three times higher than conventional decommissioning due to the specialized expertise and safety precautions involved.
3. Safety Equipment and Gear: Workers involved in managing contaminants must wear specialized safety gear and equipment to protect themselves from exposure to hazardous substances. This includes respirators, protective suits, gloves, and other safety equipment.
4. Regulatory Compliance Costs: FPSO decommissioning must adhere to strict regulatory guidelines and standards. Ensuring compliance with these regulations requires resources and investments in documentation, reporting, and adherence to safety protocols.
5. Waste Segregation and Packaging: Proper segregation and packaging of waste materials are crucial to prevent cross-contamination and ensure safe disposal. This involves the use of specialized containers and labelling.
6. Decontamination Equipment: Specialized equipment is necessary for decontaminating equipment, machinery, and facilities used in the decommissioning process. This equipment must meet stringent safety and environmental standards, adding to the cost.
7. Monitoring and Testing Equipment: Continuous monitoring and testing of the environment and personnel are necessary to ensure safety and compliance. The procurement and maintenance of monitoring and testing equipment contribute to project expenses.
8. Transportation Logistics: Contaminated materials must be transported safely and securely to designated disposal sites. This includes arranging for specialized transportation methods and logistics.
9. Disposal Site Fees: Fees associated with the disposal of hazardous waste at authorized facilities can be substantial, especially when dealing with contaminants from FPSO decommissioning.
10. Contaminant Remediation: Remediation efforts may be required to mitigate the long-term environmental impact of contaminants. These efforts involve additional costs for cleanup and restoration potentially well past the life of the initial decommissioning project.
11. Environmental Consultants: Engaging environmental consultants and experts to provide guidance, assessments, and expertise throughout the decommissioning process is necessary.
12. Waste Tracking and Documentation: Comprehensive tracking and documentation of waste generation, handling, and disposal are essential for regulatory compliance. Maintaining accurate records is both time-consuming and costly.
13. Public Relations and Community Engagement: Engaging with local communities and stakeholders to maintain transparency and address concerns is vital. Public relations efforts may require additional services for promotions, lobbying and advertising.
14. Legal Costs: Legal assistance may be required for navigating complex regulations, obtaining permits, and addressing any potential disputes or liabilities that may arise during decommissioning.
15. Planning and Approvals: Effective planning and obtaining necessary approvals, as mentioned, involve costs related to regulatory submissions, consultations, and negotiations with relevant authorities and stakeholders.

In summary, managing contaminants during FPSO decommissioning is a complicated and expensive process due to the need for specialized labour, equipment, compliance with stringent regulations, and the complex nature of handling hazardous materials.

Effective planning, budgeting, and adherence to environmental and safety standards are essential to successfully complete such projects while minimizing environmental impact and ensuring safety. Good practice would include benchmarking your costs estimates against similar projects.

Conclusion

The management of contaminants during FPSO decommissioning is a multifaceted challenge that demands thorough planning, adherence to regulatory requirements, and a commitment to environmental stewardship. BE&R Consulting recognizes the importance of addressing this issue with diligence and professionalism.

By comprehensively managing contaminants and adhering to best practices, we can contribute to environmentally responsible decommissioning practices and bolster our reputation in the industry.

References

Decommissioning Research Needs for Offshore Oil and Gas Infrastructure in Australia, https://www.frontiersin.org/articles/10.3389/fmars.2021.711151/full , 29 July 2021, Frontiers.

IMO.org: MEPC 63/23, ANNEX 4, RESOLUTION MEPC.210(63), Adopted on 2 March 2012, 2012 GUIDELINES FOR SAFE AND ENVIRONMENTALLY SOUND SHIP RECYCLING.

Northern Endeavour Phase 1 Decommissioning, https://epbcpublicportal.awe.gov.au/_entity/sharepointdocumentlocation/6a3d9448-7155-ed11-9562-00224818a1ee/2ab10dab-d681-4911-b881-cc99413f07b6?file=Att%201-EPBC%20Referral%20Supporting%20Document-V2-2022-10-17.pdf , 17 October 2022, GHD & The Department of Agriculture, Water and the Environment.

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