Tapping the hydrogen stream – how Brazil is set to start exports to Europe

Bnamericas Published: Wednesday, December 07, 2022
Tapping the hydrogen stream – how Brazil is set to start exports to Europe

Comerc Eficiência and Casa dos Ventos recently signed a pre-contract with the Pecém complex in Ceará state to build a plant to produce of hydrogen and ammonia, with the first phase scheduled to start operating in 2026. 

The undertaking is in the environmental licensing and basic project phase prior to implementation, which will be divided into stages. 

When it is operating at full capacity, the enterprise will have electrolysis capacity of up to 2.4GW, producing more than 1,000t/d of hydrogen, enabling the delivery of 2.2Mt/year of green ammonia.

Last month, the companies signed an MoU with Porto do Açu to develop hydrogen-based green industrial projects in Rio de Janeiro state.

Marcel Haratz, president of Comerc Eficiência, and Francisco Habib, Casa dos Ventos’ engineering director, speak with BNamericas about the Ceará venture. 

BNamericas: What will be the destination of the green ammonia produced by the project? The domestic and/or external market? 

Haratz (pictured, left): The green hydrogen projects, both at the Port of Açu and Pecém, are initially aimed at the international market. Not because we don't want to sell it in Brazil, but because the biggest demand is abroad. 

There is a national demand for smaller projects, mainly in industries that consume hydrogen as a raw material or intend to substitute non-renewable fuels for renewable ones, such as industries that use coke, coal and natural gas and are looking at the possibility of mixing hydrogen in this burning. 

BNamericas: Does the strong demand abroad reflect the global energy crisis, mainly due to the war in Ukraine?

Habib (pictured, right): The debate predates the Ukraine issue, but there is certainly a new stimulus caused by the conflict. The US, for example, recently announced a direct incentive program for green hydrogen. 

In Brazil, the decisions are more linked to issues such as costs and sustainability goals, because there's no shortage of energy here. But Europeans are much more willing to pay the premium for this. 

The Pecém project is, in the first phase, an export project to a port in Europe. 

Haratz: The war in Ukraine accelerated the energy transition. This has been talked about a lot, but Europe needs fuel for the winter and for its industries, so this ended up creating the possibility of exporting hydrogen.

BNamericas: Where will the energy for green hydrogen production come from? From existing Casa dos Ventos plants and/or from plants in the design/implementation phase? Is offshore wind in the plans?

Habib: Offshore wind power isn't considered initially, because this form of generation is only expected to grow later. At present, we’re working with Casa dos Ventos' projects, with Comerc's expertise, to deliver more competitive energy, with onshore wind and PV solar power projects, eventually in a hybrid model, investing in the complementarity between the sources. 

These are new projects at an advanced stage of development, close to having their construction started. The plants will be delivered by 2024, 2025. 

Haratz: Brazil has an outstanding position in the international market due to the abundance of renewable energy sources. But this isn't enough: we need the government to promote it. And we’re not talking from the electricity point of view, but from the business point of view. There are a number of processes that have to happen from now on. 

For example, green hydrogen projects aren't yet framed as infrastructure debentures, in order to be able to issue more competitive debt. 

Hydrogen is in ports, in ZPEs [export processing zones], but there could be other incentives and subsidies for this type of project. These are very large investments with extraordinary capacity to generate jobs, including for the region most in need of this type of investment in Brazil, which is the northeast. 

BNamericas: What’s the estimated cost of producing green ammonia? Why do Comerc and Casa dos Ventos consider the project economically viable as of 2026?

Haratz: The project is competitive for a number of factors. We have this partnership with Casa dos Ventos, with strong financial robustness and a large partner in TotalEnergies, while Comerc brings to the venture a company with great expertise and investment capacity, which is Vibra Energia

We’ve already started the engineering and environmental studies and we have the first results, which are quite interesting for us. We can't disclose the cost, but we know that today it will be the most competitive project in Brazil, as it involves two national companies that have been developing large projects for a long time. 

Habib: The final price still depends on some issues that haven't yet been decided, such as financing and the structuring of the ammonia contract. But our analyses indicate a very competitive final product. 

Haratz: It’s worth recalling that the ammonia plant that we’ll install here is the same as the ones other companies will install in other parts of the world. Our great differential is our renewable resources – sun and wind. Another differential can come from a national stimulus for green hydrogen in Brazil. 

BNamericas: What will be the funding strategy? Are you looking for partners?

Habib: Our base case is foreign financing because it’s an export project. So it’s possible to build the project with cheaper debt. But we’re quite comfortable with various types of financing. 

Haratz: You have to have a good balance sheet to get financing at good rates. I’ve talked to some international banks and investment funds, private equity funds, that are already showing interest in investing in green hydrogen projects. The difference is that, because we have large companies behind us, this brings even more reliability for investors. 

There will be no global decarbonization without hydrogen. I’d say that hydrogen is the main actor, so we have to make competitive projects in order to contribute.

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