Super-Cheap Hydrogen From Free Oil Heralds Big Change: BNEF Q&A
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Super-Cheap Hydrogen From Free Oil Heralds Big
Change: BNEF Q&A
March 31, 2021
Super-Cheap Hydrogen From Free Oil Heralds Big
Change: BNEF Q&A
March 31, 2021
Where some may see aging oil reservoirs as a “If the technology is proven on a large scale under
problem needing to be fixed – and cleaned up -- multiple conditions, and its zero-carbon
Calgary-based Proton Technologies Inc. sees an credentials are fully verified, it could revolutionize
almost limitless opportunity. hydrogen production,” said Martin Tengler, a
senior associate at BNEF covering hydrogen.
The Western Canadian company has developed “Hydrogen costs could fall lower than we had ever
a process to extract hydrogen from mature oil thought possible. The next couple of years will
fields – by injecting oxygen into the ground to therefore be essential.”
induce a reaction that heats up the oil and
releases hydrogen. The reservoir’s natural cap Strem spoke to BNEF in mid March. The following
rock provides a barrier to trap any released transcript has been edited for brevity and clarity.
carbon dioxide, meaning there are no greenhouse
gas emissions to the atmosphere.
“It’s incredibly wide-ranging in what kind of
geological settings and environments this can
apply to,” Grant Strem, Proton’s chief executive
officer, told BloombergNEF in an interview. “Pure
oxygen will react with any type of hydrocarbon. It
doesn’t need a certain grade of oil quality.”
Tapping old oil fields, which Proton reckons they’ll
be able to access at essentially no cost, means
the Canadian company expects to produce
hydrogen at a cost far below existing market
prices, and with no CO2 emissions. Proton’s
Strem said the company’s economic modeling
has shown it should be able to produce hydrogen
in high volumes at a levelized cost below 30 cents
per kilogram. Proton estimates almost all
hydrogen is currently produced by steam
methane reformers at a cost of $2 to $3 a
kilogram.
As a step to prove its process, Proton is piloting a
test at an aging oil field in the Canadian province Grant Strem, chief executive officer of Calgary-
of Saskatchewan. As of February, the company based Proton Technologies Inc.
was separating hydrogen from the oil field;
hydrogen truck-loading is expected later this year. Q: Hydrogen is all the rage at the moment.
Proton says it has already secured licensing deals Where does Proton Technologies fit?
with other companies in 11 countries.
A: Proton Technologies is a company set up to
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Super-Cheap Hydrogen From Free Oil Heralds Big
Change: BNEF Q&A
March 31, 2021
produce the lowest-cost and cleanest hydrogen of
all. We’re calling our product ‘clear hydrogen’ We’re giving away very interesting early-adopter
because nobody else has a lower carbon intensity deals to companies that want to move quickly
that we’ve seen according to lifecycle analysis, toward this process. So far we’ve signed licenses
and that includes wind and solar to electrolysis. in 11 countries and there’s a lot more interest.
Some of these are within Canada, a few of them
Q: Talk me through your hydrogen production are oil companies but we’re actually getting the
process. My understanding is you inject most interest from wind and solar companies
oxygen into a mature oil or gas reserve. trying to solve their intermittency problem
because our hydrogen through a turbine provides
A: An oil field exists where it is because there’s reliable baseload power they can dial up or down,
already sufficient cap rock to hold it in and that’s similar to natural gas.
why it accumulated and held there for millions of
years. When wells can no longer get enough oil to Q: Why has this not been done before?
surface, they get abandoned or in many cases
they don’t, which causes an abandonment liability A: It’s like wheels on a suitcase. As soon as
problem. These are the wells that we can people put wheels on a suitcase, people asked
repurpose either by injecting oxygen or producing why they’d been carrying suitcases around for so
hydrogen from an existing oil system. long. That’s very analogous to what we’re doing.
It’s a simple concept that should have been
Our process begins with an air separation unit discovered and used 50, 70 years ago. It seems
that removes the nitrogen so we can inject pure strange to me that it hasn’t been put together, but
oxygen, or oxygen with carbon dioxide. On the sometimes hindsight is 20/20.
production side, we have wells with a filter down
inside the reservoir that allows only hydrogen to Q: What happens to the oxygen after the
pass through up to the surface. process begins and how do you control the
combustion?
Q: So you’re deriving hydrogen from old
oilfields that would otherwise be abandoned? A: It gets trapped within carbonate rock. In some
places like Iceland the type of rock fairly quickly
A: We’re using the existing disturbances. We’re turns CO2 into carbonate and that does happen
not using a new land footprint. By leveraging all of on some timescale in every rock system but we
this and powering our process with a portion of can accelerate it and we have some patents for
the hydrogen we make, that’s what gives us the doing that inexpensively. This won’t just benefit
very low carbon intensity but it also gives us an our projects but also other carbon sequestration
extreme cost efficiency. projects.
