LatAm H2 - The Growing Importance of Low-Carbon Hydrogen in Latin America

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LatAm H2: The Growing Importance of Low-Carbon Hydrogen in Latin America | September 2022 11 In Korea, the Korea Gas Corporation, the biggest LNG importer in the country, expects to complete demonstration projects to blend 20% hydrogen in its natural gas pipelines by 2026, and by 2027, intends to start importing hydrogen. By 2050, South Korea expects hydrogen to account for 20% of its national energy mix. The country is the 6 th ranking steel manufacturer in the world and is relying on hydrogen to reduce GHG emissions. Posco, the country's largest steel manufacturer, expects to import 80% of its hydrogen demand by 2050. Perhaps most significantly, the European Union intends to import 10,000,000Mt/year of hydrogen by 2030, which is expected to rise to 60,000,000Mt/year by 2050. Germany's largest utility, E.ON, recently signed a memorandum of understanding alongside the German government with Australian green hydrogen project developer Fortescue Future Industries, for the purchase of 5,000,000Mt/year of green hydrogen from 2030 onwards. This amount is equivalent to one-third of the total calorific value of fossil fuel-based energy that Germany imported from Russia prior to Russia's invasion of Ukraine in the spring of 2022. On the export side, Chile has plans to deliver hydrogen to the Port of Rotterdam in the Netherlands based on a 2021 framework agreement to pursue the possibility of creating a hydrogen corridor between Chile and Europe. Singapore has also signed an agreement to assess the viability of routes from Chile and other Latin American countries. Chile's Ministry of Energy has also met with investors from Germany, Australia, Canada, China, the United States, Japan and the United Kingdom for potential investment opportunities; such is the keen interest in Chile's hydrogen projects. Presently, there is a limited pool of creditworthy off-takers with the risk appetite and downstream distribution network to offtake green or low-carbon hydrogen at utility scale. It is difficult for producers to commit to steady and predictable production volumes because of the need to rely on renewable power sources, making commitment arrangements complex. RISKS For all its benefits in helping achieve net-zero emission targets and creating export opportunities for much of Latin America, hydrogen is a volatile gas that poses risks that need to be taken seriously. Hydrogen leaks must be kept to a minimum throughout the supply chain, otherwise it risks exacerbating the very problem it is being manufactured to solve. To this point, scientists consider that hydrogen, when released in air, acts as an indirect GHG by setting off a chain of chemical reactions that can ultimately be greater than 33 times more potent than CO 2 in trapping atmospheric heat. CONCLUSION Although multiple countries in Latin America possess the right conditions to become green hydrogen producers and exporters, the next decade will be crucial for the long-term prospects of green hydrogen, both for local consumption and exportation. In this regard, hydrogen-specific regulation will be fundamental to provide clarity and legal certainty for the development of these projects. Latin American countries are working to position themselves front-and-center as producers to the world, and only time will tell how much demand will materialize.

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