Global Hydrogen Corridors: Essential Pathways To Decarbonisation

Barend van Schalkwyk, business development director at OCI Global explores the impact of global hydrogen corridors on decarbonising energy-intensive industries.

Lower-carbon hydrogen and its derivatives, methanol and ammonia, can significantly reduce greenhouse gas emissions (GHGs) across some of the most energy- intensive industries, including shipping, industrial manufacturing, agriculture and power generation. As a new low carbon hydrogen economy emerges worldwide, regions with the best access to renewable feedstock sources, technology developments and geographical advantages have the opportunity to take the global lead in production – though the regulatory landscape remains a fundamental factor.

Today, there are discrepancies between key producing regions such as the USA, where there is financial incentive to drive the production of lower-carbon ammonia and methanol, and the EU, where regulation is driving high demand for lower-carbon products. Meeting global climate goals will require a substantial increase of these products and the development of global trade corridors to transport them. The most efficient means of facilitating the global trade of hydrogen and derivatives is through maritime hydrogen corridors and the development of global corridors is urgent in order to capitalise on current supply and demand dynamics and maximise the global reduction of emissions in the short term.

Energy Transition In The USA vs EU

Governments are waking up to the need for regulatory incentives and mandates to curb emissions, which will catalyse demand for lower carbon fuels such as methanol and ammonia. However, the landscape is uneven. On the supply side, the USA leads the way with the Inflation Reduction Act (IRA), signed into US law in August 2022, committing $369 billion (€341 billion) in subsidies to spur investment in green technology through grants, loans and tax credits to public and private entities.

In the 12 months since the IRA’s inception, the private sector has announced more than $110 billion in new clean energy manufacturing investments. Among the pioneering decarbonisation projects benefiting from the IRA is OCI’s Texas Blue Clean Ammonia project. OCI took FID on the project in September 2022, aided by leveraging the use of IRA defined 45Q tax credits for the project, which provides for carbon oxide that is geologically stored permanently. While the 45V tax credit, which provides a credit of up to $3 for each kg of qualified clean hydrogen, has supported our strategy to offtake of green hydrogen to produce both methanol and ammonia.

On the demand side however, the US lags behind other key energy markets. In the EU, regulatory policy is driving demand across several sectors, with shipping being one key example. FuelEU Maritime, which requires ships to gradually cut their emissions by 2025 and beyond, has sparked higher demand for green shipping fuels, such as green methanol. There are more than 250 Methanol Duel Fuel engines on order across more than 35 shipowners today, with increasing number of retrofits in addition to new ship orders, as the shipping industry looks to decarbonise its operations. OCI expects to see a similar impact in the growth of ammonia as a clean marine fuel in future with ammonia-ready ships hitting the water in the next five years.

In March, the International Maritime Organisation put more structure behind the 2050 net zero ambitions it announced last year, with mid-term measures including the establishment of a global fuel standard for marine fuels and a global pricing mechanism for greenhouse gas emissions from ships being agreed at the organisation’s 81st Maritime Environment Protection Committee session, which concluded on 22 March.

More broadly, the EU REDIII has set targets for use of renewable fuels of non-biological origin (RFNBOs) in the transport sector, as well as green hydrogen adoption for current industrial uses by 2030. These initiatives certainly provide a positive demand signal for European domestic production and investment. However, to meet such targets within the desired time frame and at a cost-competitive scale will also require imports from countries like the USA, where there are supply subsidies to match. Thus, regulatory alignment and coordination across borders on requirements for electricity and hydrogen production will be key to creating a global corridor for green hydrogen.

Preparing Infrastructure

To create maritime hydrogen corridors at the speed and scale needed to address the climate crisis, infrastructure needs to be prepared urgently. OCI is in a strong position to lead this transition, connecting supply with global demand.

OCI is in the process of tripling throughput at its ammonia import terminal at the Port of Rotterdam, Netherlands, Europe’s largest seaport, connecting the USA to MENA and Europe. The expanded terminal will have capacity for 1.1 million tonnes per annum of ammonia in its first phase (with further expansion possible), and will enable a clean hydrogen corridor between the USA and Europe, where demand for lower carbon fuels and feedstocks is higher.

Collaboration Across Corridors

The global nature of the low carbon hydrogen economy was epitomised by last year’s maiden voyage of the world’s first green methanol powered containership, which sailed from Ulsan, Korea to Copenhagen, Denmark, fuelled by OCI HyFuels green methanol produced at our site in Beaumont, Texas. The ship’s successful voyage was testament to the strong partnerships forged between OCI, the ports and bunkering operators, and demonstrated the importance of cross- value chain collaboration.

Moving The Dial

Collaboration between industry and regulators will be the critical factor in the successful implementation of the hydrogen economy. The industry needs to secure hydrogen corridors by de- risking investment in infrastructure, and work together to create simpler and more consistent supply and demand regulations.

Change is happening. OCI Global’s CEO Ahmed El-Hoshy was part of the Hydrogen Council CEO delegation who signed a partnership with the International Hydrogen Trade Forum at COP28, introducing measures to encourage knowledge sharing and develop best practices to accelerate global trade in hydrogen. The key to the action plan was public-private collaboration, with both governments and companies committing to specific actions to drive the development of hydrogen corridors forward.

Such commitments give confidence that, by working together, we can create a long- lasting and effective global system that will support the scale up of the hydrogen economy. But work must accelerate now to begin addressing emissions in the short term, and provide solid foundations for regions with less immediate access to clean hydrogen.

It may feel like a monumental challenge, given the size of the projects, investments, and distances in question, but a lot has already been achieved in a short space of time. If the success of last year’s maiden voyage is anything to go by, OCI is confident that global collaboration will gets us there.

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