Sep 21

Snam Bets on North Africa as Hydrogen Hub

Stephen Bierman
Nov 30, 2021
Image: Snam

Snam sees future “green” hydrogen supplies from Northern Africa flowing to Europe, and it’s spending EUR 385 million to see that it gets there.

Europe’s largest natural gas pipeline operator is positioning itself for this scenario in a low-carbon energy transition with a deal to buy into pipelines connecting Algeria and Tunisia to Italy. Snam will take a 49.9% stake in the pipes from Eni SpA.

“Through this transaction, Snam is bridging its infrastructure towards North Africa, which represents a key area for gas supplies to Italy and forward looking for hydrogen development,” said Snam Chief Executive Marco Alvera. “In the future, North Africa could also become a hub for producing solar energy and green hydrogen.”

Europe and other leading industrial nations are pushing to move industries and transport away from fossil fuels to cut emissions, which contribute to global warming. This will be accomplished by a shift to electricity powered by a large boost in renewables generation.

Natural gas pipeline operators would seem to risk a future of stranded assets, as petroleum-based fuels are phased out. However, they have two things going in their favor.

The first is that natural gas, the cleanest of the petroleum assortment, is seen as a transition fuel for increased power generation, especially as countries quit coal.

“Gas will play a key role in the transition of energy systems to zero-emission models, and it is important to maintain the availability and diversification of supply routes for this resource,” according to Eni Chief Executive Claudio Descalzi.

The second advantage is that future volumes of clean-burning hydrogen can be transported using the existing pipeline grid. And even before a complete switch, hydrogen can be blended in small proportions with natural gas. This can reduce emissions from gas use and provide an early market for the fuel.

Hydrogen itself is tabbed for use in hard-to-electrify areas such as maritime shipping, long haul trucking, jet fuel and steel production. All of these, however, require adjustments to fleets or equipment in order to accommodate the fuel.

Northern Africa’s significance in future hydrogen production comes from its abundance of sunshine hours, which far outstrip those in Europe.

This is poised to potentially make the region a big winner as solar costs plummet. Solar energy continues to flip the script as one of the cheapest sources of generation, from one which was subsidized.

The general idea is: if cloudy Germany can make solar work, then imagine its efficiency in the desert. Northern Africa doesn’t enjoy the stability of Germany. Yet it does have the solar resource. And the production of hydrogen would give that solar generation another sales outlet aside from simply supplying the grid.

Snam has been a major proponent of hydrogen in general. Its pipeline network ought to remain supplied by natural gas volumes for the near term, supporting Europe’s electrification.

The economics appear to be driving energy toward solar power more and more, especially in countries with abundant sunshine. That is a trend that will continue. One result of that may be that countries with sun will become major players in the production of hydrogen.

Infrastructure operators like Snam appear to be taking this potentiality quite seriously – and already preparing for it.

Stephen Bierman

Stephen Bierman is a finance and energy reporter with over 15 years of experience, including at Bloomberg News and Energy Intelligence.

Tweets at: @StephenBierman1

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