The Fortescue Metals Group Limited (ASX: FMG) share price is in focus as its first green hydrogen plans come closer to reality.
While Fortescue is a huge iron ore miner, it also has plans to become a major green hydrogen producer.
Green hydrogen progress
Fortescue Future Industries (FFI) and Incitec Pivot Ltd (ASX: IPL) will progress planning for the conversion of the Gibson Island ammonia facility to run on green hydrogen to its final states.
This involves commencing front end engineering design as well as executing a framework agreement to govern the project through a final investment decision.
Studies have confirmed its feasibility. The proposed project could see the construction of a new 500MW hydrogen electrolysis facility at the site to produce green hydrogen, as well as the retrofitting of Incitec Pivot’s existing ammonia manufacturing facility to run on the green hydrogen produced onsite. This could be a useful boost for the Fortescue share price once it’s up and running.
This facility will cease traditional fertiliser manufacturing early in the new year. The Brisbane ammonia manufacturing and port facility conversion would be a “world-first”.
FFI said:
By virtue of running on green hydrogen, the facility could ultimately produce up to 400ktpa green ammonia, which can be exported to international markets as well as used in fertiliser or to help decarbonise local industry through its potential use as a low-carbon fuel source for ports, airports and heavy transport.
How much will this cost?
Fortescue Future Industries (FFI) said that the front end engineering design (FEED) is a critical phase in development and will “firm up” technical specifications and cost, underpin procurement, as well as mature the project to the final investment decision, targeted for 2023.
The FEED phase is anticipated to cost around $38 million. The Federal Government, through the Australian Renewable Energy Agency, will contribute $13.7 million.
FFI CEO Mark Hutchison said:
This collaboration aims to put Queensland and Australia ahead of the pack – not only in terms of the scale of production and supply of green hydrogen and green ammonia, but also in terms of demonstrating to the world that projects like this are feasible and that Australia has the foresight, the commitment, and the know-how to invest in and deliver them.
The two businesses are “also working with the Queensland Government to understand how the project could benefit local energy markets and support the delivery of the Queensland Government’s Energy and Jobs Plan and broader development objectives.”
Applications for planning approval for the project will shortly be submitted. FFI is working closely with Powerlink for connection of the project to the Queensland electricity transmission network and with Urban Utilities on sustainable water supply to the project. A domestic and international process is underway to canvas potential buyers of the green ammonia that will be produced by the facility.
Final thoughts on the Fortescue share price
This is a promising development towards FFI’s green hydrogen and green ammonia plans.
The earlier the better, for both revenue generation and decarbonisation.
However, with the Fortescue share price currently sitting above $17, I don’t think it’s worth buying yet. Under $16 seems like a good price to buy at. However, I am a shareholder and I’m excited by the potential of the green initiatives within FFI.
