Kellas Midstream to invest £750M in major blue hydrogen project

Kellas Midstream, based in Aberdeen, is moving forward with a £750 million investment in a big blue hydrogen project.

And the H2NorthEast initiative, which is aimed at the northeast of England, might have spillover job advantages for Aberdeen, where the energy infrastructure business is based.

In 2024, a final investment decision on the low-carbon blue hydrogen project of 1 gigawatt (GW) is expected.

Around 100 jobs are projected to be created, with around 20 individuals being able to upgrade their skills as a result of H2NorthEast.

Hundreds more jobs will be generated during construction and across the supply chain.

The project, which is presently at the concept select stage, will be the subject of a stakeholder engagement event held by Kellas today at Middlesbrough FC’s Riverside Stadium.

The event, which will present an overview of the benefits of H2NorthEast and hydrogen in general on Teesside, will be attended by local government, potential hydrogen off-takers, and academia.

Chris Beck, group director of clean growth and innovation at Tees Valley Combined Authority, Kurt Fredheim, general manager of Norsea’s seal sands port, and Thomas Luypaert of Blackrock private equity infrastructure investors, one of Kellas’ shareholders, will be speaking with Kellas management.

“The Humber and Teesside industrial areas contribute over 50% of carbon emissions from all UK industrial clusters,” said Andy Hessell, managing director of Kellas. The only practical method to decarbonize those industries and enable the UK to achieve its net-zero emissions objective by 2050 is to convert to low-carbon hydrogen. Through synergies with our CATS plant and the use of existing distribution and storage infrastructure, we think H2NorthEast can take a leadership role in supplying low carbon hydrogen to companies on Teesside at a reduced cost.”

It will be centered on the CATS (Central Area Transmission System) terminal at Kellas Midstream’s Teesside location.

H2NorthEast will begin delivering 355 megawatts (MW) of low-carbon hydrogen in 2027, with upscaling to 1GW by 2030, according to the current project plan.

As the heavy industry ramps up its attempts to decarbonize its operations, a few of offtake agreements have already been reached with surrounding industries.

Through its engagement in the East Coast Cluster, which received Track 1 designation last year, H2NorthEast has already been identified as one of the UK’s first carbon capture, utilization, and storage (CCUS) ventures.

It’s also one of six hydrogen initiatives undergoing phase 2 cluster sequencing by the UK government.

Blue hydrogen is produced from natural gas via a method known as steam methane reforming, with any emissions being reduced with CCUS.

H2NorthEast, according to Kellas, will have a carbon capture efficiency of 97 percent and will offset two million tonnes of CO2 per year.

The plan will be linked to CCUS projects provided as part of the East Coast Cluster, with emissions stored in the North Sea’s Endurance reservoir.

Kellas, which has its primary headquarters in the Silver Fin on Union Street in Aberdeen, is now going into hydrogen in a big manner, according to Mr. Hessell, after a “standing start” 18 months ago.

“Just over two years ago, we revamped our company strategy, and it was backed by three principles,” he stated. The first is to ensure that our company’s operations are safe, dependable, and efficient.

“The second is expanding our traditional business through acquisitions, new investments, and new assets, and we intend to increase our investment in our core gas infrastructure.”

“We then established the third theme for our approach, which is to create a third business based on net zero.” It’s a fantastic expansion region; some perceive it as a danger, but we don’t. Just over a year ago, we really got started looking into hydrogen and how we might invest in manufacturing.

“It was blindingly evident after some preliminary investigation that we had the right location to develop a hydrogen plant at the gas port.”

Westminster has just released its much-anticipated Energy Security Strategy.

A pledge to increase the UK’s 2030 hydrogen output ambitions to 10GW is included.

H2NorthEast may meet up to 10% of the government’s objective while also allowing Kellas to apply its gas handling capabilities to assist heavy industries in achieving carbon neutrality.

“H2NorthEast is a really forward-thinking project that connects the region’s net-zero objectives with infrastructure investment and skills development, helping to further differentiate us in the cleaner, safer and healthier sectors of the future,” said Tees Valley Mayor Ben Houchen. The initiative has the potential to upskill current employment and generate hundreds of new high-quality, well-paid opportunities for people throughout Teesside, Darlington, and Hartlepool, while also improving the local economy by up to £300 million.”