Hydrogen produced with renewable power had a significant breakthrough this month, with the signing of an offtake agreement between a European buyer and an Indian producer in Oman.
Yara, the Norwegian fertilizer and industrial chemicals producer, entered a long-term contract with ACME Cleantech Solutions Pvt. Ltd. to supply 100,000 tonnes per annum (mtpa) of ‘green’ ammonia beginning early 2027.
ACME will soon start construction on a fully integrated plant on 12 sq. km in the Special Economic Zone at Duqm (SEZAD) on Oman’s central coast.
It’s the first major agreement between non-affiliated companies for green ammonia and an important breakthrough for Oman.
Anatomy of an agreement
Ashwani Dudeja, Group President and Director, ACME Cleantech Solutions, says that the companies went through 20 months of negotiation. The agreement was signed just two weeks ago for a long-term contract of up to 30 years.
Now, with the binding agreement in place, and financing arrangements with Indian lender REC Limited (Rural Electrification Corporation) finalized last year, the company is moving forward with the project’s first phase.
Basic work at the site is underway and major work will begin this year.
The Yara contract is for 100% offtake from phase 1. Production will occur at a fully integrated self-contained plant including electrolysis, hydrogen storage, ammonia production, and a flexible pipeline and jetty, which can load ammonia carrier ships directly from the plant.
The production area encompasses 12 sq. km containing the solar power plant and a small wind plant to maintain EU Renewable Fuels of Non-Biological Origin (RFNBO) compliance, as Yara will take the volumes mostly to Europe.
A land reservation agreement for 92 sq km was signed with SEZAD in 2022, with a usufruct agreement for the 12 sq. km phase 1. For this, the company worked with different ministries in the Omani government. Related: UK Plans £60 Billion Grid Overhaul To Support Offshore Wind Boom
Later, when the government’s new facilitating agency Hydrogen Oman (Hydrom) came into existence, ACME entered negotiations with Hydrom for a subsequent phase on the remaining 80 acres. The company intends to expand the project to 0.9 million tonnes per annum with approximately 3.5 GW of electrolyser capacity, to be powered by a 5.5 GWp solar PV plant.
ACME is one of several companies operating in Oman with legacy project agreements now overseen by Hydrom. More projects in Duqm were announced in Hydrom’s Round 1 earlier this year. Hydrom is now conducting Round 2 for projects at Salalah on the south coast.
A major concern is certification to meet evolving requirements for net-zero carbon hydrogen products. Early on, ACME retained testing and certifications services company TUV Rhineland to get the Oman project pre-certified based on plan. This has now expired and the company will seek new certification of the finished plant as per the prevailing standards.
“This is an evolving area, there's no unified standard globally at the moment for hydrogen or ammonia,” says Dudeja.
“It’s big draw-back at the moment, the rules for certification in Europe may be different than in Asia, so which certification method to follow?” he says.
"Negotiating what happens if there are changes becomes a tough exercise."
The company, with others, is advocating with regulatory bodies to create some kind of standardized certification methodology for project developers to follow.
Seeking certification
As carbon-free hydrogen moves closer to market, it’s clear that companies are now dealing with more than demand risk. They are trying to adapt to regulations at an early design phase, to comply with the European RFNBO requirements under RED II and III, which lay down the conditions that will make hydrogen products compliant.
But these requirements for ‘green’ certification are evolving in different regions including Asia, adding complexity to project design and causing companies in Oman and elsewhere to proceed cautiously.
Oman has set up a framework for a pre-certification exercise, to help developers seeking to reduce uncertainty.
"The pre-certification work, to stress test what will be the certification, the degree of greenness of the molecules if we would export them to Europe, has been essential,” said Stefani Giuseppe, General Manager Green Hydrogen, DEME Concessions NV, speaking at the World Hydrogen MENA conference in Dubai last month.
"It's one of the pieces of the puzzle we need before investing further in the project,” he said.
His company, partnered with Oman’s OQ Alternative Energy in the Hyport Duqm consortium, is among the multinational consortia that were awarded land blocks by Hydrom last year.
Hyport Duqm plans to produce approximately 330,000 metric tons of green ammonia from a combined renewable power capacity of around 1.3 GW in a first phase.
"It (certification) is a major challenge very much related to the off-take, which is essential,” said Giuseppe.
First mover know-how
Ashwani Dudeja came to ACME two years ago after nearly three decades in the gas, LNG and power business including stints at BG Group, Shell and ADNOC.
He says that the company came to Oman with experience that gave it confidence to assume first-mover risk and have a head start.
“With green ammonia, about 90% of the commodity price is capex, so everything is up front, so with an up front commitment on capex you need certainty of cash flows for the project finance to happen."
“We assumed a lot of risk,” he says.
The 20 months of negotiation with Yara produced a contract that did not have much precedent. While most (grey) ammonia trades on short-term contracts, the green product required a long-term contract to match the project financing period.
"It was a great learning for both organizations."
Another important part of the company’s learning came from its pilot plant, which it built at Bikaner in Rajasthan. It’s an integrated green hydrogen and ammonia plant, operating for two years now, producing 5 tonnes per day with power from a dedicated 5 MWp solar plant.
This pilot, built at considerable cost, does not earn a commercial return; the product is sold on the market at grey ammonia prices. Yet it gave the company important knowledge.
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"We wanted to learn how to operate the electrolysers and how to integrate the entire chain," he says.
Added to this is the company’s experience as a renewable power developer, with more than 8 GWp renewable power capacity built or under construction in India.
It’s critical knowledge in the hydrogen sector, where approximately 50% or more of project cost is renewable power, the balance 50% split between electrolysis and ammonia production.
The company also enjoys deep relationships with technology providers that facilitate procurement on a consolidated basis.
A little disruptive
ACME has more large hydrogen projects in the works.
"We are building a pipeline of projects, not stopping just at Oman," says Dudeja.
Following closely on the Oman project is planning for a project at a port in the Indian state Odisha, for green ammonia production of 400k tonnes per annum. ACME has received government incentives for this project and has signed a term sheet with IHI Corp. of Japan, with FID study now underway. ACME is also considering starting its own electrolyser manufacturing for the Odisha project.
The company also secured land for a plant in Port of Victoria, Texas following passage of the IRA legislation last year. Black & Veatch is undertaking design studies, while financial decisions may wait for the US election outcome.
ACME is also one of the short-listed parties in the first H2Global contract-for-difference tender, financed by the German government to stimulate import of net-0 hydrogen derivatives to Europe.
Dudeja says that the company, which started 20 years ago producing energy management systems for mobile cell towers in India, has the agility, determination and risk appetite to make green hydrogen work. While others delay, it’s moving forward.
"We have always been a little disruptive," he says.
By Alan Mammoser for Oilprice.com
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