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Itochu and Petronas Canada are studying costs and transportation options to determine if the project is financially viable.LAI SENG SIN/Reuters

Petronas Canada is teaming up with Japan-based Itochu Corp. to explore the feasibility of building a new, US$1.3-billion facility just outside Edmonton that would produce low-carbon ammonia, a source of hydrogen fuel, for export to Asian markets.

The two companies are betting that the project will capitalize on a global surge of interest in hydrogen, an alternative fuel that emits no greenhouse gases when burned, but that is challenging to transport. As more countries set net-zero carbon emissions goals, they are increasingly seeking environmentally-friendly sources of hydrogen.

Itochu and Petronas Canada, the Canadian arm of the Malaysian oil and gas firm, are now in the process of studying costs and transportation options to determine if the project is financially viable. If it goes ahead, the companies say, construction would start in 2023 and the plant would come online in 2027.

The facility would draw natural gas from Petronas’ Montney basin assets and combine it with nitrogen to produce ammonia. This process produces significant amounts of byproduct carbon dioxide.

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By capturing and storing that carbon dioxide before it can be emitted into the atmosphere, the plant would produce what is known as “blue ammonia” – that is, ammonia with a reduced climate impact. (Not to be confused with “green ammonia,” which is made from hydrogen that comes from water electrolysis powered by renewable energy, and produces fewer greenhouse emissions during production.)

Ammonia is easier to transport than pure hydrogen. When it reaches its destination it can be chemically split, allowing its hydrogen atoms to be used for fuel.

Mark Fitzgerald, the president and chief executive officer of Petronas Canada, said he believes the project could help the Canadian natural gas industry gain a reputation as a global feedstock for hydrogen production.

“I think this is a great example of the opportunity for Canada to play a leading role in the progression of the world to a low-carbon economy,” he said.

Itochu belongs to a group of more than 30 industry players that have partnered to study ammonia as an alternative marine fuel. By examining issues such as safety, fuel specifications and net carbon dioxide emissions, the group aims to establish a global ammonia supply chain and develop ships that use ammonia fuels.

Petronas and Itochu are eyeing blue ammonia for use in thermal power generation in Japan, to replace hydrocarbon-based fuels for power plants, and for use in steel and chemical production. The Japanese government aims to secure 30 million tonnes of ammonia by 2050 as part of its efforts to achieve net-zero emissions.

Mr. Fitzgerald said the Edmonton-area project would have several competitive advantages. Those would include the ability to leverage abundant natural gas stocks in the region, and the fact that the sailing time from the West Coast of Canada to Japan is shorter than it would be from other North American ports that could supply blue ammonia.

Another potential advantage is the existing local policy support for such projects, including provincial and federal hydrogen strategies that encourage industry development.

The project would fit neatly into Alberta’s petrochemical incentive program, which grants companies 12 per cent of their eligible capital costs once a new petrochemical facility is up and running. Petrochemicals are derived from petroleum, or natural gas feedstocks such as ethane, methane and propane. Alberta is Canada’s largest producer of them.

The provincial government wouldn’t say whether Petronas has applied for a grant, nor would Mr. Fitzgerald.

Petronas estimates that the project could create about 10,000 direct and indirect jobs during construction, and 3,300 when it’s up and running.

“This is an incredible opportunity for Alberta’s natural resources to reach new markets and further display the innovation that powers our dynamic energy sector,” Dale Nally, Alberta’s associate minister of natural gas and electricity, said in an e-mail.

Successive Alberta governments have pushed for more petrochemical development in the province to help diversify its economy, citing the local abundance of low-cost natural gas feedstock.

The provincial crown corporation Invest Alberta, for example, names petrochemicals as a key focus sector.

Garret Matteotti, Invest Alberta’s director of fuels, chemicals and carbon capture, told The Globe and Mail that the province began discussions with Itochu in 2015 and 2016 – around the same time Alberta started focusing on policies to attract petrochemical projects.

In 2018, the company sent its chemicals group president to Alberta, and then Mr. Nally then visited the company’s Japanese headquarters in 2019.

“The companies do a lot of the heavy lifting in this, but when they look at Alberta, I think they see a network of support across municipal and provincial governments and economic development groups that you see in very few places in the world,” Mr. Matteotti said.

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