White hydrogen could become a huge source of income for miners

Fortescue is a major Australian mining group that has set out ambitious plans to become a clean energy giant, particularly in the hydrogen market, where it has launched several major international green projects and has formed numerous partnerships with other companies. However, earlier this year, Fortescue began to show signs of a cold shoulder. Metal prices were not as high, which meant less cash available to invest in non-cash projects. Profits fell short of expectations and could fall in the coming fiscal year. In addition, electricity prices have risen, and electricity is a key ingredient in producing clean hydrogen. Higher energy prices are making green hydrogen even less cost-competitive. In the middle of the year, Fortescue announced a delay to its green initiatives and laid off 700 staff.

Okay, so this isn’t the first company to back down from ambitious green energy plans. But we were more interested in what happened next. In late August, Fortescue agreed to buy a 40% stake in a small Australian company for $14 million that was set up to drill for white hydrogen (hydrogen underground, created by the reaction of rainwater with certain minerals), which can be classified as a renewable energy source. Abandoned wells in the areas targeted for drilling, by the way, show high concentrations of helium with hydrogen—the icing on the cake, you might say. The company’s target area is in Kansas and Nebraska, conveniently located near pipelines and potential users. Drilling to determine the commercial viability of the finds is expected to begin in late 2024 or early 2025. Drilling for hydrogen by another Australian company in Fortescue’s home state of Western Australia is also expected to begin in late 2024. (Abandoned wells in Australia also show high concentrations of helium.)

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Now back to the motivation. If the estimates are correct, white hydrogen will cost a third of what green hydrogen (produced using non-fossil fuel electricity), which is what Fortescue and others currently plan to sell from their hydrogen plants. So if there is enough white hydrogen, why produce green hydrogen at a much higher cost? And if there is enough white hydrogen, government subsidies for green hydrogen projects may be a waste of money. Why buy expensive green hydrogen when you can buy cheaper white hydrogen? Lots of ifs. So here are the final ones.

White hydrogen, if found in sufficient quantities and in enough locations (potential sites have been identified in the eastern United States and Europe), would become an economical energy source rather than a specialized product purchased by environmentalists.

In six months, uncertainty could turn to enthusiasm, and OilPrice readers will be talking about hydrogen fever. And if that happens, remember that you read this here first.

By Leonard Hyman and William Tilles for Oilprice.com

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