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Electrolyzer start-up selected for 20 MW project

Houston-based Splitwaters will supply the electrolyzers, and will be responsible for the engineering, procurement, construction, and commissioning of the plant.

Splitwaters, a Houston‐based electrolyzer manufacturer and EPC firm has signed an agreement with Akna Energy, LLC for a 20 MW green hydrogen plant to be built & in operation in late 2025.

This plant will be the first of many green hydrogen plants that Akna plans to build with Splitwaters in and around the United States, according to a news release.

The facility will produce more than 3 million kilograms of green hydrogen per year and will be operational in late 2025. Splitwaters will provide a complete turnkey solution for the green hydrogen plant, will supply the electrolyzers, and will be responsible for the engineering, procurement, construction, and commissioning of the plant.

Zentech Inc. of Houston, Texas with its over 40 years of engineering and project management experience is the engineering partner for Splitwaters. The engineering design is well underway to meet the project deadlines.

“Splitwaters was selected for their rich expertise in Green Hydrogen generation, their modular approach, compact design, lower initial Capex, and speed of delivery. The engineering designs and equipment fabrication for this plant are well underway. We are very excited to have our first plant delivered within budget and in a record timeline. This will be the first of many green hydrogen plants we plan to build with Splitwaters,” said Paul Hudson, CEO of Akna Energy.

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JAPEX to develop carbon capture and blue ammonia projects

JAPEX has partnered with Invest Alberta to explore CCS, BECCS, and blue ammonia projects in the province.

Japan Petroleum Exploration Co., Ltd. (JAPEX) signed a memorandum of understanding (MOU) with Invest Alberta Corporation (IAC), an investment attraction agency established by the government of Alberta, Canada, to partner together to support JAPEX’s development of projects in the province, according to a news release.

The MOU signifies the intent of both parties to work jointly on potential projects of JAPEX in Alberta, leveraging JAPEX’s extensive experience in petroleum exploration, production and CCS (Carbon dioxide Capture and Storage) / CCUS (Carbon dioxide Capture, Utilization, and Storage), while Invest Alberta will support JAPEX with its in-depth knowledge of the local market and investment landscape.

JAPEX is a global hydrocarbon E&P and transportation company.

On this partnership, JAPEX is seeking to develop the projects in several areas:

  • CCS/CCUS
  • BECCS (Bioenergy with Carbon dioxide Capture and Storage) (*)
  • Blue Hydrogen/Ammonia Business

“We are very excited to start working together with Invest Alberta,” said Tomomi Yamada, executive management officer, president of overseas business division II, JAPEX. “JAPEX had a very long-standing history of business in Alberta in the areas of oil sands (as an operator) and natural gas. We are now aiming to come back to Alberta and contribute to its decarbonization, using our expertise and experiences gained through the participation in CCS demonstration project in Japan by investing in the project company and extensive E&P businesses in Japan as well as overseas.”

Established by the Province of Alberta, Invest Alberta provides high-end tailored support to companies, investors, and major new projects. As one of North America’s leading investment attraction organizations with teams strategically placed around the world, including in Tokyo, Invest Alberta breaks down barriers so businesses can start up, scale up, and succeed without limits.

“Invest Alberta is honoured to partner with JAPEX to help the company seize the opportunities that Alberta offers to investors,” said Rick Christiaanse, Invest Alberta CEO. “As Canada’s energy capital, Alberta has a skilled workforce and renowned researchers capable of advancing major projects forward in a welcoming business environment. JAPEX is a strong and valuable partner for Alberta, bringing extensive experience in the energy sector and a shared dedication to achieving net-zero through environmentally sustainable projects.”

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Carbon transformation firm closes equity round

A start-up that aims to turn greenhouse gas emissions into carbon materials for sustainable and inexpensive everyday essentials has raised $6m.

Carbonova Corp., a start-up that aims to turn greenhouse gas emissions into carbon materials for sustainable and inexpensive everyday essentials, announced today that it has successfully closed its SAFE equity financing in an oversubscribed round with $6m raised, according to a news release.

