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LSB Industries outlines blue ammonia project economics

US fertilizer producer LSB Industries gives a glimpse at the economics of two in-development blue ammonia projects.

LSB Industries estimates its Houston Ship Channel blue ammonia project will add approximately $150m of EBITDA annually, CEO Mark Behrman said today.

The facility, which would produce approximately 1.1 million metric tons of ammonia and capture and sequester 1.6 million metric tons of CO2 annually, is currently in the pre-FEED phase and planned for construction on the Vopak Exolum Houston Ship Shuttle Ammonia Terminal.

Behrman gave a back-of-the envelope estimate assuming the cost of the facility would come in at $800m, resulting in the added $150m of annual EBITDA .

“If you could tell me what the cost is, we’re only in pre-FEED now, but if we used an $800m cost, and I’m not suggesting that that’s the cost, I think we really need to go through our engineering, and we look at the types of returns that we would want, I would guess that for a very stable and steady stream of income, it’s probably somewhere in the neighborhood of $150 million annually,” Behrman said.

Oklahoma-based LSB will use a project finance model to fund the project, the company previously said, giving estimates of between $500m – $750 for the cost.

LSB expects initial offtakers based out of Japan and Korea, but Behrman said today that, more recently, “we have had conversations with potential European offtakers and are encouraged as we now believe Europe to be a viable target market as well.”

The company is developing the facility in partnership with INPEX, Japan’s largest E&P company, and plans to build and operate an ammonia synthesis loop using low-carbon hydrogen produced by Air Liquide, who will also handle the carbon capture and sequestration as well as the nitrogen supply.

El Dorado

Meanwhile, LSB expects to add up to $20m of EBITDA per year from the installation of a carbon capture unit at its ammonia facility in El Dorado, Arkansas.

LSB has partnered with Lapis Energy on the project, which will capture and sequester 450,000 metric tons of CO2 per year from El Dorado’s ammonia production. Lapis will receive 45Q tax credits of $85 per ton of CO2 sequestered and pay a fee to LSB for each ton.

In turn, LSB will produce 375,000 tons of low-carbon ammonia that can be sold at a premium, executives said on an investor call today.

“All combined, this should equate to an estimated 15 to $20 million in annual incremental EBITDA for LSB,” CEO Mark Behrman said.

“The main gating factor is the approval of our Class VI permit application from the EPA that will enable Lapis to begin construction and then capturing and permanently sequestering,” he said. Indications from the EPA are that they are on track to issue the permit during 2025, he added.

At the same time, LSB elected to delay the expansion of production capacity at the El Dorado facility citing commodity market conditions, planned turnarounds and other initiatives the company has underway.

The El Dorado expansion project has been selected to receive funding under the USDA Fertilzer Production Expansion Program, a financing element under which LSB expects to have five years to complete the project once approved for the grant.

LSB previously paused a green ammonia project planned for Pryor, Oklahoma, citing lower gas prices, higher power prices, and uncertainties around tax credit incentives under 45V that created conditions favoring blue ammonia projects.

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EUR 220m granted for Spanish H2 production

The European Commission has approved a EUR 220m Spanish measure to support Cobra Instalaciones y Servicios, S.A. in the production of renewable hydrogen for use in industrial sectors.

The European Commission has approved a  EUR 220m Spanish measure to support Cobra Instalaciones y Servicios, S.A. (COBRA) in the production of renewable hydrogen for use in industrial sectors, according to a press release.

The measure is in line with the EU Hydrogen Strategy and the European Green Deal targets, meant to reduce dependence on Russian fossil fuels and fast forward the green transition in accordance with the REPowerEU Plan.

COBRA, which is not yet active in hydrogen production, will start producing renewable hydrogen at large scale via water electrolysis. The renewable hydrogen produced will be used for external industrial off-takers, in particular in energy-intensive and hard-to-abate sectors such as refineries and ceramics.

The aid, which will take the form of a direct grant, will support the construction and the installation of electrolysers in the Spanish regions of Cartagena and Castellón. The two electrolysers will have a total capacity of 205 MW and are expected to produce approximately 8,550 tonnes of renewable hydrogen and 6,840 tonnes of oxygen per year. The electrolysers are envisaged to be constructed in stages, with the first electrolyser operating as of 2023.

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bp selects Honeywell technology for 5 SAF facilities

bp will use Honeywell’s Ecofining technology at five sites in the US, Europe, and Australia.

bp has selected Honeywell’s Ecofining™ technology to help support the production of sustainable aviation fuel (SAF) at five bp facilities across the globe, according to a news release.

Honeywell UOP Ecofining technology will be installed at the following bp sites: Cherry Point refinery in Blaine, Washington; Rotterdam II refinery in Rotterdam, Netherlands; Lingen refinery in Lower Saxony, Germany; Castellón de la Plana refinery in Castellón, Spain and Kwinana Oil refinery in Kwinana, Australia.

