Paul Rodden • Season: 2023 • Episode: 243
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In episode 243, The BOEM wants to open up the Gulf of Mexico to offshore wind farms and hydrogen producers are taking notice and Technip Energies wins a big BP project in Australia. I'll go over all of this on today's hydrogen podcast.
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The BOEM wants to open up the Gulf of Mexico to offshore wind farms and hydrogen producers are taking notice and Technip Energies wins a big BP project in Australia. I'll go over all of this on today's hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen. And this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In an article in the Washington Examiner Breanne Deppisch, writes energy giants eye up green hydrogen possibilities in the Gulf despite wind skepticism. Breanne writes, the Interior Department will hold its first ever offshore wind auction in the Gulf of Mexico on Tuesday, a move that comes as the Biden administration looks to slash hydrocarbon emissions and combat climate change. The sale will include 102,480 acres offshore Lake Charles, Louisiana and two areas totaling nearly 200,000 acres offshore Galveston, Texas this according to the interior, which announced sales last month, combined to the area's being auctioned off have potential to generate 3.7 gigawatts of energy or enough to supply roughly 1.3 million homes.
The auction will include major players such as Shell, Equinor, and Total energies and it comes after years of engagement between the Interior's Bureau of Ocean Energy Management or the BOEM, and other government agencies, states and industry stakeholders in the region. The areas being sold will offer much different opportunities for development than traditional offshore areas leased by the BOEM, which are almost entirely concentrated in the Northeast. That's because the Gulf has lower wind speeds and a six month annual hurricane season that could delay or derail development of a traditional offshore wind farm. Instead, potential bidders largely see the offshore acres in the Gulf area as a potential hub for green energy production, one that will allow them to tap into the state level subsidies for carbon Free Energy Production and Infrastructure in the region, as they look to develop one of the most expensive forms of clean energy ahead of the first auction.
Here's a look at the challenges and opportunities for the offshore areas being leased in the Gulf Coast. The first is wind project skepticism, experts are skeptical about the potential for offshore wind generation in the Gulf of Mexico, noting that as lower wind speeds than the Northeast softer soils that will complicate construction and a hurricane season that lasts for half a year. And a quote from Chris Smith, a Republican congressman from New Jersey, the vulnerability of massive structures the size of the Chrysler Building to hurricanes, nor'easters and superstorms has not been adequately investigated and vetted. Imagine 1000 foot poles falling like dominoes into the sea. Wind turbines are also vulnerable to collapse and destructive hurricanes that frequent the Gulf. According to a 2012 Carnegie Mellon University study, there's a very substantial risk that a category three or higher hurricane can destroy half or more of the turbines at some locations. As a solution, some companies have started to work to adapt wind turbines and project infrastructure to account for the different conditions. The New Orleans based company Gulf wind technology, for example, recently teamed up with Shell to begin developing turbines that can withstand high speed winds and other weather patterns unique to the region.
In the interim. These factors make it quote harder to justify an investment decision into the Gulf. This according to Alon Carmel a partner at PA Consulting who advises offshore wind companies. This he told a quote to Reuters. What the Gulf lacks in favorable wind farm conditions it makes up for an infrastructure, skilled workers and a well developed supply chain that has been decades in the making. The BOEM and others see it as a natural spot to begin innovating in the green hydrogen space. The Gulf is quote, uniquely positioned to transition into a renewable energy future including the development and implementation of the production and use of green hydrogen. This coming in a quote from John Filostrat, a spokesman for the BOEM.
Offshore wind turbines can help create green hydrogen through electrolyzing water or a process known as electrolysis and power refineries and other energy industry operations located in Texas and Louisiana. In a quote from Eric Milito, the head of the National Ocean Industries Association of the NOIA, which represents both offshore wind and oil and gas companies said all of a sudden, you can see the greening of what are rather carbon intensive industrial facilities along the coast. NOIAand their clients are quote, thrilled about the potential of offshore wind developments in the Gulf of Mexico this year also added some developers see the pairing of offshore wind and hydrogen as an opportunity to allow them to tap into the inflation reduction Act's subsidies for carbon free energy projects while also relying on existing infrastructure that's long been used for offshore oil and gas development in the region to cut down on costs for green hydrogen production.
