Provaris Energy — Q3 activity update highlights key milestones

Provaris Energy made significant progress during the September quarter, including reaching several key milestones at its Tiwi H2 project in the Northern Territory, its HyEnergy export study in Western Australia, and the MOU signed with Total Eren. Already in the December quarter it has completed a marketing initiative in South-East Asia. It has also received advice that an Environmental Impact Statement (EIS) process is required for submission in 2023 for project approvals mid-2024, with planning and early works now underway. Furthermore, it is hoping to receive Class Approval for Construction on its novel H2Neo compressed H2 vessel. Looking out further, the next key milestone would be the signing of agreements to show progress towards offtake and/or shipping contracts which is likely to be achieved in 2023.

In the July to September 2022 quarter, Provaris Energy completed its Tiwi H2 concept design study. This is important because the study established a clear pathway for the project to proceed to pre-FEED (front-end engineering and design) and FEED level technical, commercial and economic studies, which then allow for the consideration of potential project funding options. The study also confirmed several observations and outcomes first published in Provaris Energy’s 2021 compressed hydrogen chain scoping study.

The highlights of the study are important and include:

Subsequent to the end of the September quarter, the Northern Territory EPA advised the Tiwi H2 project that it will require an EIS with respect to the environmental assessment process. The scope of the EIS will be the subject of a terms of reference (ToR), with a draft of the ToR scheduled for Q1 2023. This will require a reset of the Tiwi H2 development schedule. Provaris anticipates announcing an update on the schedule once the final ToR for the EIS is issued by the Northern Territory EPA.

Also, in November Provaris appointed CE Partners as Owner’s engineers covering a number of aspects of the project for the renewable energy generation assets on Melville Island. These assets include the solar farm, battery energy storage system, substations and the transmission line connecting the Solar Precinct, to the H2 Production Precinct. CE Partners’ remit is to complete a 30% design-level package by the end of 2023 with a view to seeking construction proposals and then the selection of an engineering, procurement and construction contractor in early 2024, and also the procurement of operation and maintenance quotations

This is important because it paves the way for Provaris to demonstrate the viability and value of the project at the Financial Investment Decision stage when Provaris is likely to be considering selling a stake in the project to institutional financial investors. Theis assumes offtake, land access and permits are in place, and then subject to funding.

First exports of green hydrogen from the Tiwi H2 project remain scheduled for 2027. In the meantime, preparation continues on the schedule of activities and timing for a decision to proceed to pre-FEED level studies which can now be aligned with scope of the draft ToR scheduled for Q1 2023, mentioned above. The overall schedule will be aligned with further permissions and consultation on commercial terms with the Munupi Clan on Melville Island.

Key activities for the Tiwi H2 project over the next two quarters include:

In August 2021, Provaris entered into a non-binding MOU with Province Resources (ASX: PRL) and global renewable company Total Eren (together the HyEnergy Project partners) to support a technical and commercial feasibility study on exporting green hydrogen using compressed shipping from the 8GW HyEnergy Project located in the Gascoyne region, Western Australia, to nominated markets in the Asia-Pacific region.

The feasibility study is focused on a proposed phase one capacity of renewable energy generation for the export of 200,000tpa of compressed H2 (out of a total of 550,000tpa). The study has received funding as part of the Western Australian Renewable Hydrogen Fund (Round 2). A link to our note discussing the project is here.

In the September quarter, Milestones 3 and 4 were completed and Provaris submitted the outstanding Milestone 5 reports to the Western Australian government as part of the Western Australian Renewable Hydrogen Fund grant.

Provaris Energy has progressed with a number of workstreams, including shipping cycle time analysis, the design of shore-crossing and sub-sea pipelines to offshore mooring facilities, as well as a review of port infrastructure options in Singapore (see images below), the design of unloading terminal concepts and final commercial modelling. Final deliverables are now under review and awaiting completion. These include the Final Study Report and a public Knowledge Sharing Report, which will be made available publicly.

