DIGGING FOR GREEN HYDROGEN
A Canadian startup produces cheap, clean, and green hydrogen in an abandoned oil well. The innovation could disrupt the energy industry and accelerate efforts to reverse global warming.
In the thinly populated province of Saskatchewan in the middle of Canada, an energy project is taking place with the potential to radically change the way we power the world. A startup company has developed a technology to cheaply produce green hydrogen underground in an abandoned oil well. The innovation is simple and uses tested technologies, but the impact can be profound. Grant Strem, co-founder and CEO of Proton Technologies, likens his energy solution to “adding wheels to a suitcase”—something that should have happened a long time ago.
For decades, the hydrogen economy—based on the most abundant element in the universe—has been heralded as the ultimate clean energy solution. In 1875(!), Jules Verne wrote in his novel L'Île mystérieuse (The Mysterious Island): “I believe that water will one day be employed as fuel, that hydrogen and oxygen which constitute it, used singly, or together, will furnish an inexhaustible source of heat and light, of an intensity of which coal is not capable.”
Hydrogen is the only carbon-free, and sustainable fuel that can both generate electricity and power heavy industry. When hydrogen reacts with oxygen, the process generates heat and energy or electricity, and the only waste product is water.
Today, more than 90 percent of the hydrogen in the world is produced by ‘reforming’ natural gas and steam. This process releases CO2 emissions. Hydrogen becomes a green fuel when it is produced through the electrolysis of water with renewable electricity. But even with the dramatic drop in the prices of renewables in recent years, the production of green hydrogen is still not competitive with fossil fuels.
Driven by concern about global warming and the global energy crisis caused by the Russian invasion in Ukraine, governments have recently announced massive support for the transition to the hydrogen economy. In the Inflation Reduction Act of the Biden administration, producers are getting a tax credit of $3 per kilogram of green hydrogen for the next 12 years. The European Union has set up multiple support programs for hydrogen investments worth billions of euros. With that background, the importance of the Proton innovation is that the company has shown that green hydrogen can be produced at lower cost than natural gas. That is a disruptive innovation.
Grant Strem got his degrees in geology and engineering at the University of Calgary. As we drive through the vast plains of central Canada, he tells me that, as a young student, he knew he wanted to contribute his talents to sustainable solutions for the planet. When he graduated the only job he could find was in the traditional oil and gas industry. But Strem kept searching for innovation. In his quest, he stayed in regular contact with Dr. Ian Gates, his former professor in the Department of Chemical and Petroleum Engineering, University of Calgary, who is now the director of the Global Research Initiative in Sustainable Low Carbon Unconventional Resources.
Gates and Strem used to meet for 6 AM breakfasts in Calgary. Strem: “I knew I could tempt him for an occasional early bacon and eggs meal before the start of his working day.” At their breakfasts, Gates and Strem discussed energy solutions. One day, Gates showed up with a research report: “This might interest you”, he said.
As part of a research project to find ways to reduce the emission of hydrogen sulfide—the ‘rotten eggs’ gas—during oil- and gas exploration, Gates had stumbled upon a dataset of a test that British Petroleum (BP) had done in the 1980s. BP had injected pure oxygen into an oil field near Calgary in an attempt to reduce the viscosity of the oil and increase production.
The research report showed that the experiment had been successful: The oil production of the well had increased indeed. Nonetheless, BP had decided not to pursue the project. Instead, the British multinational adopted an alternative method to increase production—steam injection—that had become popular in the oil industry at that time. Looking at the data of the BP test some 30 years later, Gates noted that the injection of oxygen had also produced massive amounts of hydrogen.
In the early 1980s, BP had no interest in hydrogen. The report was stored in a research library where Gates found it in 2015. At their breakfast meeting, Gates and Strem quickly concluded that the BP experiment showed an opportunity for a different and very efficient way to produce green hydrogen without CO2 emissions. The discovery would lead to their joint initiative to launch Proton Technologies.
Initially, Proton Technologies, using the BP data, developed a model system for underground ‘in-situ’ hydrogen production. The company designed a filtering system that would allow to only harvest hydrogen gas from an oil reservoir and leave all other gases and fuels—including CO2—in the ground. The Proton founders created several patents for the process. The next step seemed simple to Strem: “We were going to present our innovation to the oil industry, and—in these times of climate change challenges—we were sure we would find great interest.”
But that was not the case. For two years, Strem traveled to the offices of big oil- and gas companies in Canada without any success. The disappointing experience was even more remarkable because his co-founder Gates is an established consultant to the fossil fuel industry with multiple patents in his name. Gates: “We found a resistance to change. Oil and gas companies have billions invested in infrastructure and in a supply chain that works for oil and gas. Five years ago, people were not talking about hydrogen.
As the doors of the oil industry remained closed, Proton Technologies decided to build their own hydrogen production facility. In 2017, the company was able to inexpensively acquire an abandoned oil well project near Kerrobert, Saskatchewan. In the past few years, Proton has been testing its technology to produce hydrogen, and the company is currently raising funds for an investment to scale the production.
Proton’s oil field is situated among many other oil wells in Saskatchewan. The province produces 10 percent of Canada’s oil. A small team of power engineers is operating the Proton facility. In small cabins they look at computer screens presenting lots of data of what is going under the soil beneath our feet. Strem takes me on a tour of the site in his pickup truck. There are pipelines, storage tanks, well heads, safety valves—all the features of a regular oil field.