The company intends to use the net proceeds from the financing to advance its strategy towards building the first commercial demonstration carbon nanofibers unit in Canada.

The financing round was led by Kolon Industries, a multi-billion-dollar Korean conglomerate. Kolon has a keen interest in Carbonova’s technology applications in Asia, including batteries, plastics, and other materials.  Another major participant in this round was the Natural Gas Innovation Fund NGIF Capital, a venture capital firm focused on innovative technologies for improving the environmental performance of existing or renewable natural gas and hydrogen production. This round also saw strong participation from the company’s directors, management, and staff team. This funding adds to the previously announced $2.5 million from Sustainable Development Technology Canada “SDTC” and the National Research Council of Canada Industrial Research Assistance Program “NRC-IRAP” secured in February of 2023.

“Carbonova’s vision is to create everyday essentials from everyday emissions for everyone on earth, and with this financing, we are on track to complete the design of our first-of-a-kind commercial demo unit to put our vision into action,” said Mina Zarabian, Carbonova’s CEO and Co-Founder. “We have investors and customers from the wide spectrum of the carbon value chain validating the strong pull from the market for transitioning to this recycling of carbon to enhance the building blocks of virtually everything in modern society”.

Carbonova currently produces carbon nanomaterials for customers at a pilot facility at the company’s headquarters in northeast Calgary, Alberta. The commercial demonstration expansion will result in unit production cost efficiencies and is forecast to reduce the CO2 footprint of the carbon nanomaterials to below net-zero.

“Carbonova is on track to complete the front-end-engineering design (FEED) of its first commercial demo unit; the new design will represent a significant scale-up from Carbonova’s existing pilot facility,” said Zarabian. “The new plant will generate multiple hundreds of kilograms of carbon nanomaterials per day. This amount is sufficient to generate thousands of tons of sustainable end products and serve dozens of customers to bring their own innovative sustainable products in different sectors to the market.”

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NOVA Infra and Nopetro Energy form new RNG and biofuels JV

Nopetro Renewables, a newly formed company, will construct one of Florida’s first landfill-gas-to-RNG facilities in Vero Beach.

NOVA Infrastructure, a middle-market infrastructure investment firm, has partnered with Nopetro Energy to create a renewable energy platform focused on renewable natural gas and biofuels, according to a news release.

Nopetro Renewables will construct one of Florida’s first landfill-gas-to-RNG facilities in Vero Beach. In addition to investing in the newly formed Nopetro Renewables’ platform, NOVA also has made an equity investment in Nopetro Energy.

“Our new platform, Nopetro Renewables, seeks to build and operate renewable energy infrastructure, starting with a shovel-ready landfill-gas-to-RNG project in Vero Beach,” Chris Beall, founder and managing partner of NOVA Infrastructure, said in the release.

Nopetro was founded in 2007 with the goal of displacing petroleum consumption with a cleaner, cost-effective and domestic natural gas fuel. Led by Jorge Herrera, the company has developed a strong reputation in the US southeast and currently operates 16 CNG fueling facilities where it serves government, waste, and industrial customers.

In July 2022, NOVA announced the close of its $565m Infrastructure Fund I, which attracted commitments from a diverse group of leading North American and global institutional investors including public and private pension funds, insurance companies, family offices and asset managers.

NOVA’s investment in Nopetro marks its seventh platform investment as part of Fund I and is a continuation of its strategy of targeting middle-market providers across the infrastructure landscape.

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Pennsylvania blue hydrogen DevCo planning project equity raise

A natural gas company has tapped an advisor and is planning to launch a process to raise project equity in the fall for a blue hydrogen production facility with contracted offtake in Pennsylvania.

KeyState Energy, a Pennsylvania-based development company, has engaged a financial advisor to launch a $60m equity process in September, according to two sources familiar with the matter.

Young America Capital is advising on the forthcoming process, the sources said.