The detailed Contract Design Package (CDP) for H2Neo, which was 90% complete at the end of the June quarter, has now been finalised and submitted to the American Bureau of Shipping (ABS) for final review. This includes cargo piping and instrumentation design which has been tested in various cargo loading and discharge simulations including assessments in conjunction with the process engineering team of a potential European receiving terminal.

The piping design was subjected to a gas dispersion, fire and explosion study by ABS Consulting, which verified the safety of the design and identified some operational procedures that will be included in the safety management system for green hydrogen (GH2) carriers. ABS Class also facilitated a second HAZID (hazard identification) workshop attended by ABS experts, plus representatives from Provaris, the ship designer Capilano, ship manager Northern Marine and the consultants designing the cargo containment and handing system.

ABS is now progressing a final FEED level review covering all of the studies mentioned above and has confirmed that it expects to issue a Design Approval for Construction letter in early December, thus significantly de-risking the project and making compressed H2 an accepted transportation solution.

In the September quarter, energy safety consultancy C-FER Technologies completed a report confirming the application of strain gauges to monitor the integrity of the cargo tanks and is also progressing small-scale testing of cargo welds and tests of the stainless steel liner material. Future tests will be conducted in a high-pressure hydrogen environment.

Finally, an Asian shipbuilder continues to review the CDP while confirming its interest in constructing the H2Neo. The shipbuilder is also in discussions with local steel mills to source compliant steel plate and other equipment suppliers.

Provaris Energy continues to promote compressed GH2 as a mid-stream solution. In October, Provaris executed a joint marketing roadshow with Total Eren in Asia while also hosting its own marketing events in November. These initiatives are increasing the awareness of compressed H2 as a solution and raising the probability of the signing of agreements leading to the firm offtake of volume, which would be a major milestone for Provaris. It is thought that the first offtake market for Tiwi H2 is likely to come from an industrial user in Singapore, probably in 2023.

In Europe, Provaris is focusing on projects in Norway, a country that hosts nearly 50% of the European Economic Area’s hydropower reservoir capacity. Provaris hopes to take advantage of this low-cost reliable energy source for H2 production for export to key importation terminals in Germany and the Netherlands, supported by the Norwegian government, which is seeking solutions for hydrogen production, local consumption and exports of clean energy. The location of Norway in relation to potential European Union markets lies in the ‘sweet spot’ for Provaris. H2 exports fed into mainland terminals would support the EU’s dedicated European Hydrogen Backbone project. The appointment of Herman Hildan as a strategic advisor to fast-track opportunities in Norway and across Europe is expected to accelerate such opportunities.

In September, Provaris announced an MOU with Total Eren, a leading France-based renewable energy independent power producer (IPP), to further its co-operation on the development of green hydrogen projects in Asia and Europe where the application of Provaris’s compressed H2 storage and transport supply chain can be applied.

The MOU was the culmination of almost 12 months of technical and commercial analysis of Provaris’s compressed H2 carrier supply chain, and includes opportunities already identified to be assessed by Total Eren and Provaris for the feasibility of importing hydrogen into Europe and Asia using Provaris Energy’s compressed hydrogen supply chain.

The agreement includes the development of solutions that will meet the requirements of offtakers, port authorities, shipyards and ship operators. Total Eren is developing a global portfolio of green H2 projects in countries including Chile, Morocco, Australia and Tunisia, with a focus on the H2 markets of Europe, Japan, Korea and Singapore. The agreement provides Provaris with a key partner to facilitate and accelerate the delivery of the first fleet of Provaris’s H2Neo GH2 carriers, including investigation of a future financing scheme. It is also inclusive of a study underway with a port operator in Europe comprising the techno-economic analysis and preliminary engineering of a dedicated compressed H2 terminal which would connect to Europe’s dedicated H2 backbone and salt caverns for storage.

A link to our initial comment relating to the MOU signed with Total Eren is here.