Uruguay state oil company outlines green hydrogen strategy

Wind resource-rich Uruguay’s vision for green hydrogen centers on eventually developing a maritime production hub geared to the export market.

For the domestic market, the country also seeks to produce green hydrogen to substitute liquid fuels in the heavy transport sector and to make green fertilizers.

Officials – already advancing an onshore green hydrogen production and transport incentives plan – are working on a bidding round for rights to offshore blocks for power generation with associated green hydrogen production, with an initial bidding process planned to get underway next year.

Uruguay has a wealth of offshore wind power generation potential, and authorities possess geological seabed data from hydrocarbons exploration work – an activity the country is promoting in parallel, given the importance of natural gas in the energy transition and as a potential revenue generator. Uruguay, seeking to become a hydrocarbons producer, has two open hydrocarbons E&P rounds a year, with offshore basins still underexplored. 

“We’re designing an offer of blocks to present, for consideration, to private [hydrogen] investors,” said Alejandro Stipanicic, chairman of state hydrocarbons and cement company Ancap. He added that timing of the process was key, citing the importance of ensuring investors can access the right technology at the right price. 

Port retrofitting and expansion work would not be required if production is carried out offshore, where tankers could load green ammonia – which Uruguay is betting on – directly from production and storage platforms. Green ammonia can be made by using hydrogen from water electrolysis and nitrogen separated from the air. Green ammonia is seen as key to reducing carbon emissions from shipping and other forms of heavy transport. 

Uruguay, which currently has a surplus of wind generation capacity, has estimated onshore and offshore wind potential at 30GW and over 250GW, respectively. “We’re talking about significant amounts,” Stipanicic said. Producers of green hydrogen and green ammonia will need an abundant supply of cheap renewable energy to turn a profit. 

“Our ambition is that Uruguay, via Ancap, exports the energy of the wind to central [global] markets,” said Stipanicic, who was a speaker at industry event Hydrogen Americas Summit. “For this, much investment is needed, thinking of offshore.

“For Uruguay, betting on hydrogen as a source of exports is a strategic vision.”  

As part of the first phase of a three-phase plan, officials opened a data room this year for an onshore pilot green hydrogen project. Uruguay is seeking parties interested in investing in a production facility and a fleet of hydrogen-powered trucks and buses.

An initial bidding round for investment incentives – spanning electricity supply and grid connection and access to Ancap infrastructure, land and technical support services – could get underway before the end of the year, Stipanicic said. Investors would be awarded tax breaks under general legislation introduced to spur inward investment. Power would be provided by state-owned utility UTE, which would offer several concessional rate options. 

The second phase involves expanding the local green hydrogen ecosystem and the third building out offshore export infrastructure.  

Under the current administration, Uruguay has shifted its green hydrogen focus away from R&D and toward getting production actually started, Stipanicic said. The objective, he added, was to achieve this in partnership with the private sector. 

In the Southern Cone, Chile is advancing apace along the green hydrogen highway, with one project already granted an environmental license, while lawmaker Gustavo Menna in Argentina is driving efforts to develop an industry there.

Latin America is expanding its solar and onshore wind capacity but has yet to tap its huge offshore potential. In terms of standard grid power generation, the competitive levelized cost of offshore wind electricity is dropping yearly, but as yet has not yet fallen sufficiently to whet appetites in the region and shift developer focus away from cheaper technologies like solar PV and onshore wind. 

Emissions-related policy incentives could trigger development of the sector, BNamericas was told recently.