Q: Is this a new process? Does it require new Q: Is the amount of hydrogen you produce
technology? controlled by the amount of oxygen injected?
A: There’s been more than 500 projects that A: Yes. It’s our main limitation and our main cost
oxidized oil in place, always with the goal to heat factor. The more oxygen that we get in and the
it up so that the viscosity lowers and flows more faster that we get it in, the more hydrogen we can
easily. All of those projects had unintended get out faster.
production of hydrogen as a byproduct. Our
downhole filters were developed in the early days Q: Again, why does this produce no carbon
of the steam methane reforming industry. They’re dioxide?
technologically proven. They’re just tied together
in this new pathway, which gives us a unique A: Carbon dioxide is formed within the oilfield
ability to be successful in patents all around the when reactions happen but it very quickly can
world. become carbonate rock. Some of it dissolves and
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Change: BNEF Q&A
March 31, 2021
becomes carbonic acid within the waters of the hydrogen by truck. As fuel cells become more
system and that reacts with various chemicals common, transportation becomes a trajectory as
that are down there or that are introduced, like well.
oilfield waste water, and that triggers a reaction
that causes the formation of solid carbonate. Q: What kind of company will you be in five
years? Will you be a producer of hydrogen
Q: Will your process work only at certain yourself or will you license the technology?
oilfields based on their geological structures?
A: I imagine we’ll be more focused on doing it
A: It’s incredibly wide-ranging in what kind of ourselves five years from now. Right now we’re
geological settings and environments this can trying to get early adopters to implement it and we
apply to. Pure oxygen will react with any type of want to leave the door open for people to do it
hydrocarbon. It doesn’t need a certain grade of oil themselves. This is a technology that we hope to
quality. There are a few things that we predict are see proliferate as fast as possible. Prices will
better than others. For example, if you have escalate over time for license fees and royalties.
greater porosity in the rock it means that less
energy goes to heating up the rock. With a tighter Q: You’re operating a test site at the moment
rock you’ll expend more of the thermal energy in Saskatchewan?
warming up the container. We require projects
that never leak to surface so there must be some A: Right now we’re producing hydrogen but it’s
sort of a competent cap rock so there’s no chance getting burned in our incinerator. We need to start
of carbon dioxide breaching and making its way separating it for sale. Our plan is to start trucking
up. Typically, this is already true of oilfields that in liquid oxygen as a near-term demo within the
have demonstrated holding in oil and gas for next few months and that will give us the
millions of years. interesting data that takes us to the next level in
terms of investment toward large-scale air
Q: Is this suitable for Canada’s oil sands? separation units.
A: It is suitable. We have more than 2 trillion Q: You’ve said your production cost is below
barrels of oil in Alberta alone. For us, it’s an 30 cents per kilogram. Is that right?
enormous target. Using roughly one tenth of the
resource remaining in Western Canada, we can A: We anticipate handily beating that target at full
supply 10% of the world’s energy by 2040 scale. We’re not there today. That’s on a
assuming a 50-year project life. Canada can be a standalone basis, and not including any other
significant clean energy export superpower at a revenue streams from nitrogen production.
cost that’s lower than hydrocarbons. Hydrogen on a standalone basis, we expect to
see a levelized cost below 30 cents per kilogram.
Q: What are the markets you’re looking at? There’s potential to be below even 10 cents.
A: Our biggest primary market is baseload power Q: Is your cost assumption based on the oil in
– so making electricity and selling it through the the ground being free?
existing infrastructure to the existing market.
People would prefer to pay less for electricity and A: Yes it is. The smallest component to our entire
they would rather it be clean. Interest in that input is taking over someone’s abandonment
trajectory has only accelerated since the liability. Right now it exists on the wrong side of
Canadian carbon tax was introduced. There’s an someone’s balance sheet and the government
enormous push to decarbonize the energy system from wherever has a gun to their heads saying
here. To put in a hydrogen-capable turbine and `abandon these wells or else.’ They look at the
make electricity – we see that as a very large cost of abandonment and they are super eager to
market to step into. Meanwhile there are other dump those projects. So there’s no shortage of
demonstrations we’ll be involved in like selling them. No one can corner the market on low-
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displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance
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Change: BNEF Q&A
March 31, 2021
quality oil fields. They’re endless. They’re
everywhere.
Q: Are there other benefits you haven’t
discussed?
A: Whenever I talk about our technology, one of
the things I always come back to is air pollution. It
kills millions of people per year and I think it
behooves us to evaluate how we spend our
efforts in terms of buying energy and energy use
systems. It’s worth closely considering the issue
of air pollution. Greenhouse gases and climate
change have grabbed the environmental narrative
but air pollution is an unsung crisis that needs a
lot more attention and it’s a big part of my
motivation in wanting to scale up Proton
Technologies as fast as I can.
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March 31, 2021
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