Hexagon Energy Materials Limited (ASX: HXG) has completed a robust PFS for the Pedirka clean Hydrogen Project in Western Australia.
This PFS was based on the initial Pedirka scoping study and, through an extended scope, expanded to analyse broader routes to market.
The completed PFS resulted in a number of key findings:
- The production of Ammonia (as a hydrogen carrier) is more commercially viable than liquid hydrogen due to the capital and operational costs associated with handling and transporting liquid hydrogen as a product. Technology developments will, over time, create shifts that Hexagon will position itself on a commercial basis to capitalise on.
- Carbon Capture and Storage (CCS) or decarbonisation is a major cost consideration in selecting the project location. Minimising the cost of transporting CO2 for CCS and being able to tap into multi-user, established infrastructure based business models, to minimise total CCS costs toll charges, is crucial.
- Minimising gross CO2 production is a key driver of profitability. The use of low-cost renewables as the source of energy in the hydrogen conversion process and on-site CO2 capture and compression processes, and the potential use of natural gas rather than coal as the hydrocarbon feedstock, will significantly lower Hexagon’s total CCS costs and requirements.
- Locating the hydrogen plant at or near a substantial pre-established port facility brings significant commercial benefits to the project in terms of construction costs and ongoing operational expenses (OpEx).
- Locating the hydrogen plant adjacent to feedstock supply is also critical to minimising raw material logistics costs and, as a result, commercial returns. Low cost access to local process water supply and infrastructure impacts commercial returns, also.
- Participation in and capitalisation on well-funded hydrogen hub investments that share substantial upfront capital costs (CapEx) will result in improved commercial returns. Lowest Risk, Lowest Capex will result in improved commercial returns.
Hexagon says it is now in a position to pursue a lower risk, lower CapEx and OpEx, more rapid and cost-effective route to market in establishing its clean Hydrogen business than the model originally laid out in the Pedirka scoping study. The findings better pave the way for Hexagon to substantially grow as the global clean Hydrogen market emerges.
Next Steps
Hexagon has commenced technical and commercial work including financial modelling, on a WA clean Hydrogen project (WAH2).
This project significantly leverages the work done on the PFS based on Pedirka and the insights gained. In relation to CCS, the PFS confirmed the need for Hexagon to leverage established infrastructure and low-cost renewable energy to the greatest extent possible.
The PFS confirmed natural gas was Hexagon’s preferred hydrogen feedstock. This requires Hexagon to be in locations where low-cost access to natural gas over the long term is achievable.
The PFS also clearly demonstrated that, for Hexagon to deliver its clean Hydrogen strategy, coastal sites would be far more attractive and efficient. In accessing CO2 compression processes, accessing renewable energy and sourcing well established large scale offshore gas field feedstock would be more attractive and efficient than sourcing coal from Pedirka as a feedstock.
Positive initial progress has already been made on the WAH2 Project leveraging the work and insights gained from the PFS. Around 30% of insights, engineering and modelling have been carried over to the going forward strategy.
