BHP Explores Hydrogen as Potential Alternative to Coking Coal
BHP Explores Hydrogen as Potential Alternative to Coking Coal

BHP Explores Hydrogen as Potential Alternative to Coking Coal

  • 23-Mar-2023 11:06 AM
  • Journalist: Patrick Knight

Australia: BHP, one of Australia's leading resources firms, has unveiled plans to develop an electric smelting furnace (ESF) in the country. The furnace could be fuelled by Hydrogen, allowing it to replace coking coal which is currently mined in Queensland for Iron ore processing. To make this plan a reality, BHP will collaborate with engineering firm Hatch on designing and constructing a pilot plant that can produce Steel using direct reduced Iron (DRI) from Pilbara in Western Australia. This marks the first time BHP has invested into an Iron ore processing plant in Australia since 2005 when it wrote off its Hot Brickette Iron Boodarie plant in WA for $266 million.

BHP remains one of the biggest global suppliers of seaborne coking coal, managed through its BHP Mitsubishi Alliance (BMA) with Japanese trading house Mitsubishi. It has been divesting many of its lower grade metallurgical coals in order to focus on higher-grade production. Last month, BMA put its 12 million tonne-per-year Blackwater and 2.5 million tonne-per-year Daunia mines up for sale.

Despite being part of the 'big three' Pilbara Iron ore producers, comprising itself, Rio Tinto and Fortescue, BHP has been less proactive in developing "green Steel" options due to their long-term use of coking coal in Steel production as well as their failure at the Boodarie project.

BHP has strategically linked the increase in royalty rates in Queensland to its decision to cut investment and sell assets, suggesting that it is playing both the Queensland government and those of WA off against each other. The Direct Reduced Iron-Electric Arc Furnace (DRI-ESF) Steel production route that BHP plans to use for its mid-quality Iron ore in the Pilbara, is set to reduce Carbon Dioxide emissions by more than 80 percent compared to traditional blast furnace routes.

BHP has announced a de-risking test programme that will complement its Steel customers' development plans. The programme is designed to make investment in commercial scale projects more secure. While no details were given as to who would be funding the projects, or where they might take place, BHP compared it to the Hybrit project in Sweden. This project aims to reduce the amount of fossil fuels used in Steel production.

Australia has the potential to be a leader in green Steel, with its abundant supplies of Iron ore and access to renewable energy sources. The US Inflation Reduction Act has made it difficult for pure Hydrogen projects to attract international investment as they must compete with their US counterparts. However, Australian projects have an advantage due to the country’s low population density and its ample sunshine and strong winds, which make renewable energy development easier. Consequently, Green Steel is seen as a great growth opportunity in Australia.

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