A new gold rush | There are now 40 companies searching for natural hydrogen deposits — up from ten in 2020

The lure of the potential energy source is due to its expected cost advantage over green and grey H2, says analyst Rystad Energy

Rystad Energy's head of hydrogen research, Dr Minh Khoi Le.
Rystad Energy's head of hydrogen research, Dr Minh Khoi Le.Photo: Rystad Energy

At the end of last year, there were 40 companies searching for natural hydrogen deposits — up from just ten in 2020, according to Norway-based Rystad Energy.

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Exploration is now under way in eight countries, the analyst says — Australia, the US, Spain, France, South Korea, Canada, Colombia and Albania — but no commercially exploitable deposits have been found anywhere in the world, aside from at a small well in Mali, west Africa, that produces about five tonnes a year for electricity production in a nearby village.

But the prospectors in this new gold rush are pinning their hopes on the expectation that any reserves of natural hydrogen — also known as white, gold or geologic H2 — would have significant cost advantages over hydrogen produced from renewable energy or fossil fuels.
Rystad says that grey hydrogen derived from fossil fuels costs less than $2/kg on average and green H2 is currently three times more expensive.
However, developers expect that natural hydrogen could be extracted and purified at a cost of about $1/kg — and the only current producer of geologic H2, Hydroma, which operates the Mali well, can produce it an estimated cost of $0.50/kg, says Rystad.
Indeed, the potential is so large that US-based natural-hydrogen explorer Koloma recently raised $245m in private finance.

At the same time, natural hydrogen in the US “could be eligible” for the hydrogen production tax credit (PTC) of up to $3/kg, depending on emissions intensity, according to Rystad.

“At a hydrogen content of 85% and minimal methane contamination, the carbon intensity is around 0.4kg carbon dioxide equivalent (CO2e) per kg [of] hydrogen gas — including embodied emissions and hydrogen emissions, says the Norwegian analyst, pointing out that the PTC’s top rate of $3/kg is for projects that emit less than 0.45kgCO2e/kgH2.

However, it is not clear if natural hydrogen would actually be eligible for tax credits, and the rules and regulations surrounding their disbursement are yet to be finalised.

A company called Gold Hydrogen recently found hydrogen concentrations of up to 86% in South Australia during exploratory drilling in South Australia.

“Although still in its infancy with lots of uncertainty, white hydrogen has the potential to be a gamechanger for the clean hydrogen sector as an affordable, clean natural resource, thereby shifting the role of hydrogen from an energy carrier to part of the primary energy supply,” said Rystad’s head of hydrogen research Minh Khoi Le.

“However, the actual size of the reserves is still unclear, and the transportation and distribution challenges of hydrogen remain.”

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Published 18 March 2024, 08:45Updated 22 March 2024, 14:03