Ecofining is a proven, ready-now technology, and its simplified design provides bp a capital and cost-efficient solution to increase bp’s SAF production from renewable feeds. It will help bp achieve its aim to supply 20% of the SAF market globally by 2030.

SAF produced from Honeywell’s Ecofining technology is certified for use according to international standards. It can be used as a drop-in replacement without engine modifications and currently can be used in blends of up to 50 percent with the remainder as conventional (fossil-based) jet fuel.

“bp has an established global biofuels business that is positioned for rapid growth utilizing Honeywell’s technology. The world’s demand for SAF is set to increase dramatically and bp seeks to play an important role in helping the airlines to decarbonise,” said Nigel Dunn, senior vice president biofuels growth, bp.

“Demand for Ecofining has more than doubled in the last two years, and Honeywell has now licensed 35 Ecofining plants around the world with a total production capacity in excess of 400,000 barrels per day,” said Lucian Boldea, president and CEO of Honeywell Performance Materials and Technologies. “Honeywell helped pioneer SAF production with its Ecofining process, which has been used to produce SAF commercially since 2016.”

“The Honeywell UOP Ecofining process, developed in conjunction with Eni SpA, converts non-edible natural oils, animal fats and other waste feedstocks to renewable diesel and SAF, and can reduce GHG emissions up to 80% when compared to the emissions from fossil fuels,” added Boldea.

Honeywell now offers solutions across a range of feedstocks to meet the rapidly growing demand for renewable fuels, including SAF. In addition to Honeywell UOP Ecofining, Honeywell’s renewable fuels portfolio includes Ethanol to Jet technology and the recently announced Honeywell UOP eFining™, which converts green hydrogen and carbon dioxide into e-fuels.

Honeywell recently committed to achieve carbon neutrality in its operations and facilities by 2035. This commitment builds on the company’s track record of sharply reducing the greenhouse gas intensity of its operations and facilities as well as its decades-long history of innovation to help its customers meet their environmental and social goals. About 60% of Honeywell’s 2022 new product introduction research and development investment was directed toward ESG-oriented outcomes for customers.

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Strata closes $300m revolving loan

The proceeds of the loan will support the development, construction, and operation of Strata’s upcoming renewable energy, energy storage, and Power to X projects.

Strata Clean Energy has closed a $300m new revolving loan and letter of credit facility to expand Strata’s operational fleet and accelerate the commercialization of its diversified 17+ GW development pipeline.

Nomura Securities International, Inc. (Nomura) led the financing, acting as Sole Coordinating Lead Arranger, Bookrunner, and Nomura Corporate Funding Americas, LLC as Administrative Agent, with First Citizens Bank and ING Capital as Joint Lead Arrangers alongside five other participant banks.

The loan adheres to a Green Financing Framework in accordance with the 2023 Loan Syndications and Trading Association (LSTA) Green Loan Principles. Nomura and ING Capital acted as Green Structuring Agents.

The proceeds of the loan will support the development, construction, and operation of Strata’s upcoming renewable energy, energy storage, and Power to X projects. This facility also provides working capital for Strata’s growing EPC and O&M divisions, both of which have played a pivotal role in the Company’s 15-year history of high-quality execution for its own Independent Power Producer (IPP) and third-party customers.

“This facility strengthens Strata’s liquidity position and enables us to drive forward with groundbreaking and economically viable renewable initiatives in markets nationwide,” said Alice Heathcote, CFO of Strata Clean Energy. “The support of our financial partners is instrumental in propelling us forward as a leading fully-integrated cleantech platform, offering a comprehensive one-stop solution for development through construction, with an unwavering commitment to quality.”

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Low-carbon crude refinery developer lining up project cap stack

The developer of a low-carbon crude refinery is in talks with banks and strategics to line up project financing for a $5.5bn project in Oklahoma.

Texas-based Southern Rock Energy Partners is holding discussions with banks and potential strategic investors with the aim of shaping a $5.5bn capital stack to build a low-carbon crude refinery in Cushing, Oklahoma.

The project, a first-of-its-kind 250,000 barrel-per-day crude refinery, would make it the first crude facility of that size built in the United States in several decades.

The company is evaluating a project finance route with a debt and equity structure for the project, and has held talks with several major investment banks as well as “industry-leading” strategics in midstream, industrial gas, and electricity generation, Southern Rock Managing Partner Steven Ward said in an interview.

In support of the refinery, the city of Cushing and the Cushing Economic Development Foundation approved $75m in tax-exempt private activity bonds, Ward noted. He added that the company could also tap industrial revenue bonds as well as PACE equity financing.

