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Punta Arenas: the capital of green hydrogen


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    Last week, executives from France's Total Eren met with the mayor of Punta Arenas, Claudio Radonich. They presented the first guidelines to advance in a green hydrogen project in the commune of San Gregorio, about 40 kilometers from the regional capital. A month before, senior executives of Porsche had been in the same offices: the director Michael Steiner and the member of the Executive Council, Barbara Frenkel. Today the automobile company is part of the HIF Global conglomerate, which in collaboration with Siemens, Enel Green Power, Gasco, ExxonMobil and Enap, is developing the Haru Oni project, a laboratory plant in the Cabo Negro area, on land belonging to the National Petroleum Company. Earlier, the holding company HNH - composed of AustriaEnergy and the Danish fund Copenhagen Infrastructure Partners (CIP) - had also visited the mayor.

    What were initially only expectations are now beginning to take shape. The so-called fuel of the future is moving forward. Already on Friday, in fact, HNH announced an agreement with Neltume Port, of the Von Appen group, to build a port that allows the export of green hydrogen to the world. Data from the Ministry of Energy indicate that Magallanes could produce 13% of the product of the whole world.

    The start-up of the HIF laboratory is foreseen for the end of this year... it will be the first one. Today -explains the general manager of HIF Global, Clara Bowman-, the demonstration plant is 70% complete.

    And Punta Arenas is already getting ready. "I have urgently asked the companies that, regardless of the company, the industry should have a voice, because they are all asking for the same thing," explains Mayor Radonich. A few weeks ago he met for a total of six hours with different companies, explaining the common needs of all the firms: housing and labor. And what the commune can and cannot provide.

    Housing capacity

    The first voices pointing concretely to the development of green hydrogen in Chile emerged more than eight years ago. In general terms, the initiatives were oriented to produce ammonia to, for example, generate fertilizers, via green hydrogen, with the exception of HIF, which goes directly to the production of the final product: fuel. The plant aims to obtain green hydrogen from water with wind energy, then combine it with CO2 captured from the atmosphere and through a synthesis process will produce eFuels. It is initially a small, pilot structure, costing US$ 51 million. This, compared to plants such as that of HNH, whose global long-term investment is US$ 3,000 million and aims to generate 150,000 tons of green hydrogen for ammonia.

    HIF has already set up offices in Punta Arenas. It has hired 22 people, of which eleven are from the area and eight have moved permanently. At present, 205 people work at the Haru Oni plant, which will produce 350 t/year of eMethanol and 130,000 Lt/year of eFuel, 86% of whom come from Punta Arenas. In the next few months, around 30 more people will be added. "The fuel will be exported to Germany, where Porsche will use it in its cars," says Clara Bowman. It will leave by ship, through Puerto Mardones, in Punta Arenas.

    Sources in the know say that Total and HNH's schedules aim to complete their Magellanic subsidiary in June. And although these would be the most advanced initiatives in the area, according to a presentation by the Ministry of Energy last year, there are also projects under analysis by CWP Global to produce 170,000 tons of green hydrogen per year from 2028, and one by Sociedad de Inversiones Albatros, called Selknam Proyect, which aims at 135,000 tons for ammonia, starting in 2025. "In Magallanes there are five projects. In the Antofagasta region we have identified more than ten potential projects, such as the transformation of FCAB locomotives and the replacement of ammonia imports with green ammonia produced in Chile," adds Minister Claudio Huepe. In fact, he stresses that, at the national level, 15 production projects have announced that they will start operations by 2025. If these announcements materialize, 3.7 GW of electrolysis would be operating by 2025 and 35 GW of electrolysis by 2030.

    Punta Arenas is already dressed in this new business. And sales of hectares to generate the product are multiplying. Magallanes has a unique attribute: constant winds practically all day and all year round. In addition to access to water, indispensable ingredients for the business. Green hydrogen is generated with water and some renewable energy. Through a process called electrolysis, the water particle is split and the oxygen is separated from the hydrogen, which requires a lot of energy, but when obtained via renewable sources, it results in green hydrogen, as opposed to the gray hydrogen that comes from fossil fuels. The whole process requires large areas of land. It is estimated that each blade," says the mayor, "requires one hectare. For example, the HIF wind turbine is 148.5 meters high: 84 meters for the tower and 64.5 meters for the blades; it is equivalent to the height of the Telefonica Tower or three times the Dreams hotel in Punta Arenas.

