Why make what you can mine? Here’s why natural hydrogen is also known as ‘gold’ hydrogen
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Natural hydrogen, or “gold hydrogen” as it is also known, is hydrogen that is produced by certain geological processes such as when water reacts with certain rocks, deep in the subsurface.
This gas is then trapped in reservoirs akin to those that host oil and gas, with indications that the resource could be renewable and be continuously generated over very short geological timeframes.
Of special interest is the potential for natural hydrogen to offer significant cost and emissions advantages relative to other means of production.
So why is it that this potential resource is only now starting to get real attention from companies and markets?
Speaking to Stockhead, H2EX managing director and former Woodside senior executive Mark Hanna noted that natural hydrogen as a sector is still very new.
“People have been using hydrocarbons since the 1870s and all this time when we were looking for oil and gas, we have been finding hydrogen as an associated gas which in context was considered to be a nuisance,” he explained.
“The green hydrogen phenomena has really only picked up pace in the last five years while the literature on natural hydrogen has only been prevalent for probably three to five years.
“Just as importantly, it was only recently that South Australia amended its Energy Act to allow for the exploration and exploitation of hydrogen.
“You could not do that in Western Australia and to be fair, I’m not sure what you could do onshore in Queensland, New South Wales and Victoria,” Hanna added.
But what is especially interesting for him is the potential for far lower costs compared with manufactured hydrogen.
“No one is making money out of green hydrogen. The sector is trying to get costs down from about $8/kg to about $2/kg but from everything I’m hearing they’re really stuck at $6 to $8,” he said.
“You will probably have to spend billions of dollars to try and get the cost structure down to something that we’d regard as affordable.
“What attracted me to natural hydrogen is that based on the literature from analogues in Mali, Africa, academics believe the cost structure could be anywhere between 50c and $1.50 per kilogram.”
It certainly helps that demand for man-made hydrogen surged some 50% between 2000 and 2020 and is expected to grow from 90Mt to more than 200Mt by 2030, despite the expensive cost of production.
Needless to say, this has the potential to be hugely lucrative but with the natural hydrogen still very much in its infancy, there are plenty of questions and challenges to be overcome.
The paucity of hydrogen exploration wells drilled to date means that little is known about the composition of gas in the target reservoirs.
While high purities are certainly preferred and possible – as noted by historical oil bores in South Australia intersecting 80% to 90% hydrogen content – the associated gases present might present an issue.
The best known example, the natural hydrogen reservoirs at the Bourabougou field in Mali, is known to be almost purely hydrogen with trace amounts of methane, nitrogen and helium, none of which are particularly difficult to deal with.
Gas mixes such as this are comparatively simple to deal with, with Hanna noting that footprint of processing plants required will be as small as those used for onshore natural gas (methane) fields.
This might not always be true in other reservoirs and should larger concentrations of carbon dioxide or deleterious gases such as hydrogen sulphide be present, it will present greater challenges for explorers.
“This is an economic global or national solution where there’s going to be bits of emissions in some places,” Hanna added.
“Not everything individually can be zero emissions, but there’s going to be offsets and benefits in other places and natural hydrogen is potentially super low cost and have smaller footprint compared with green hydrogen.”
Transportation of hydrogen also remains an issue. Institute for Energy Economics and Financial Analysis analyst Bruce Robertson noted that hydrogen is a very small molecule that tends to leak from conventional pipes.
Liquefaction is also challenging as it requires that the gas be super cooled down to much lower temperatures then natural gas.
“LNG is already an energy intensive process. In Australia, according to the Department of Industry, we burn 9% of the gas to liquefy it and further 2-6% is lost in boil off losses when you transport by ship,” he told Stockhead.
“Obviously that’s going to probably be more for hydrogen because you’ve gotta get it down that much cooler and plus boil off losses as well.
“In my opinion, there’s still a long way to with getting it to a hydrogen export industry.”