Seed capital for project development has so far come from strategic partners, some of which are operational partners, Ward said. He declined to comment further on the capital raise, noting that engagement letters have yet to be signed.

Engineering firm KBR is conducting a feasibility study for the Cushing project, and the company is moving through land acquisition, air permit preparation, and EPC selection, Ward said.

While most crude refineries consume natural gas, off-gasses, and ambient air, Southern Rock’s proposed refinery would use oxygen along with blue hydrogen produced from the refining off-gasses and green hydrogen from electrolysis. The process would eliminate 95% of greenhouse gas emissions at the proposed refinery.

“Our furnaces and our process heating units are fed 100% hydrogen and oxygen,” Ward said, noting that this type of system does not currently exist in the market. The company is expanding on technology it licenses from Great Southern Flameless, he said.

The size of the refinery would make it the largest to be built in the US since Marathon Petroleum built a 200,000 barrels-per-day facility in 1976.

Certain other low-carbon crude projects have been in the market for several years. Meridian Energy has been seeking to build cleaner crude refineries in North Dakota. Raven Petroleum ran up against environmental concerns while seeking to build a clean refinery in Texas. And MMEX is aiming to build an “ultra clean” crude refinery in West Texas.

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How hydrogen from nuclear power shows pitfalls of ‘additionality’

An interview with the Nuclear Energy Institute’s Director of Markets and Policy Benton Arnett.

Tax credits for low-carbon hydrogen production in the Inflation Reduction Act represent one of the climate law’s most ambitious timelines for implementation, with the provision taking effect late last year. That means low-carbon hydrogen producers can, in theory, already begin applying for tax credits of up to $3 per kilogram, depending on the emissions intensity of production.

However, IRS guidelines for clean hydrogen production have yet to be issued, and industry groups, environmentalists, and scientists are taking sides in a debate over whether the tax credits should require hydrogen made via electrolysis to be powered exclusively with new sources of zero-carbon electricity, a concept known as “additionality.”

In a February letter, a coalition of environmental groups and aspiring hydrogen producers expressed concern to the IRS that guidelines for 45V clean hydrogen production tax credit implementation would not be sufficiently rigorous, especially when it comes to grid-connected electrolyzers. Citing research from Princeton University, the group argued that grid-powered electrolyzers siphon off renewable generation capacity, requiring the grid to be backfilled by fossil power and thus producing twice the carbon emissions that natural gas-derived hydrogen emits currently.

(The group, which includes the National Resources Defense Council, Intersect Power, and EDF Renewables, among others, also argues in favor of hourly tracking, which they say would better guarantee energy used for electrolysis comes from clean sources, and deliverability, requiring renewable power to be sourced from within a reasonable geographic distance. In February, the European Commission issued a directive phasing in, over a number of years, rules for additionality, hourly tracking, and deliverability.)

Benton Arnett, director of markets and policy for the Washington, DC-based Nuclear Energy Institute, a nuclear industry trade association, does not believe the concept of additionality was part of Congress’s intent when the body crafted the Inflation Reduction Act. For one, he notes, the text of the 45V provision for clean hydrogen production includes specific prescriptions for the carbon intensity of hydrogen production as well as for the analysis of life-cycle emissions, but says nothing about additionality.

“When you get legislative text, you don’t usually have prescriptions on carbon intensities for the different levels of subsidies,” he said. “You don’t usually have specifications on what life-cycle analysis model to use – and yet all of that is included in the 45V text. Clearly [additionality] is not something that was intended by Congress.”

Reading further into the law, section 45V contains precise language allowing renewable electricity used for the production of hydrogen to also claim renewable energy tax credits, or “stacking” of tax credits. Further, the statute includes a subsection spelling out that producers of nuclear power used to make clean hydrogen can also avail themselves of the 45U tax credit for zero-emission nuclear energy production.

“It’s really hard for me to think of a scenario where the drafters of the IRA would have included a provision allowing existing nuclear assets to claim 45V production tax credits and also be thinking that additionality is something that would be applied,” Arnett said.

Text of the IRA

The NEI emphasized these provisions in a letter to Treasury and IRS officials last month, noting that, “given the ability to stack tax credits for existing sources with section 45V, the timing of when the section 45V credit was made available” – December 31, 2022 – “and congressional support for leveraging existing nuclear plants to produce hydrogen, it is clear Congress intended for existing facilities to be eligible to supply electricity for clean hydrogen production.”

Arnett adds that the debate around additionally ignores the fact that not all power generation assets are created equal. Nuclear facilities, in particular, given the regulatory and capital demands, do not fit within a model of additionality geared toward new renewable energy capacity. (Hydrogen developers have also proposed to use existing hydropower sources for projects in the Pacific Northwest and Northeast.)

