Omani H2 resources ‘phenomenal’: InterContinental

Perth-headquartered InterContinental Energy is planning three large projects for producing renewable hydrogen and derivatives — Australian Renewable Energy Hub (AREH), Western Green Energy Hub (WGEH), also in Australia, and Green Energy Oman (GEO). InterContinental Energy is developing all three alongside major partners and plans to build them in several stages. The projects could together produce nearly 7mn t/yr when fully developed — although this is expected to take several decades. Argus spoke to InterContinental chief executive Alexander Tancock about the firm's approach to scaling up, the need for government support, and why Oman is a prime location for major projects. Edited highlights follow:

How are your projects progressing?

We have the AREH project in Australia, with BP as the operator. That is in an area called the Pilbara, which is the world's largest iron ore exporter. So it just made so much sense to make that project about green steel. A domestic green steel project means you don't have to worry about exporting losses, conversions… you use the hydrogen right there to make green steel.

At our second Australian project, WGEH, with support from the government we can now achieve somewhere around $3/kg of hydrogen, which is really cost effective. That project will probably be focused on methanol and ammonia exports.

Then in the Middle East, we are in Oman, where the government is really strongly behind hydrogen. It is probably one of the most — if not the most — forward-looking hydrogen governments on the planet. And the resources that we have in Oman are phenomenal. The only issue now in Oman is that the domestic play is a bit harder. The resources are there, but there are not many people. What we need to figure out is where that cheap green hydrogen goes — to find a domestic market or work with points overseas in a strategic manner. The Omani government is taking a huge role there, and we are fortunate with our project in Oman as Shell and OQ are co-investors. With OQ being the domestic energy company and Shell being the largest foreign investor — if anybody can figure this out, it would be them.

When it comes to Oman — are things on track?

We're on track, broadly speaking. With these large projects, time will tell if there will be slippage. But if I look at the discussions we're having with our partners and offtakers, I'd still see these projects reaching a final investment decision (FID) towards the end of this decade.

What time lag do you expect between FID and construction or start-up?

With our projects, the timelines are going to be a few years from FID to product, because of their scale. And then full construction will take decades. If you take our largest project, WGEH — that's 30 nodes. A node a year would be a good run rate. So WGEH will grow with the offtake market to 2050 and beyond.

What exactly do you mean by ‘nodes'?

The onus has to be on government to help the sector along. But the onus also has to be on us as an industry to drive our costs down, as the government is not there to just shell out money. There are a few ways of achieving that. One is to make the equipment better and cheaper, and there are good companies doing that. Then on the project side, you have to go to scale and develop architecture that allows you to make the entire project more efficient — i.e. less capital expenditure (capex) and less equipment, but the same or higher output.

If you have these huge projects that are the size of small European countries, you can't build them in one go. They are just too big and no one will finance them. So you have to build them in stages. So what our team did, a couple of years ago, is to say that if we eliminate all of the high-voltage equipment, we save a lot of money and time. But that means that you have to put all your wind and solar within a certain distance of the hydrogen production. So the team optimised that, and what you end up with is this nodal unit, where you have 1-2GW of electrolysers surrounded by twice as much upstream generation capacity. And all of that wind and solar connects to this hub in the middle, where you have your electrolysers, and so all of that electricity stays at distribution voltage. With this, you save a lot of capex. Hydrogen generation takes place there and connects by pipeline to your downstream use — methanol, ammonia, green steel.

Then you build a second node that has its own pipeline, and so on, like building blocks. And just like in a natural gas network, that pipeline network becomes a battery. So rather than having to pay for additional batteries, your battery comes with the pipelines you're building anyway. So for us, we think in units of nodes. That's how we develop our projects. And each node can be a standalone phase. We're working with our project partners and others, using this as the baseline. If you look at Oman's entire process, it has adopted the node as the base unit.

Are you interested in participating in Oman's upcoming bid round for land?

We don't need to because our first-round project is a legacy project. It is the only project that was given expansion rights, because we were a legacy player. The GEO project can go up to 25GW.

Beyond Oman, I think Saudi Arabia was on your radar at some point?

We had been looking over the past few years at different markets beyond our three projects, and we continue to look at other projects. But we have three incredible projects that are very, very large. So the need to deliver and focus is more where we are today, rather than expansion. Having said that, if the right project and the right partners were to come along, we would be open-minded. But we have a lot to deliver, so our focus is on that.

Oman's model of auctioning off land through bidding rounds is somewhat unique. What makes the approach suitable for Oman, but not others?

The Oman approach is better suited to markets where the government has more control over land. It would be difficult to implement that model in places that are full of freehold land. The Middle Eastern approach in general is one of looking for master planning and delivery, and that is something the region has done so well. You look at the infrastructure projects they've delivered across this region. Does anybody do it better? No. So that model is really well suited to environments like this.

In terms of infrastructure, what do you think is most needed today? Pipelines? Import-export facilities? Storage?

None of the above. The most important factor is government policy and support, because the market will not solve everything. If you can help bridge the gap between where we are now and what people are wiling to pay, the solutions are all there already. None of this really requires new technology. It just requires architecture that is optimised. So that's all solvable. Government legislation and support — that's the critical piece of the puzzle I think we're missing in most markets at this point in the industry's development cycle.