The Karratha gas plant, part of the Woodside Energy-led North West Shelf project, Western Australia. The processed gas is exported as LNG and used in the domestic market, including by miners and downstream refineries. Source: Woodside Energy

Australia's gas sector sees the potential for commercial opportunities with miners to capture and store carbon from "blue hydrogen" produced from natural gas for industrial purposes as the country transitions toward net-zero emissions by 2050.

The 2021 climate policy principles issued Feb. 12 by the Australian Petroleum Production and Exploration Association, or APPEA, supports government policies and industry actions to meet Australia's carbon neutrality goal.

Australian Prime Minister Scott Morrison started voicing support for the 2050 target this year. Meanwhile, the National Party, which forms the ruling Coalition government with Morrison's Liberal Party, wants to ensure the mining, manufacturing and agriculture sectors are not forced to "pay the price" for a lower emissions target, The Australian reported this month.

APPEA's statement, issued amid public debate over how to achieve Morrison's goal, has implications for the mining sector.

According to APPEA's breakdown of federal government data, both mining and manufacturing — the latter of which includes downstream metals refining — were Australia's equal-second highest users of natural gas for fiscal 2019 at 24%, behind electricity generation, which accounted for 35%.

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In December 2020, the Australian Energy Market Operator said the mining and refining sectors will underpin Australia's gas demand growth over the next decade.

Just as Asian economies have shown reduced emissions in recent years with imported Australian LNG, so too are Australia's miners transitioning toward increased use of gas and/or renewables, not only in their power but also for land and sea transport, APPEA CEO Andrew McConville said.

"We want to work very closely with the mining sector and players in there to work out what the energy transition actually looks like," he said.

While producing blue hydrogen from gas uses more advanced technology than green hydrogen, it generates significant emissions. McConville said CCS technology would mitigate that risk.

"Using natural gas can get us to net-zero a lot quicker, due to its lower emissions profile than coal and diesel, its complementary to support faster uptake of renewables, its ability to provide hydrogen as a fuel source, and using technology like [carbon capture and storage, or CCS,] to offset the emissions from that process," he told S&P Global Market Intelligence.

Though GFG Alliance Ltd. and iron ore producer Fortescue Metals Group Ltd. are separately developing renewable energy-sourced "green" hydrogen-powered steelmaking centers in Australia, APPEA is keen on coordinating with the mining sector to boost the use of blue hydrogen.

International Energy Agency data from 2019 shows 76% of the roughly 70 million tonnes of hydrogen production was derived from natural gas. The rest was sourced mainly from coal.

Coordinated effort

McConville said APPEA has "worked in a coordinated way" with the Minerals Council of Australia, or MCA, and the Chamber of Minerals and Energy of Western Australia to encourage the federal government on how it could fit CCS into its emissions reduction fund, using carbon credit units for CCS activities.

Glencore PLC co-chairs the MCA's energy and climate committee, which formulated a climate action plan issued in 2020 whereby the MCA committed to the Paris Agreement on climate change and its goal of net-zero emissions.

"Natural gas will play a role in the development of blue hydrogen much quicker than green hydrogen" due the former's technology advances, and would be of use to energy-intensive refining processes, McConville said.

Given the oil and gas industry has created an opportunity to store large amounts of carbon, "there is scope for commercial opportunity," McConville said. "Those sort of things is where the two sectors meet quite closely."

MCA CEO Tania Constable told Market Intelligence that "achieving global net-zero emissions requires consideration of all low-emissions technologies such as advanced coal with carbon capture, utilization and storage; renewables; gas; and nuclear power to meet Paris Agreement goals."

On the impact of APPEA's policy of supporting net-zero emissions by 2050, Australian Mining and Exploration Companies CEO Warren Pearce told Market Intelligence that many miners are already making such targets, "predicated in part on the belief that hydrogen is going to make a significant difference."

The mining sector is working its way toward a lower emissions profile "faster and faster," he said, as "almost all new mines have large renewables components to them now, and as technology gets better, that transition will speed up."