The capital raise is for the company’s marquee Natural Gas Synthesis blue hydrogen project in Clinton County, one of the sources said. CapEx for the project is estimated at $1.5bn. OCGI is a pre-FEED investor in the project and the coming equity raise is meant to attract a FEED investor.

The 200 mtpd project has contracted offtake with Nikola Corporation, one of the sources said. In October it was reported that Nikola and KeyState were working towards a definitive agreement to expand the hydrogen supply for Nikola’s zero-emissions heavy-duty fuel cell electric vehicles.

The 7,000-acre natural gas and geologic storage site was formerly known for coal, iron and rail, according to the company’s website.

KeyState Energy did not respond to a request for comment. YAC declined to comment.

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Denbury to transport CO2 for Louisiana blue methanol project

A subsidiary of Denbury Inc. will transport and store CO2 for a planned blue methanol plant in Lake Charles, Louisiana.

Denbury Carbon Solutions has executed a 20-year definitive agreement to provide CO2 transportation and storage services to Lake Charles Methanol in association with that company’s planned 3.6 MMPTA blue methanol project, according to a press release.

LCM’s facility will be located along the Calcasieu River near Lake Charles, Louisiana, approximately 10 miles from Denbury’s Green Pipeline.

The facility is designed to utilize Topsoe’s SynCORTM technology to convert natural gas into hydrogen which will be synthesized into methanol while incorporating carbon capture and sequestration.

The process is anticipated to deliver more than 500 million kilograms of hydrogen per year as a feedstock to produce the 3.6 MMTPA of blue methanol.

LCM is finalizing its major permits to begin construction. The project is expected to reach a Final Investment Decision in 2023 with first production anticipated in 2027.

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Interview: Vinson & Elkins’ Alan Alexander on the emerging hydrogen project development landscape

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

In the meantime, a number of novel legal and commercial issues facing hydrogen project developers have come to the forefront, as outlined in a paper from the law firm this week, which serves as a guide for thinking through major development questions that can snag projects.

In an interview, Alexander, a Houston-based project development and finance lawyer, says that, although some of the issues are unique – like the potential for a clean fuels pricing premium, ownership of environmental attributes, or carbon leaking from a sequestration site – addressing them is built on decades of practice.

“The way I like to put it is, yes, there are new issues being addressed using traditional tools, but there’s not yet a consensus around what constitutes ‘market terms’ for a number of them, so we are having to figure that out as we go,” he says.

Green hydrogen projects, for example, are “quite possibly” the most complex project type he has seen, given that they sit at the nexus between renewable electricity and downstream fuels applications, subjecting them to the commercial and permitting issues inherent in both verticals.

But even given the challenges, Alexander believes the market has reached commercial take-off for certain types of projects.

“When the hydrogen rush started, first it was renewables developers who knew a lot about how to develop renewables but nothing about how to market and sell hydrogen,” he says. “Then you got the people who were very enthusiastic about developing hydrogen projects but didn’t know exactly what to do with it. And now we’re beginning to see end-use cases develop and actionable projects that are very exciting, in some cases where renewables developers and hydrogen developers have teamed up to focus on their core competencies.”

A pricing premium?

In the article, Vinson & Elkins lawyers note that commodities pricing indices are not yet distinguishing between low-carbon and traditional fuels, even though a clean fuel has more value due to its low-carbon attributes. The observation echoes the conclusion of a group of offtakers who viewed the prospect of paying a premium for clean fuels as unrealistic, as they would need to pass on the higher costs to customers.

Eventually, Alexander says, the offtake market should price in a premium for clean products, but that might depend in the near term on incentives for clean fuels demand, such as carbon offsets and levies, like the EU’s Carbon Border Adjustment Mechanism.

