1 Background

Countries all over the world are continuing to raise their ambition for measures to mitigate climate change, including reducing reliance on fossil fuels, following the 27th Conference of the Parties (COP27) to the United Nations Framework Convention on Climate Change (UNFCCC) concluded in November 2022 [1]. According to figures from the World Bank, the energy sector is responsible for 43% of all emissions in Latin America. Therefore, if the countries in the region are to fulfil their commitments under the Paris Agreement and pursue efforts to keep global warming to 1.5°C over pre-industrial levels, the change in energy mixes is an inevitable reality. The new geopolitical and energy market situation demands urgent actions in the clean energy transition and energy independence.

South America receives a significant portion of its energy from natural gas, which is derived from both domestic resources and LNG and pipeline gas imports. Argentina, Brazil, and Chile have been boosting their usage of renewable energy, particularly wind and solar, as part of a growing focus on decarbonisation and diversifying indigenous resources. South American countries have been looking for viable ways to develop decarbonised gas for a while, such as biogas, biomethane, and, more recently, hydrogen.

Looking at the entire region, Argentina and Brazil have the most potential for biogas and biomethane production, whereas Chile has the least. More incentives and rules will be needed to realise that potential, notably for biomethane. While PV appears to be the most cost-effective source of green hydrogen in the hydrogen market, levelized costs of green hydrogen continue to be at least twice as high as those of hydrogen derived from natural gas without CCUS.

Figure 1. Hydrogen projects in South America. Source: https://dialogochino.net/en/

Green hydrogen offers certain nations a promising opportunity to export the fuel. In contrast, others are more interested in using it locally to produce byproducts, such as synthetic fuels, clean fertilisers, electricity for electric vehicles, and various other commercial and domestic uses.

Along with Chile, Colombia is another country making progress in its H2 development. The tropical nation introduced tax incentives for “blue” and “green” hydrogen projects (those produced using fossil fuels but with emissions capture) with the purpose of attracting new investments, in addition to establishing a strategy for the sector in 2021. Colombia intends to reduce and halve its emissions by 2030, and the development of green hydrogen is invaluable to that discussion.

In the meantime, Uruguay’s Long-Term Climate Strategy mentions green hydrogen and has issued a call for pilot projects that is still active. Although these programmes are geared toward residential uses, officials anticipate that they will act as a “learning curve” to educate technicians about the hydrogen industry. Uruguayan government officials stated that the intention is for green hydrogen to be “a transitional, clean energy that has no environmental collateral” [2]. The country generates over 98% of its electricity from renewable energy sources.

Although several nations are pursuing decarbonised gas projects, early planning is still ongoing, and there is insufficient coordination between the government and policymakers to propel the development. Large-scale projects, particularly for hydrogen, are probably beyond the present NDC horizon of 2030; immediately establishing a clear transition pathway will boost the possibility of realising South America’s considerable potential for decarbonised gas.

2 An Insight Into Decarbonisation

2.1 Definition

The new buzzword lately is decarbonisation. Several organisations have their own definitions, but at its essence, the term means to reduce the carbon impact on the atmosphere. There are multiple aspects of this new term. We will define them here as supply and demand.

On the demand side, it means we should use things and methods that use less energy, thereby generating fewer carbon emissions that get added to the atmosphere. On the supply side, it means generating energy from non-carbon (or at least less carbon-generating) sources. It also means doing things that reduce the already high level of carbon emissions currently in the atmosphere.

After the oil embargoes of the 1970s, “energy conservation” was the industry buzzword and started appearing more and more in the press. As an industry, we stopped using the term energy conservation (because it was seen as doing less with less) and coined a new buzzword, “energy efficiency” (doing more with less).

So, the new buzzword is decarbonisation. What does it mean? Decarbonisation is energy conservation. But it also means energy efficiency. It even includes energy management, renewable energy, fuel switching, sustainability, and many other concepts introduced over the last decades. It also means removing carbon emissions already in the atmosphere, reducing CO2 levels below their current levels, not just reducing the current rate of increase.

2.2 Natural Gas Production and the Need for Decarbonization

Globally, the demand for natural gas has been significantly increasing every year and currently accounts for a quarter of the world’s primary energy demand and electricity generation. Albeit a fossil fuel, the environmental benefits of burning NG are superior to coal. NG is also an important energy carrier as it offers much-needed flexibility and stability to renewable-powered electricity generation [3]. The production of NG reached the 4 trillion billion cubic meters (bcm) mark in 2019, an increase of 3.3% compared to 2018.

This level of dependence on fossil fuels is not compatible with the decarbonisation goals of the world. It thus needs a well-laid framework and strategy to tackle the impending and exigent decarbonisation of the NG sector. Although existing policies and regulations monitor GHG emissions and support low-carbon alternatives, several studies indicate that the current framework will not fully decarbonise the EU’s economy by 2050 as envisioned.

