Moscow offers new subsidies for Arctic hydrogen

The natural gas that is spent on production of hydrogen and ammonia in the Arctic will be exempted tax, the Russian government decides.

The measure follows a request from Novatek, Kommersant reports. It could significantly benefit the company’s plans to build a hydrogen and ammonia plant in the region.

Novatek has long planned to develop its Ob project, but international sanctions introduced against Russia following its war against Ukraine has halted progress.

The company initially planned to produce up to 5 million tons of LNG in the project, but then instead decided to go for ammonia.

Contracts were signed with international companies Uniper, RWE and Mitsui in 2021. Few months later, the partners pulled out.

The Russian government now seeks to stimulate a resumption of plans. The bill that this week was sent from Government to the State Duma proposes to remove the production tax on natural gas used to generate hydrogen and ammonia.

The Ob project includes the annual production of 2,2 million tons of ammonia and 130,000 tons of hydrogen. The first part of the project was originally planned launched in 2026 and the second in 2027. It is all based on the natural gas resources of the Verkhnetiuteyskoye and Zapadno-Seyakhinskoye, and later also the Neytinskoye and Arkticheskoye, fields.

ADVERTISEMENT

Included in the project plans are also the catch and storage of up to 4 million tons of CO2 per year, which was to make the ammonia and hydrogen attractive for the EU market.

There are currently several more Arctic projects on hydrogen and ammonia production.

In northern Norway, company Horisont Energi plans to use natural gas from the Snøhvit field for the production of up to 3,000 tons of blue ammonia per day. In the Norwegian town of Berlevåg, the company Varanger Kraft is in the process of building a plant on the production of green hydrogen based on its local wind power farm. Similar plans have also been discussed in Murmansk, at the Kola Wind Farm.

As international energy have markets increasingly turned towards new and renewable sources, Russian authorities have highlighted hydrogen as a priority area. On the 15th of October 2021, Prime Minister Mikhail Mishustin confirmed that 9 billion rubles (€110 million) over the next three years will be invested in new and domestically developed technology for production, transportation and storage of hydrogen.

The plan was based on Russia’a vast natural gas reserves, as well as nuclear power and renewable energy sources.