This year, the NEI conducted a survey of its 19 member companies representing 80 nuclear facilities in the US. The survey found that 57% of the facilities are considering generation of carbon-free hydrogen. Meanwhile, the US Department of Energy’s hydrogen hubs grant program requires that one hub produce hydrogen from nuclear sources; and the DOE has teamed up with several utilities to demonstrate hydrogen production at nuclear power plants, including Constellation’s Nine Mile Point Power Station, Energy Harbor’s Davis-Besse Nuclear Power Station, Xcel Energy’s Prairie Island Nuclear Generating Plant, and Arizona Public Service’s Palo Verde Generating Station.

“We’re worried that if [additionality] goes into effect it’s going to remove a valuable asset for producing hydrogen from the system, and it’s really going to slow down penetration of hydrogen into the market,” Arnett said.

As for the research underlying arguments in favor of additionality, Arnett says that it appears to take the 45V provision in a vacuum, without considering some of the larger changes that are taking shape in US electricity markets. For one, the research, which argues that electrolyzers would absorb renewable capacity and require fossil-based generation to backfill to meet demand, assumes that natural gas generation will continue to be the marginal producer on the electrical grid.

“One of the shortcomings of that is that the IRA has hundreds of billions of dollars of incentives aimed at changing that very dynamic. The whole goal of the IRA is that marginal additions of power are carbon-free,” he said, noting incentives for clean electricity production tax credits, investment tax credits, supply chain buildouts, and loan program office support for all of these projects.

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Exclusive: Methanol electrolyzer start-up gearing up for seed capital raise

An early-stage technology company seeking to commercialize an electrolyzer that produces methanol from CO2 at ambient temperature and pressure is preparing its first capital raise.

Oxylus Energy, a methanol technology and project development start-up, is preparing to kick off its first capital raise later this month.

The Yale-based firm is seeking to raise $4m in seed funding, with proceeds funding the advancement of a production-scale CO2-to-methanol electrolyzer cell and its first commercial agreements for offtake, CEO Perry Bakas said in an interview.

Oxylus aims to commercialize an electrolyzer that creates methanol from CO2 at room temperature and pressure, and also plans to develop and operate its own methanol production plants, he said.

The technology, which will scale to larger versions in coming years, recently hit a key milestone with the validation of a 5cm2 platform.

The seed capital raise would provide approximately 26 months of runway, according to Bakas. The company would then raise between $20 – $30m in a follow-on Series A in late 2026.

“What we’re gonna do with the Series A is put that first electrolyzer into the ground,” he said. “It’ll be our first revenue-producing methanol.”

Oxylus is currently owned by Bakas and his fellow co-founders. The company has been entirely grant funded to this point. DLA Piper is advising as the law firm on the seed capital raise.

“I think the most important thing about the technology is it’s the most energy-efficient pathway to making renewable methanol,” he said. “At the right energy prices, you’re below cost parity with fossil-derived methanol. When that happens, I think it’ll become a very interesting development scenario.”

Oxylus is focused on bringing the so-called green premium down to zero, Bakas said, noting that it requires achieving scale in electrolyzer production or partnering with established electrolyzer manufacturers.

Methanol for shipping

Oxylus will seek to introduce its technology into target markets that are already using methanol as a feedstock, like high-value petrochemicals. In the longer term, shipping and aviation are likely to become attractive markets. Taken together, the company believes methanol has the potential to decarbonize 11% of global emissions.

Methanol will compete with ammonia for primacy as a shipping fuel in the future, but Bakas believes methanol is the better option.

“These are massive markets – they need a lot of solutions, and quickly,” he said. “But ammonia is not energy dense, and it doesn’t integrate with existing infrastructure.”

The International Energy Agency recently projected that while ammonia will be cheaper to make, methanol is easier to handle, resulting in roughly similar cost profiles for e-methanol and green ammonia. The added cost for methanol production, the report found, is likely to come from a scarcity of biogenic CO2.

On that topic, Bakas acknowledged that the methanol pathway still requires combustion of carbon, but emphasized his technology’s ability to displace existing fossil fuel-based methanol production.

“The distinction we need to make is: are these virgin hydrocarbons or are they recycled hydrocarbons? If you’re just continuously pumping new CO2 out of the ground into the atmosphere, you’re gonna continue to cause climate change,” he said.

“The technologies that we are building in this suite of technologies that cover direct air capture, point source capture, carbon conversion, that whole CCUS world,” he added, “are really working to monitor and create a homeostasis in the atmospheric balance of CO2.”

Oxylus recently completed a lifecycle assessment of greenhouse gas emissions, Bakas said, finding that its fuels are expected to reduce CO2 emissions by 95% at optimal voltage compared to natural gas steam methane reforming.

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