It is not all negative though with Robertson noting that it would be an easy matter to place a power station right on the field if it was close to transmission lines.
“The other thing you could do is start a fertiliser factory on site and make ammonia-based fertilisers,” he added.
“That’s not out of the realms of possibility either and not a bad idea because we need fertiliser in Australia, with a lot of plants closed because natural gas is too expensive.”
Hanna certainly seems to be thinking along local lines for H2EX, saying that while there is still a place for large power developments, there was also a move towards more localised solutions.
“In regional centres, you could have 100 megawatts of power sourced from natural hydrogen project to fuel a town,” he noted, adding that H2EX itself seeks to initially displace diesel power generation at mine sites in the Eyre Peninsula.
As previously noted, natural hydrogen is still very much in its infancy. Despite this there are already players making their moves in the sector.
While H2EX is unlisted, it was one of the first movers, pegging out some 32,000km2 of ground of which 6,000km2 has been granted and the remaining is still under application.
Of the ASX plays, the focus appears to be in South Australia, which is already known to have natural hydrogen potential, though at least one play has its eyes set in North America.
Gold Hydrogen was amongst the first movers in South Australia where the company has secured its flagship Ramsay project and exclusive applications for seven other tenements.
Ramsay sits on granted Petroleum Exploration Licence PEL 687, which covers 7,280km2, and is host to an independently estimated 1.3bn kilograms of potentially recoverable natural hydrogen, several drill-ready targets and the historical wells which encountered between 80% and 90% natural hydrogen from depths of around 500m to 1,000m.
The bulk of the remaining gas is primarily nitrogen with 1% to 2% CO2 and 1% to 2% methane.
Gold Hydrogen plans to start drilling wells in the third quarter of this year by first using modern techniques to twin original bores that were drilled almost a century ago.
This will use soil testing, airborne surveys, and seismic processing to validate the historical hydrogen occurrences for the drilling process.
Meanwhile, veteran oil and gas play Buru has become the latest company to peg out ground prospective for natural hydrogen in South Australia.
Its wholly-owned subsidiary 2H Resources has been confirmed as the preferred applicant for the grant of six South Australia licences for hydrogen exploration.
These cover a total of 30,000km2 and is estimated to be capable of hosting a risked prospective hydrogen resource of between 49 million and 1.3 billion kg with a best estimate of 343 million kg.
A further two applications covering 5,700km2 have also been made by the company.
The company has already detected anomalous hydrogen concentrations in recent exploration wells and noted that hydrogen has been detected in many legacy drill holes in Australia and as seeps and flowing accumulations in international areas.
Unlike its ASX peers, HyTerra has chosen to focus on the US where it expects the low cost of exploration, existing infrastructure and ready potential markets will allow to build what’s essentially a new sector – much like how the shale oil sector was incubated in the Permian Basin, Texas.
The company currently has a 10% interest in Project Geneva in Nebraska, which is favourably located near infrastructure and market opportunities, but has the right to earn up to 51% under its Joint Development Agreement with operator Natural Hydrogen Energy.
HyTerra and Natural Hydrogen Energy are all set to start an extended flow test of their Hoarty NE3 natural hydrogen exploration well in February with service providers prepared to mobilise the rig and supporting equipment to site.
The Hoarty NE3 well targeted Precambrian basement rocks predicted to contain hydrogen enriched gases and has been drilled, completed and swab tested.
Manual sampling of gas from the drilling mud has already yielded elevated hydrogen concentrations while gas evacuated, while swabbing burned with a clear flame in direct sunlight, which is interpreted as hydrogen gas being predominant in the stream.
Testing of the well will involve dewatering with a pump to reduce hydrostatic pressure on prospective zones, which is expected to allow hydrogen enriched gases in these zones to flow freely.
At Stockhead we tell it like it is. While Gold Hydrogen and HyTerra are Stockhead advertisers, they did not sponsor this article.