In a world that is clamouring for carbon abatement opportunities and one that is becoming awash with a new breed of “green” fund managers, large carbon abatement and clean energy projects that are viable are nonetheless still difficult to come by.
Whether it’s the Paris Agreement, the seemingly incessant flow of climate alarmist material or the new suite of laws being passed by Government’s around the world, it would seem that the clean energy revolution has arrived – but how do you get a piece if it?
Money for these projects does not appear to be a problem – the problem is more the lack of large scale projects that can be taken seriously. Indeed, the Australian federal government has already put up $2 billion for its Hydrogen Headstart program and $6.7 billion for its Hydrogen Production tax incentive and any number of so called “green” fund managers are sitting on piles of money that is still looking for a safe home in the clean energy space.
Asx-listed company Pilot Energy (ASX: PGY) says it is in the vanguard of players developing serious clean and green projects that will take big money to build and return even bigger money.
Up until recently Pilot, in partnership with Triangle Energy, has operated the Cliff Head oil well offshore from Dongara in WA’s Mid-West, albeit that project is now fully depleted of oil.
Pilot is in the process of buying out Triangle and the company has an ingenious plan to repurpose the old oil well as a carbon storage facility that is capable of taking liquified carbon emissions from WA’s big industrial emitters and along the way, Pilot also developed a plan to become one of them.
The company is looking to create a carbon storage business for third party emitters but will also look to get into the hydrogen and ammonia production business itself by utilising Cliff Head to store the carbon biproduct from an onshore ammonia facility – the single biggest hurdle for those looking to build clean hydrogen or ammonia production plants.
Pilots goal is to be Australia’s first “blue” ammonia producer.
Historically, Cliff Head was the first commercial oil discovery to be developed in the offshore Perth Basin and after coming onto production in 2006, produced more 15 million barrels of crude oil in its lifetime.
The oil was piped 120km back to shore and stored before being shipped to refineries in Asia. Water was then reinjected at the bottom of the reservoir courtesy of a second pipeline in order to create upwards pressure on the remaining oil.
Interestingly, Pilot now has on oil well that is still under pressure but pretty much full of water, which just happens to be approximately the same viscosity as carbon after it has been liquified.
The grand plan now for Pilot is to do deals with WA emitters (and its own proposed clean ammonia plant) by capturing and liquifying their carbon emissions and pumping them back into the old well at the bottom using the existing pipelines – something it says can be done for decades.
Pilot says it has essentially tested the well’s ability to trap and store the liquified carbon given that it has successfully stored water in it under pressure for years at a similar viscosity.
Pilot plans to extend the oil field’s lifespan by another 25 years by converting it into a carbon storage facility with a capacity to store more than 50 million tonnes of CO₂ — placing it within the top 10 carbon storage projects globally.
Pilot’s 2022 scoping study suggests it is tapping into what could be a net present value (NPV) of $210 million. That figure could end up being highly conservative too if the pricing of carbon credits, currently valued between $41 and $71 per tonne, head skywards. At 1 million tonnes of additional storage a year, Pilot says it can lock away each tonne at just $20 per tonne.
The onshore infrastructure that once piped oil to storage tanks will soon play a new role in carbon management and Pilot is now on track to start CO₂ injections by 2026, capturing emissions from both external industrial sources and its own proposed ammonia production facility.
Ammonia is typically created by splitting natural gas, firstly into hydrogen and carbon dioxide – the latter of which creates a problem for players looking to enter the lucrative ammonia industry.
Targeting the lucrative Asian ammonia/hydrogen market, particularly in South Korea, Pilot’s facility will capture 99 per cent of the resulting CO₂.
And it would seem the prospect of an ammonia plant which is likely to cost big money is not just a pipe dream either.
Pilot has attracted the interest of some of the largest players in the South Korean energy market who are now looking to invest in it –with an eye to securing the offtake.
Those players include Korea Southern Power Co, Korea East-West Power, Samsung C&T and hydrogen producer Approtium.
The Korean firms have formed a consortium that is now running the rule over Pilot’s plans to build a clean ammonia plant and that activity ramped up exponentially last week when the goliath consortium secured $2.2m from the Korean Export-Import Bank which will fund a feasibility study on the project.
It seems that governments are also signing on too after the company secured crucial approvals as a certified supplier under South Korea’s Clean Hydrogen Production Standard, which incentivises clean ammonia consumption by covering the cost difference to incorporate it over traditional fossil fuels, garnering a nice price premium to the Korean market.
Early this year the Australian federal government also stepped into the breach by declaring a “Greenhouse Gas Storage Formation” over the Cliff Head oil field.
Our project could be the world’s only blue ammonia plant that has fully integrated carbon capture, enabling very low-cost clean ammonia at an industry-leading carbon intensity.
Pilot Energy Executive Chairman Brad Lingo
Earlier this year, Pilot also acquired a large Greenhouse Gas Assessment Licence G-12-AP, adding substantial acreage to its existing holdings in the Perth Basin. It’s now expanded license increases Pilot’s potential storage acreage from 72 square kilometres to some 7,472 square kilometres, creating an inter-generational business opportunity.
Pilot’s deal to acquire full control over Cliff Head comes through a $16 million buyout from joint venture partner Triangle Energy.
Pilot is also planning to supply blue and eventually green hydrogen to Western Australia’s own energy grid, positioning itself as a major supplier as the state looks to cut emissions. The WA government already has a bent for hydrogen having appointed the inimitable Alanah MacTiernan as the state’s first Minister for Hydrogen back in 2021.
In addition to capturing and storing carbon, Pilot’s is also exploring the potential of “Direct Air Capture” (DAC), a futuristic technology designed to remove CO₂ directly from the atmosphere. A recent grant of $6.5 million from the Commonwealth will fund research into deploying DAC at its Mid-West onshore facility, further funding pilot’s clean energy ambitions.
The support from both domestic and international regulators for Pilot’s grand plan has the company wanting to move quickly to finalise front-end engineering design and capitalise on potential lucrative offtake agreements with South Korea.
With governments, private industry players and big fund managers all falling over themselves to throw money at big vision clean energy projects, Pilot has a chance to re-write the narrative with its visionary carbon storage and clean ammonia plan. Many projects of this scale in different industries struggle to get up due to funding issues, however this does not look to be one of those. The money will come when the work is done and Pilot is currently knee-deep in that body of work that just might end up being the benchmark for clean energy projects around the world.
Is your ASX-listed company doing something interesting? Contact: office@bullsnbears.com.au