And in a quote from Shell, the Gulf of Mexico is uniquely situated to facilitate and benefit from Green hydrogen production via offshore wind, noting that the area's existing infrastructure, including ports and pipelines made it particularly lucrative to help facilitate the development and distribution of green hydrogen. And in a quote from Amanda Dasch, the Vice President of Shell offshore Americas these opportunities have the potential to rapidly advance integrated decarbonisation and renewable energy generation activities that are only possible with the Gulf of Mexico unique energy landscape supply chain and workforce. Others in the region agree in a quote from John Begala, a senior official with the Business Network for Offshore Wind, they understand the business proposition, there's a lot of real possibility here, and the Gulf is ready.
Okay, I need to break away from the story for a second to share a quick word from our sponsor. From water electolyzers to flow batteries and fuel cells, Nafion™ Proton Exchange Membranes play a major role in advancing the Hydrogen Economy. Through their high conductivity, superior strength, and chemical durability, Nafion™ membranes provide the performance needed to make green hydrogen safer, more sustainable, and more affordable. Learn how Nafion™ ion exchange materials support the decarbonization of energy across the globe at www.nafion.com.
Now back to the show. Okay, so some interesting developments going on in the Gulf of Mexico. Now, if you're not familiar with US based oil and gas, the Gulf of Mexico or GOM is one of the most densely packed regions in the world for hydrocarbon production, refining and shipping. Every super major oil and gas company has facilities along the coast along with the coastal infrastructure. The Gulf is also home to some of the most cost intensive and lucrative drilling areas in the world. This area knows energy. And so when these companies say that the infrastructure is there to support hydrogen, they know what they're talking about, not just because they know oil and gas, but because this area has been using hydrogen in the refining processes for decades. Conversely, I understand the concern for hoisting massive offshore wind farms off the coast. These units are massive, much much larger than traditional onshore wind farms.
And so the risk associated with putting offshore wind in the Gulf is exponentially higher than other areas. Now, as of this recording, the sale has already commenced and did not receive much of a response, there was only one winning bid totaling $5.6 million from Germany's RWE. The bid was received for the offshore Louisiana block which was just over 102,000 acres with the Texas blocks not receiving any bids. Now, RWE is one of the world's largest offshore wind developers and sees the Gulf as a great opportunity Total energies was also selected to bid but held off saying the economics just weren't there for them to bid on the opportunity. And to be honest, I'm not surprised by the lack of enthusiasm. From the hydrogen perspective, this area is already abundant with hydrocarbon feedstock and with the work Exxon is doing with CCUS the hydrogen output is clean and inexpensive. Now I do think this area could someday host large scale offshore wind farms, but the economics need to improve drastically and more work needs to be done to drop the risk profile for development. And just real quick in a press release from Technip Energies.
Technip energies has been awarded a significant contract by BP for a hydrogen production unit, and it's Kwinana biorefinery in Western Australia in support of the plan project to produce sustainable aviation fuels and biodiesel from bio feedstocks. The contract covers engineering procurement and fabrication of a modularized hydrogen production unit with a capacity of 33,000 normal cubic meters per hour using Technip energy's SMR proprietary technology. Hydrogen is used for the conversion of bio feedstocks into biofuels such as SAF and biodiesel. As the unit will be capable of producing hydrogen from either natural gas or biogas produced by the Kwinana bio refinery, it's planned to integrate with the site's existing import terminal operations and plans for green hydrogen production, which are currently being assessed. The Kwinana renewable fuels project is one of five biofuel production projects that BP has planned globally.
Okay, so just a quick press release on what could be a very impactful hydrogen project in Australia. And what I find interesting about this project is the focus on derivatives production, specifically, SAF and biofuels. I believe that the SAF market is going to be a great opportunity in the very near future as the synthetic fuels market continues to develop. And it sounds like BP feels the same way with several of these projects underway around the world.
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