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Oil & Gas 101

Oil & Gas 101: Hydrogen

In Canada, many see a strong future for blue hydrogen, an energy source with low greenhouse gas emissions derived from natural gas.

Can Canada become a blue hydrogen hotspot?

As the world moves to address climate change, hydrogen may become more important for reducing carbon emissions. When combusted, hydrogen produces heat or electricity as needed, with no carbon dioxide or other greenhouse gas (GHG) emissions. The only byproduct is water. However, some emissions can be created during production and transportation, depending on the method and how it is used. 

Hydrogen is an energy-dense fuel that could be used in many ways, from industrial applications, to heating homes, producing electricity in large-scale, long-term energy storage (batteries) and in fuel cells that power vehicles. While fuel cell technology is progressing, many of these other applications are farther from commercial deployment. 

While the development of low-emissions passenger vehicles has focused on electric battery technologies, the high-energy density of hydrogen makes it a strong candidate for heavy-duty vehicles like buses and trucks, and for emerging technologies like air taxis.

In the near-term though, hydrogen can be blended into natural gas streams for consumer uses such as electricity generation, residential heating and cooking, thus lowering overall emissions from burning natural gas (which is already a relatively low-emission fuel). For example, Heritage Gas in Nova Scotia is looking into fuel blending. In Alberta, ATCO Ltd. recently announced a project that will blend hydrogen into a section of an existing natural gas network, to be used primarily for building heating.

The biggest challenges: hydrogen is costly to produce and some production methods generate significant emissions. According to the International Energy Agency (IEA), grey hydrogen is currently the cheapest form, driven by the price of natural gas from which it’s derived. The IEA projects an increase in global demand for natural gas, which is expected to drive price increases. That, in turn, could make other forms of hydrogen relatively more economical. In addition, GHG emissions associated with grey hydrogen are often subject to carbon taxes and other costs, which are increasing as governments seek to reduce emissions.

Grey, blue, green? Decoding hydrogen types

Grey hydrogen is a common product derived from natural gas through a process called steam methane reforming (SMR). SMR mixes natural gas with very hot steam in the presence of a catalyst. A chemical reaction creates hydrogen and carbon monoxide. More water is added, converting the carbon monoxide to carbon dioxide and creating more hydrogen from the added water. Carbon dioxide is vented to the atmosphere. About 95 per cent of all hydrogen produced around the world today is grey hydrogen.

Blue hydrogen is created using the same SMR process, but here’s the key difference: produced carbon dioxide is captured using carbon capture and storage (CCS) technology, which usually injects carbon dioxide into deep rock or saline formations for permanent storage. The result: producing nearly pure hydrogen with significantly reduced GHG emissions – up to 90 per cent lower than grey hydrogen. Costs to produce blue hydrogen are driven by the cost of natural gas as well as the cost to develop and operate CCS systems. 

Green hydrogen does not involve natural gas or oil. Instead, through a process called electrolysis, water molecules are split to create hydrogen and oxygen. If renewable energy sources are used to generate the required electricity for the process, green hydrogen production can have very low emissions. However, the amount of electricity required makes this an expensive process is compared to creating blue hydrogen.

Moving hydrogen

Once produced, there are several options for transporting hydrogen, including pipelines – which require the hydrogen to be compressed (similar to natural gas) – or by truck or rail, again requiring compression or liquefaction similar to liquefied natural gas (LNG). Marine transport can carry hydrogen to global markets either in a liquefied form (requiring very low temperatures, again similar to LNG) or by converting hydrogen to a more stable compound such as ammonia. Hydrogen can be blended with natural gas (up to 20 per cent of the total volume) and transported using existing natural gas pipelines, while pure hydrogen requires special purpose-built pipelines and infrastructure.

Growing global markets

According to the IEA, a global hydrogen revolution is already underway, underpinned by a desire to address GHG emissions. Many governments in Europe, as well as South Korea, Japan and Australia, are creating policies and incentives that support blue hydrogen production. The Hydrogen Council, a global advisory council of corporate executives, estimates hydrogen production could generate US$2.5 trillion annually by 2050.

For Canada in particular, blue hydrogen could hold a key for future production that leverages many of the country’s existing energy sources, technology, skill sets, and geological advantages for CCS.

Canada’s blue hydrogen advantage

Western Canada is ideally suited to producing blue hydrogen: an abundant supply of inexpensive natural gas; numerous deep rock formations suitable for CCS; and a strong culture of innovation. Few other producing countries in the world have this critical combination, meaning that Canada — and Alberta in particular — could capitalize on these advantages over the coming decades. With the development of large-scale transportation pipeline infrastructure, Canada could become a world leader in high-value hydrogen fuel for emerging international markets.

According to a recent report from the Alberta-based think tank Transition Accelerator, Alberta’s Industrial Heartland region north of Edmonton has the potential to be Canada’s first major blue hydrogen production hub. Leveraging existing infrastructure, technology and expertise means this area is strategically positioned to take a leadership role. In fact, Alberta has the potential to produce some of the world’s lowest-cost blue hydrogen. 

Alberta already has crucial CCS infrastructure in place. The Alberta Carbon Trunk Link (ACTL) — the world’s largest carbon pipeline — transports carbon dioxide generated by a number of different facilities in the Heartland region to storage in underground reservoirs in central Alberta. Excess capacity currently exists in this pipeline that could be filled with carbon dioxide generated from blue hydrogen production. And the Quest CCS project associated with the Shell Scotford upgrader near Edmonton has an excellent deep storage reservoir with significant capacity for carbon dioxide injection. 

Five facilities in the Heartland corridor produce hydrogen, including Shell Canada’s Scotford refining complex, the NorthWest Refinery, and an Agrium fertilizer plant. Alberta currently produces about 2,250 tonnes of hydrogen per day, of which about 930 tonnes per day can be considered blue hydrogen

The Alberta government recently released its Natural Gas Vision and Strategy, which includes provisions for blue hydrogen technology, and the federal government released its national hydrogen strategy in December 2020.

While there are opportunities for future hydrogen technology development, domestic and global markets are only gradually emerging. Canada’s natural gas and oil industry has a significant role to play in a responsible energy future. The industry has the natural resources along with talent and expertise to deliver lower emissions intensive energy to the world, whether that be as natural gas and oil today or hydrogen tomorrow.