Enap taking position in Chile’s green hydrogen vanguard

Leveraging existing infrastructure is seen as critical to help Chile’s fledgling green hydrogen industry grow and take flight – and that is exactly what state-owned hydrocarbons company Enap is doing.

Enap said it would use some of its industrial and wind power generation assets in barren southern region Magallanes to build a pilot green hydrogen production plant.

Magallanes is already home to Chile’s pioneering Haru Oni demonstration plant, which Enap is involved in as logistics partner. Haru Oni harnesses the power of the wind to make green hydrogen that, in turn, is used to make synthetic gasoline. Officials plan to scale up the project to eventually start large-scale exports, likely to Europe. 

Enap, meanwhile, is planning to build at its Cabo Negro industrial complex the 1-2MW maiden hydrogen project, which it expects online by end-2025. Planned work also includes construction of logistics facilities. The project is expected to enter the tendering phase this year.

In terms of power generation, the company has a 66% stake in wind power company Vientos Patagónicos, which operates the 10.4MW Cabo Negro wind park, which began injecting power in 2020.

Enap produces a relatively small amount of hydrocarbons in Magallanes – an activity that is winding down after peaking in the 1980s, when offshore production was underway. An Enap official had said last year, during a Dutch trade mission event in Chile, that infrastructure studies were being conducted and that Enap had signed MOUs linked to hydrogen projects.

Enap’s work is part of a wider country focus that encompasses areas including tourism, territorial planning, industrial development and community engagement and involvement. Enap development and innovation director Juris Agüero told prospective Dutch investors and service providers during the event: “First of all, we’re looking at the design of projects and how they can use existing infrastructure.” He referred to the issue of minimizing environmental impacts by adapting and repurposing. A next phase would involve looking at how to integrate new infrastructure.

Enap chief Julio Friedmann, during a recent visit to Magallanes, said knowledge and skills-building was a key objective.

“The most important thing for us is that our Enap professionals and workers prepare for this change and, therefore, having this pilot also has that objective, that they can understand how it behaves, how it integrates with our own processes, with our own natural gas, how it is managed,” Friedmann said. “This is very important from the point of view of safety, processes, for example.”

While in Magallanes, Friedmann, local daily DF reported, also attended an event to mark the launch of a regional green hydrogen and derivatives industry association, comprising HIF Global – owner and lead developer of Haru Oni  – TEG Chile, Total Eren, EDF Andes and EDF Renewables.

He said Enap was working with private sector players that want to invest at Enap sites to “install the infrastructure necessary to be able to permit the ingress of the machinery, materials and equipment that these investors need.”

Multiple gigawatt-scale units are planned for Magallanes, which has abundant wind resources, uninhabited land and existing logistics and industrial infrastructure in place. Among the multiple challenges are adapting and expanding infrastructure. 

Chile is home to 46 publicly announced hydrogen projects in the development phase, according to sector chamber H2 Chile.

Projects targeting local offtakers and leveraging existing infrastructure and know-how are likely to lead the charge, followed by gigawatt-scale export facilities from the second half of the decade.

Twenty projects are planned for northern Chile, which has world-class solar resources and a large mining sector. Thirteen target central Chile, home to steel, oil, glass, pulp, agriculture, chemical, fishing and transport industries, while 13 are planned for windswept Magallanes.

ENAP ASSETS IN MAGALLANES

Oil was discovered in Tierra del Fuego in 1945, and five years later Enap was created.

The company’s Magallanes industrial assets are spread across four main complexes and include gas and oil processing facilities and maritime terminals. Enap also has a network of gas and LPG ducts.

At the Cabo Negro terminal, near Punta Arenas city, activities are focused on production of propane, butane and natural gasoline.

ENAP CAPEX, PRODUCTION

Rating agency Fitch expects annual Enap capex to be around US$500mn in 2022-25, hitting a possible peak of US$700mn this year.

Fitch expects the company will finance the work – about half corresponding to E&P – using internal cash flows, without recurring to acquiring additional debt.

In terms of 4Q22 Enap output, Chile accounted for 2,000boe/d oil and 20,000boe/d gas, Ecuador 24,000boe/d oil, Argentina 3,000boe/d oil and 9,000boe/d gas and Egypt 6,000boe/d oil.

In its 4Q22 results presentation, Enap said its E&P investment goal was maintaining hydrocarbons reserve levels. 

FINANCIALS

Enap saw net income quadruple to US$575mn in 2022 as sales climbed to US$12.3bn from US$7.66bn in 2021, mainly driven by a 40% increase in the price of ICE Brent.

Total financial debt stood at US$4.45bn in December, largely in line with levels observed in previous years.