Fortescue agrees to supply Covestro with green H2

Australian hydrogen company Fortescue Future Industries (FFI) — the green energy arm of the Fortescue Metals Group — has agreed a deal in principle to supply German chemicals and materials producer Covestro with up to 100,000 t/yr of green hydrogen and derivatives including green ammonia from 2024.

Covestro plans to replace grey hydrogen derived from fossil fuels with green hydrogen from renewables in its industrial processes, enabling it to cut its CO2 emissions by up to 900,000 t/yr. The 100,000 t/yr target for green hydrogen supply is a long-term goal. The amount provided by FFI initially will probably be much smaller. "We expect the total supply volumes to grow over time in line with the ramp-up of green hydrogen production capacities and market acceptance," a Covestro spokesperson told Argus.

"FFI has currently projects in over 20 countries. We have agreed to review the most attractive locations together to supply Covestro's relevant sites in Asia, North America and Europe," Covestro said. "FFI's projects in Australia are the ones with the shortest lead time. As such, we expect the initial supplies to be shipped from Australia."

Pure hydrogen is liquified at -252.9°C and has a low energy density in terms of volume, making it impractical and costly to move by ship. Some 85pc of today's hydrogen is consumed where it is produced. FFI and Covestro intend to use green ammonia as a hydrogen carrier, as there is more extensive existing infrastructure for shipping the former.

FFI plans to make the shipping sustainable by using green ammonia as a bunker fuel. German ship engine manufacturer Man Energy Solutions said it expects ammonia-fuelled engines to be ready by 2024 at the earliest.

The green hydrogen shipped from Australia or elsewhere will be significantly more expensive than the grey hydrogen currently used. Covestro said it will work on a pricing scheme with FFI that allows it to be phased into the current system. To make the plan economically viable, "we will explore existing governmental subsidy schemes for the ramp-up of green hydrogen", but "in the long-term, our goal is to achieve competitive pricing without subsidies".

The agreement is non-binding but the companies intend to finalise the deal "as soon as possible", Covestro said.

By Aidan Lea