“Ultimately what we need is for the market to say, ‘I will pay more for low-carbon products,’” he says. “The mindset of being willing to pay more for low-carbon products is going to need to begin to permeate into other sectors. 30 or 40 years ago the notion of paying a premium for an organic food didn’t exist. But today there are whole grocery store chains built around the idea. When the consumer is willing to pay a premium for low-carbon food, that will incentivize a farmer to pay a premium for low carbon fertilizer and ammonia, which will ultimately incentivize the payment of a premium for low-carbon hydrogen. The same needs to repeat itself across other sectors, such as fuels and anything made from steel.”

The law firm writes that US projects seeking to export to Europe or Asia need to take into account the greenhouse gas emissions and other requirements of the destination market when designing projects.

In the agreements that V&E is working on, for example, clients were first focused on structuring to make sure they met requirements for IRA tax credits and other domestic incentives, Alexander says. Meanwhile, as those clean fuels made their way to export markets, customers were coming back with a long list of requirements, “so what we’re seeing is this very interesting influx” of sustainability considerations into the hydrogen space, many of which are driven by requirements of the end-use market, such as the EU or Japan.

The more stringent requirements have existed for products like biofuels for some time, he adds, “but we’re beginning to see it in hydrogen and non-biogenic fuels.”

Sharing risk

Hydrogen projects are encountering other novel commercial and legal issues for which a “market” has not yet been developed, the law firm says, especially given the entry of a raft of new players and the recent passage of the Inflation Reduction Act.

In the case of a blue hydrogen or ammonia project where carbon is captured and sequestered but eventually leaks from a geological formation, for example, no one knows what the risk truly is, and the market is waiting for an insurance product to provide protection, Alexander says. But until it does, project parties can implement a risk-sharing mechanism in the form of a cap on liabilities – a traditional project development tool.

“If you’re a sequestration party you say, ‘Yeah, I get it, there is a risk of recapture and you’re relying on me to make sure that it doesn’t happen. But if something catastrophic does happen and the government were to reclaim your tax credits, it would bankrupt me if I were to fully indemnify you. So I simply can’t take the full amount of that risk.’”

What ends up getting negotiated is a cap on the liability, Alexander says, or the limit up to which the sequestration party is willing to absorb the liability through an indemnity.

The market is also evolving to take into account project-on-project risk for hydrogen, where an electrolyzer facility depends on the availability of, for example, clean electricity from a newly built wind farm.

“For most of my career, having a project up and reaching commercial operations by a certain date is addressed through no-fault termination rights,” he says. “But given the number of players in the hydrogen space and the amount of dollars involved, you’re beginning to see delay liquidated damages – which are typically an EPC concept – creep into supply and offtake agreements.”

If a developer is building an electrolyzer facility, and the renewables partner doesn’t have the wind farm up and running on time, it’s not in the hydrogen developer’s interest to terminate through a no-fault clause, given that they would then have a stranded asset and need to start over with another renewable power provider. Instead, Alexander says, the renewables partner can offset the losses by paying liquidated damages.

Commercial watch list

In terms of interesting commercial models for hydrogen, Alexander says he is watching the onsite modular hydrogen development space as well as power-to-fuels (natural gas, diesel, SAF), ammonia and methanol, given the challenges of transporting hydrogen.

“If you’re going to produce hydrogen, you need to produce it close to the place where it’s going to be consumed, because transporting it is hard. Or you need to turn it into something else that we already know how to transport – natural gas, renewable diesel, naphtha, ammonia.”

Alexander believes power-to-fuels projects and developers that are focused on smaller, on-site modular low-carbon hydrogen production are some of the most interesting to watch right now. Emitters are starting to realize they can lower their overall carbon footprint, he says, with a relatively small amount of low-carbon fuels and inputs.

“The argument there is to not completely replace an industrial gas supplier but to displace a little bit of it.”

At the same time, the mobility market may take off with help from US government incentives for hydrogen production and the growing realization that EVs might not provide a silver-bullet solution for decarbonizing transport, Alexander adds. However, hydrogen project developers targeting the mobility market are still competing with the cost of diesel, the current “bogey” for the hydrogen heavy mobility space, Alexander says.

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