Petronas subsidiaries well-positioned to benefit from hydrogen production

KUALA LUMPUR: Petronas' subsidiaries such as Petronas Chemicals Group and Petronas Gas are well positioned to begin investing in natural gas-to-hydrogen production, which could diversify their revenue stream.

In a note, AmInvestment Bank Research said support providers such as Dialog Group, which have built liquefied natural gas terminals in Pengerang and provide specialist and plant maintenance services, may also be able to participate in the value chain.

"While exploration and development operators such as Sapura Energy and Hibiscus Petroleum produce natural gas, we do not see their near-term involvement in this early-stage technology, which is only likely to be borne by Petronas with a much stronger capability, balance sheet and governmental support.

"Likewise, even though other smaller service providers such as KNM Group may have the expertise in fabricating containment vessels and processing equipment, we are uncertain of their financial capability at this juncture," it added.

Petronas recently signed a memorandum of understanding with Tokyo-based ENEOS Corp to explore low-carbon hydrogen production from Petronas' petrochemical facilities and green hydrogen produced by renewable energy.

The MoU also covers a technical-commercial joint study to develop a competitive clean hydrogen supply chain between Malaysia and Japan.

The study, which will be eligible for funding from the Japanese government’s Green Innovation Fund, includes hydrogen production, transport in methylcyclohexane form and conversion from its original gaseous state into a liquid form to enable large volume deliveries.

According to AmInvestment Bank Research, the development of liquid organic hydrogen carrier technology has gained traction due to its chemically stable nature that allows for long-term storage and long-distance transport as well as leveraging existing conventional oil and petrochemicals infrastructure.

"This evades the need to develop new assets, hence improving its cost competitiveness, scalability and ultimately, financial viability for established energy players," it said.

The research house also noted that emissions-free green hydrogen will become more competitive over the next decades as the global average size of electrolysers are expected to increase over 20x in the next three years.

AmInvestment noted Rystad Energy's projection that green hydrogen cost could fall from US$7.40/kg to US$1/kg by 2050.

"Even so, policy measures could reduce the costs much more rapidly. We note that the US Department of Energy’s Hydrogen Energy Earthshot Initiative is providing funding for clean hydrogen projects to bring the cost of green hydrogen to US$1/kg by 2030 while Norway-listed Nel ASA is working to bring that to US$1.50/kg by 2025," it said.

At present, blue and grey hydrogen have the lowest cost at US1.50-US$2.50/kg.

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