There are several studies on the decarbonisation of energy sectors, such as power and district heating systems. Researchers have tackled the question of decarbonising natural gas, providing the base for advancing research on the topic [4]. Also, several independent organisations have pitched to investigate the road to neutrality using low-carbon gases.

Water electrolysis is a much cleaner alternative to producing hydrogen (H2), and it is expected to play a huge role in the energy transition strategy in the EU. Electrolyser technologies, viz., Proton Exchange Member (PEM), Solid Oxide Electrolyser Cell (SOEC), and Alkaline Water Electrolysis (ALK), are at the forefront and have seen rapid development. Major strides have been achieved in ensuring enough capacity for centralised hydrogen production. Research and development in the efficiencies of electrolyser technologies continue to improve the push for competitive green hydrogen.

2.3 Decarbonisation of Gas Turbines

With ongoing drive and effort by companies to decarbonise their operation, there is a need to monitor the performance of existing assets and improve on performance adequately. Specifically, when focusing on O&G companies, there are aggressive targets to decarbonise industry operations by 2040 and 2050.

Energy efficiency is one of the most cost-effective enablers that support the energy transition to achieve the decarbonisation target. Major energy-intensive sub-systems/equipment includes gas turbines (GT) based drivers, electric generators, motors-driven compressors and pumps, boilers, and furnaces. Operational load management is applied to optimise pump station loading, including identifying the optimum loading of pump stations via recommending a target discharge pressure for each to reduce overall system fuel consumption and CO2 emission [5].

Figure 2. Diagram of a Heat Recovery Steam Generator (HRSG).

Gas turbine exhaust provides enormous opportunities for waste heat recovery through heat recovery steam generation (HRSG) to provide a combined heat and power (CHP) system with a system thermal efficiency of over 80%. The South American Gas Turbine Market will expand at a CAGR of 4.19% from US$817.510 million in 2020 to US$1089.477 million in 2027 [6].

Typical HRSG systems require the availability of demineralised water and a large utility system to utilise waste heat for steam generation, which require additional costs and complexity. Moreover, water scarcity in some geographical regions in South America makes it difficult to adopt the HRSG design. The Organic Rankine cycle (ORC) offers an alternative solution for waste heat recovery from gas turbines.

ORC utilised different organic hydrocarbon working fluids that have lower evaporation temperatures than water and are able to work with a wide range of waste heat temperatures between 95°C and 450°C.

3 The Case of the Southern Cone

3.1 Regional Potential

In Argentina, natural gas accounts for 50% of the country’s primary energy consumption, compared to only 12% in Brazil and 14% in Chile. Chile is the only one of the three nations to date that has suggested reaching GHG neutrality by 2050. Argentina has not yet set promises past 2030, but Brazil’s nationally determined contribution (NDC) is compatible with a long-term goal of achieving carbon neutrality by 2060.

Around 12% of Brazil’s primary energy supply came from natural gas, while the state’s Energy Planning Company (EPE) anticipates a growth of 45% in natural gas supply between 2019 and 2030 [7]. Natural gas use in 2020 was 26.3 bcm, of which 36% went towards power generation. Brazil has much potential for producing biogas and biomethane because it is one of the top agricultural producers in the world.

Natural gas consumption in Chile reached 6.5 Bcm in 2019, with 1.5 Bcm coming from domestic production and the remaining from seasonal pipeline imports from Argentina and LNG. Despite recent significant development, the proportion of wind and solar energy in Chile’s energy mix is relatively small—about 3% of the country’s primary energy supply. At about 17%, trash and biofuels are more substantial. As a net energy importer, Chile has prioritised developing renewable energy sources, and the country has put in place legal and regulatory frameworks that encourage this growth.

Currently, Chile produces about 200 kt of hydrogen annually for refining and a glass factory. The glass plant produces hydrogen using electrolysers; however, most is grey hydrogen from natural gas. With significant wind and solar resources, Chile hopes to generate 70% of its electricity from renewable sources by 2030. Chile’s Green Hydrogen Strategy was revealed in 2020, with a goal of 5 GW of electrolyser capacity by 2025 and 25 GW by 2030. This strategy will first be used to decarbonise domestic hydrogen use before beginning green hydrogen exports after 2030 [8]. The largest of Chile’s roughly 40 green hydrogen projects is slated to start producing at MW size by 2024 and then ramp up to GW scale after that.

The demand for natural gas in the three countries reached 89 Bcm/year in 2019, the starting point where a combination of biomethane and green and blue hydrogen could theoretically compensate. Table 1 summarises the existing, planned and conceivable production of biogas and hydrogen.

Table 1. Summary production and planned/potential decarbonised gas volumes (2019-2030) [9].

3.2 Possible hydrogen sources

In regard to hydrogen, the three Southern Cone countries are endowed with resources to produce hydrogen from decarbonised and non-decarbonised sources.

