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Energy multiplex would produce LNG, hydrogen and electricity
South Korean conglomerate Hanwha is prepared to throw billions of dollars around Canada, it seems, in order to secure an $80 billion-plus submarine building contract with the Canadian government.
One of its proposed investments in Canada is Kanata Clean’s $22 billion floating LNG terminal in Prince Rupert.
The project just came out of left field Tuesday with the signing of a memorandum of understanding between Hanwha Ocean and Kanata Clean Power & Climate Technologies Corp.
Before Tuesday’s announcement, no one had even heard of the project before, and it is being met with an understandable dose of skepticism.
Addressing the pipeline access challenge
One of the first questions to arise is: where will they get the natural gas from?
“I cannot disclose what’s going on there, but we are highly confident that we will have pipeline access,” Kanata Clean Power & Climate Technologies Corp. CEO Robert Delamar told me.
The fact a subsidiary of Korea’s fifth largest chaebol is at least thinking of backing the proposal, I think, warrants at least hearing their pitch. Premier David Eby appears keen to hear more.
“More big news for B.C.!” he tweeted Wednesday. “A South Korean and a Canadian company are looking to build a US$15.7 billion floating LNG export project in our province.”
Here’s the pitch: A floating LNG export terminal, built in stages, with an ultimate export capacity of 12 million tonnes per annum (MTPA) in Prince Rupert.
The vision of an energy multiplex
That’s the first phase. Kanata Clean also proposes a combined cycle natural gas power plant, and a blue hydrogen production plant, with captured CO2 railed to Alberta for sequestration.
The combined cycle natural gas power plant could run on blends of natural gas and blue hydrogen.
“Once there’s natural gas to that site, we believe we can turn that natural gas into two value-added products,” Delamar said.
“If you turn that natural gas into hydrogen, you can build a power plant and have a hydrogen co-fired power plant on that same site.”
So, ultimately Kanata Clean envisions an energy multiplex producing three products: LNG, hydrogen and electricity – and Lord knows we could use more electricity.
The Kanata Clean project was initially a blue hydrogen production and export proposal, and that’s still part of the longer range plan.
But the recent crisis in the Strait of Hormuz caused the company to pivot to LNG, at South Korea’s urging.
South Korea still wants hydrogen from Canada, but LNG is the more urgent priority.
Korea is the world’s third largest LNG importer, according to the Asia Natural Gas and Energy Association, and the recent energy crisis in the Middle East now has it scrambling to secure more reliable long-term supplies.
“That energy security conversation was the catalyst for this project,” Delamar said.
“We had been looking at developing our hydrogen project on this site, and it was very clear that the world wanted Canadian LNG first before hydrogen became an export option.
“So it was a relatively easy, small pivot for us because the same people you’re talking to from an engineering and OEM perspective on the hydrogen side are the same people that build LNG platforms.”
Leveraging marine engineering expertise
Hanwha Ocean would build and operate at least one, and up to three, floating LNG platforms, and would also be an offtaker.
Floating LNG platforms is one of Hanwha’s areas of expertise. Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering) built the world’s first floating LNG platform, for Petronas. It also builds LNG carriers.
Other partners in Kanata Clean include Alberta’s Frog Lake First Nation, which is a majority shareholder.
Some forecasts have suggested Korea’s demand for LNG is set to decline.
However, the Strait of Hormuz crisis may change that demand picture, as Korea seeks to secure long-term supplies from more reliable and secure suppliers, like Canada.
“Canada has world-class natural gas resources and strong long-term potential to support reliable LNG supply to Asia-Pacific,” Hanwha Ocean president Philippe Levy said in a press release.
However, he added that the MOU signed Tuesday is just a “first step.”
“Significant work remains before any final investment or project execution decision can be made.”
Delamar said his company is in negotiations to secure a large site in Prince Rupert for its proposed energy complex.
“This particular site, in the past it was a candidate for an LNG facility, so there’s been extensive environmental work already done on the site, extensive commercial and technical work done on the site.”
The company is also working to secure partnerships with First Nations in Prince Rupert.
Asked if a new natural gas pipeline would need to be built, Delamar said negotiations are underway and he could not disclose what the options might be.
“I think there is sufficient permitted pipeline capacity in the region,” he said.
The only permitted pipeline that I am aware of that would go to Prince Rupert is the Prince Rupert Gas Transmission line, which will feed the Ksi Lisims LNG project on Pearse Island, north of Prince Rupert.
Provided PRGT were built to have the capacity to feed two 12 MTPA LNG export facilities, it’s technically feasible that Kanata Clean could negotiate with the Nisga’a and Western LNG to have a spur line added to Prince Rupert. But that is just pure speculation on my part.
Kanata Clean’s proposal for an LNG, gas power plant, and blue hydrogen energy complex in Prince Rupert sounds grandiose.
But the fact a major player like Hanwha may be on board with it does add some weight to the proposal.
The strategic defense contract connection
“It is early days, and Hanwha is very likely proposing it as part of the submarine bid,” said Heather Exner-Pirot, director of energy, natural resources and climate at the Macdonald-Laurier Institute. “But also, if they win it, they are a serious player.
“For me, the project is really at early stages, but I take this news as an indication of the momentum on Canadian natural gas. A West Coast LNG project is one of the most logical places for Hanwha to invest if they need to demonstrate deeper ties with Canada.”
The question is whether Hanwha’s interest will evaporate, should it lose the bid to build submarines to the other bidder–Germany’s Thyssenkrupp Marine Systems.
Hanwha has been pretty blatant that its investment plans in Canada are tied to winning the submarine contract.
In a sponsored content post in iPolitics, Hanwha states: “Hanwha Ocean, the company behind the Republic of Korea’s proposal, is preparing for a broad, $6.3 billion investment into building with Canada, if chosen for the contract.
“Along with technological transfers, Hanwha’s proposed strategic partnership agreement would mean investments in Ottawa’s efforts to expand liquefied natural gas (LNG) production, hydrogen infrastructure, energy, and advanced manufacturing.
“All told, this future collaboration with Korea would generate $96.3 billion for Canadian GDP over time and add the equivalent of more than 433,000 Canadian job-years.”
Let’s hope that losing the submarine contract to Germany wouldn’t torpedo all those potential investments.
Nelson Bennett’s column appears weekly at Resource Works News. Contact him at [email protected].
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