The Future of Hydrogen 2019

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The Future of Hydrogen Chapter 4: Present and potential industrial uses of hydrogen gas needs to be imported. Coal gasification is routinely included in new refinery setups in China as a main or auxiliary hydrogen production unit. Merchant supply of hydrogen is an option in densely industrialised areas where developed hydrogen pipeline infrastructure exists, such as the US Gulf Coast and Europe’s Amsterdam- Rotterdam-Antwerp hub. As with dedicated on-site production, merchant hydrogen is mostly produced from natural gas, although a certain amount also comes from chemical processes, where it is a by-product of operations such as steam cracking and chlorine production. In regions such as the US Gulf Coast, merchant hydrogen can meet over a third of total hydrogen demand. Hydrogen production costs vary widely, largely reflecting differences in natural gas prices. US production costs are among the world’s lowest, while costs are substantially higher in Europe and Asia. In the United States, hydrogen costs amount to around USD 1.1/kgH2 or USD 0.7 per barrel of oil refined. This may seem a relatively small cost component for refineries overall, for example in comparison with crude costs, but even a small cost advantage in hydrogen costs can have a notable impact on refining margins, which are generally thin in what is a very competitive market (Figure 35). Figure 35. 8 6 4 2 0 Hydrogen production costs compared to refining margins, 2018 Refining Hydrogen margin cost United States Refining margin Hydrogen Refining cost margin Hydrogen cost European Union Asia Note: Based on production costs via natural-gas based SMR. More information on the assumptions is available at www.iea.org/hydrogen2019. Source: IEA 2019. All rights reserved. In many regions, hydrogen costs are a significant drain on refinery profits. Potential for future hydrogen demand in oil refining Fuel costs (gas) OPEX CAPEX Average refining margin (2010-18) In recent decades, refinery hydrogen demand has grown substantially as a result of growing refining activity and rising requirements for hydrotreating and hydrocracking. This trend is set to continue as fuel specifications globally further reduce acceptable levels of sulphur content. Many countries, including China, have already reduced sulphur content requirements in road transport fuels such as gasoline or diesel to under 0.0015%, and others may introduce similar standards. The International Maritime Organization has also introduced new bunker fuel regulations that limit the sulphur content of marine fuels to no more than 0.5% from 2020 (IEA, 2019a), and this is likely to lead to a significant increase in hydrogen requirements for marine PAGE | 94 C C O O 2 p prri ic ce e 2 IEA. All rights reserved. USD per barrel

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