    "We have sold some stays for mainly German companies. They have not installed generators on top, because they are speculating when the transmission lines are going to arrive, where the port is going to be. So, in the meantime, they are buying because they know that the values will continue to rise", says Hans Holzhauer, Tattersall's Assistant Manager of Agricultural Properties.

    A few days ago, 7,341 hectares were sold to a foreign company near the Strait of Magellan. There were three lots that were initially offered at about $ 1,800 million, but residents explain that they were sold for $ 3,800 million, more than double. "There is a lot of expectation, all the big energy companies are looking at this; they are looking at contracts, where to set up", emphasizes the executive director of Fitzroy, Hernán Passalacqua. He adds: "There is a small bubble that we have to wait for it to become a reality".

    In fact, most of the contracts that these companies have signed with ranchers are leases. Basically, they are long-term agreements, where initially there is only a commitment that the leasing company will be the only one that will be able to build mills in that area, a stage where an amount of around US$ 50,000 is paid, plus an annual variable for leased hectares. Once construction begins, a larger portion is paid, but the bulk of the rent will be paid when production begins. Payment is made according to the amount of MW expected to be extracted. If at the beginning they were offering between US$ 2,000 and US$ 3,000 per MW, today they are offering between US$ 6,000 and US$ 8,000. The projects, on average, aim to have an installed capacity of more than 1,000 MW, i.e., that rancher could receive more than US$ 6 million per year and continue to develop livestock farming in those areas.

    This, they say in the sector, has activated the purchase of land, not necessarily to build a project, but to lease it to these companies. And to receive that rent. If a few years ago a hectare cost less than $ 300 thousand, now it can exceed one million pesos.

    Punta Arenas has 124,169 inhabitants, according to data from the 2017 Census. For the construction of the plants, HIF needs, in a first phase, 1,200 employees, and AustriaEnergy aims at about 2,000 to 3,000 people. In operation, that figure could be reduced to between 120 and 200 workers.

    And although, of the three most advanced initiatives, two are located in the commune of San Gregorio and only one - HIF - in Punta Arenas, the mayor is clear that the latter city must be prepared to be the one to provide the services. The problem is that absorbing that workforce is complex... or impossible. The Ministry of Energy estimates that in the next decade the industry could generate some 20,000 jobs, concentrated basically in Magallanes and Antofagasta.

    "If 50 families arrive at the same time, the market will burst," says the mayor. "Our city will be the service city, where those who build the plant and those who operate it will live," he adds. Radonich points out that companies should have a sense of industry and operate in this way to cover their needs. This, starting with the fact that they themselves will see the way to provide housing for their personnel, through some kind of association with real estate companies, for example. Housing in Punta Arenas is expensive and scarce. The mayor says that a two-bedroom apartment, about 75 m2, costs an average of $ 250 million, so that a wave of the magnitude that is projected could generate an increase in values that directly impact the traditional residents of the commune. The housing market must be expanded by the hand of the companies, repeats the mayor.

    In search of labor

    In general terms, the green hydrogen initiatives have three stages: studies and permits, construction and operation, which can be extended for about 60 years.

    H2 Magallanes is the name of Total Eren's project. In December 2021 they secured the land. And they plan to launch the initiative in 2025, to start producing hydrogen in 2027. HNH's goals are similar, while the first scalable and commercial stage of HIF would start producing in 2025. They have three years then to prepare the workforce: they need it to be highly skilled. "We don't have that today," says the mayor.

    In Punta Arenas there are five technical schools, and one of them is industrial. In August, the mayor asked the Municipal Corporation to update the educational programs of the specialties, such as electricity and welding, among others. And that the inputs be provided directly by the companies that are currently in Magallanes, such as Enap, Metanex or Asmar. The idea is to train the teachers and then educate the students; the same work that the green hydrogen companies will have to do.

    Total Eren has already signed a collaboration agreement with the University of Magallanes, as has HIF. The latter are also working with the CFT Magallanes, Inacap, the Instituto Profesional Santo Tomás, as well as the technical establishments of Punta Arenas. "The government is committed to increasing public investment in R&D in order to consolidate long-term growth for Chile," Minister Huepe emphasizes. "These investments will not only be in productive projects," he stresses.

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