Argentina possesses gas resources and the potential to develop grey — via steam methane reforming, blue — via natural gas with CCUS, and turquoise — via methane pyrolysis — hydrogen, whereas Chile and Brazil, which are net gas importers and have an immense potential for renewable energy, will most likely follow the route towards green H2.

Based upon renewable power projections by the Inter-American Development Bank (IADB) [10], a gross and illustrative scenario for the potential production of green hydrogen in the three meridional countries is estimated at 276 Mt/year by 2050. The full development of green H2 would require an electrolyser capacity of 4.3 TW, with massive CAPEX for the electrolysers and another substantial investment for the wind and solar power plants. Yet, the figures do not cover the CAPEX required to build power transmission lines, ammonia plants, methanation facilities, hydrogen pipelines, and other logistics and storage costs.

Given the high availability of wind and solar resources, production is unlikely to be bound to abundant resource constraints but mainly to demand, materialised by the development of domestic markets and the ability to compete with suppliers in Southern Europe and Africa, as well as other relevant factors like the cost and access to financing, and the construction of adequate infrastructure (both on the energy side and the domestic transportation/export side). Additionally, and particularly for Argentina, vast natural gas resources (namely shale gas from Vaca Muerta) show a relevant potential for developing natural gas-based hydrogen (through methane pyrolysis, natural gas with CCUS or steam methane reforming).

4 Ongoing Projects

The contract to finance the gas-powered Marlim Azul Energia power plant in Macaé of Rio de Janeiro State was signed with BNDES, or the National Bank for Economic and Social Development, in January 2020, according to Patria Investments, Mitsubishi Hitachi Power Systems Americas (MHPS), and Shell. One of Brazil’s first pre-salt gas energy projects, this facility will provide electricity to customers at an attractive price. The plant is set to be operational in 2023. The plant is the first in Brazil to use an enhanced J-Series air-cooled technology with high operational flexibility [11], allowing the plant to supplement intermittent renewable generation.

Figure 3. Ecopetrol’s oil refinery in Cartagena, Colombia, where the company launched a pilot test of green hydrogen production. Source: https://dialogochino.net/en/

The La Plata Cogeneration II combined heat and power (CHP) facility started operating commercially, according to a late 2020 announcement from GE and YPF Luz, the power generation division of Argentina’s largest energy provider. The new cogeneration facility, powered by GE’s 6F gas turbine technology, is anticipated to add about 90 MW to the 128 MW now powering the La Plata Industrial Complex (CILP), making it the cogeneration complex in Argentina with the highest capacity output.

GE’s 6F.03 gas turbine, Mark VIeS SIL controllers, a Heat Recovery Steam Generator (HRSG) with supplemental firing, and an A34 generator are all used in La Plata Cogeneración II [12]. The most advanced 6F in the GE fleet, the 6F.03 gas turbine is outfitted with a state-of-the-art Dry Low NOx (DLN) 2.6+ combustion system to significantly reduce NOx, SOX and particulate emissions, as well as an upgraded Advanced Gas Path (AGP) turbine module components for increased output and efficiency.

Furthermore, in order to support and oversee the modernisation of Bolivia’s three biggest electric power plants, Siemens was given the project. This is in line with Bolivia’s ambition for energy generation, highlighted by its 2025 plan [13], and to ensure that Bolivia emerges as the hub for natural gas exports. Additional SGT-800 gas turbines would be employed for Termoelectrica de Warnes, among other things. There will be six more SGT-800 gas turbines at Termoeléctrica Entre Rios. Last but not least, additional SGT-800 gas turbines have been allocated for Termoeléctrica del Surfour

5 References

[1] Countries Present Climate Ambition and Action at COP27 | UNFCCC

[2] Green hydrogen: Latin America makes moves on ‘fuel of the future’

[3] https://www.iea.org/fuels-and-technologies/gas

[4] Khatiwada, D., Vasudevan, R. A., & Santos, B. H. (2022). Decarbonisation of natural gas systems in the EU–costs, barriers, and constraints of hydrogen production with a case study in Portugal. Renewable and Sustainable Energy Reviews, 168, 112775.

[5] Mana Al-Owaidh, Abdulrahman Hazazi, Mohammed Al-Fawzan, and Khaled Al-Usaimi. Decarbonization Strategy for Gas Turbine Drivers in Oil and Gas Pumping Systems. International Journal of Energy Management. Vol. 4, No. 6—2023. ISSN: 2643-6787

[6] South America Gas Turbines Market Size: Report, 2022-2027

[7] https://www.epe.gov.br/sites-pt/sala-de-imprensa/noticias/

[8] National Green Hydrogen Strategy

[9] IEA (b), 2021. Hydrogen in Latin America, Paris: International Energy Agency.

[10] La Red del Futuro: Desarrollo de una red eléctrica limpia y sostenible para América Latina

[11] M501JAC Archives

[12] GE Gas Power in South America

[13] Bolivia Electric Plan 2020-2025 (Plan del Sector Eléctrico del Estado Plurinacional de Bolivia 2025) – Policies – IEA