Oil is formed from the fossilized remains of dead plants by exposure to heat and pressure in Earth's crust over millions of years. When Proton injects oxygen in an oil reservoir, it triggers an oxidation process that restarts chemical processes that stopped millions of years ago due to lack of oxygen during sediment burial.
The chemical reactions heat up the oil from ‘room’ temperature to several hundred degrees centigrade. This heat transforms the water that is always present in an oil field into high pressure, high temperature steam. In a process that is similar to the production of hydrogen from methane, the steam causes a chemical reaction—the ‘water-gas-shift’—that produces hydrogen. In simple terms: The oil is used to fuel a transformation of water into hydrogen in an underground chemical factory.
“When people talk about oil reserves, they make calculations about how much oil they can get out of the ground to burn somewhere else. At Proton, we are not interested in getting the oil out of the ground. We are using the oil to heat water to produce hydrogen. There is no oil production anymore!” says Gates.
The oxidation in the reservoir produces CO2. However, Proton has developed two patented technologies to separate the hydrogen from CO2 and other gases which are reinjected in the well. The company also holds a patent for a technology to co-inject CO2 with ion-rich wastewater—from the reservoir, other industries, or from cities.
The reaction between alkaline water and CO2 triggers the formation of carbonate. That means that, in a perfect carbon sequestration process, CO2 becomes solid rock! The chemical reaction also produces hydrogen. “As a result of our carbon-negative process, our hydrogen production increases,” says Strem.
In collaboration with the University of Calgary, Proton has done extensive modeling based on the original BP data and on the results of the company’s own tests. Proton is confident that the injection of 12 tonnes of oxygen will produce about 1 tonne of hydrogen.
So far, Proton has been doing air injection, which is inefficient because air is only 21 percent oxygen. However, to scale and improve the production the company needs to build a small factory—an air separation unit (ASU)—on the site of the oil well. The process of cooling air to separate it into oxygen, nitrogen, and rare ‘noble’ gases as argon, neon, krypton and xenon was invented by the German scientist and engineer Carl von Linde in 1895. Von Linde later started the company Linde that is still a major manufacturer of ASU’s today.
Proton estimates that the air separation unit takes up about 80 percent of the investment in a green hydrogen production facility. After that investment, the costs of operation are remarkably low. The air is free. The energy to run the ASU comes from a fraction of the produced hydrogen.
An abandoned oil reservoir can be acquired for little money. A typical oil well produces for about 15 years. When about 40 percent of the reservoir has been exploited, it becomes uneconomical to continue the production. However, that ‘non-recoverable’ oil can be used as cheap fuel to turn water into hydrogen underground.
Take the example of Proton’s oil field in Saskatchewan: When the company acquired the abandoned oil field, the reservoir still contained an estimated 200 million barrels of oil. As Proton is considering a future initial public offering (IPO) at a stock exchange, the company’s official documents conservatively project that that volume guarantees a hydrogen production of 500 tonnes per day for the next 50 years. Informally, Gates and Strem say that their projections show that a reservoir like theirs may very well produce hydrogen for more than a century…
The fact that Proton needs water to produce hydrogen may raise eyebrows. Water is scarce. However, the so-called ‘produce water’ in oil wells is saline. It is not drinking water. Deep underground water keeps circulating in oil reservoirs. Oil wells are not going to run out of water. In the oil industry, reservoirs that contain a lot of water are less popular as the water decreases the oil production. Water is, however, an asset for the Proton technology.
Oil fields have an existing infrastructure that has already been paid for. There are pipelines, roads, and powerlines. Adapting that infrastructure to hydrogen production requires some updates and adjustments. But the investments are minimal. Furthermore, oil- and gas companies include ongoing exploration costs in their budgets. They know that the wells they dig will only be productive for a limited time. The Proton innovation, on the other hand, does not require any new oil exploration: There are millions of abandoned oil wells around the world.
The U.S. Environmental Protection Agency (EPA) estimates that in the United States alone, there are more than 3 million abandoned oil and gas wells. Most owners of these reservoirs face substantial environmental liabilities and clean-up costs. That is why abandoned oil fields can be cheaply acquired. The Biden administration has carved out $4.7 billion in the recent infrastructure law for cleaning up abandoned oil and gas wells. The alternative to transform an oil field into a clean hydrogen production facility for the next 50 years or more can be attractive.
All these factors, make Proton’s innovative technology to produce green hydrogen very competitive. According to the company’s investor presentation, Proton expects to achieve a hydrogen production cost of under $1.8/kg in the short term. That is well below $5.5/kg, the price of the most efficiently produced green hydrogen through electrolysis today.
Long term, Proton projects a production cost of $0.50/kg or less. The Biden administration 2022 ‘Hydrogen Shot’ seeks to reduce the cost of clean hydrogen to $1/kg in the next 10 years. When that ambitious goal is realized, Proton’s technology will still be competitive.
The Proton energy solution seems almost too good to be true. Grant Strem is confident: “In the worst case, we will produce a lot of hydrogen. In the best case, we will produce a ridiculous amount of hydrogen.” Co-founder Ian Gates and his university department have analyzed the data extensively. “We think the projections are conservative,” he says. But he adds that production volumes will fluctuate and may on occasions disappoint. “Every oil reservoir will require fine-tuning of the design to achieve consistent hydrogen production. There will always be variations as we are dealing with nature.”
At the same time, any risks around the hydrogen production are mitigated by the multiple revenue streams of the Proton process. The air separation unit also produces nitrogen. Nitrogen is used to make fertilizer (ammonia). “Ammonia is an almost infinite market”, says Strem. Similarly, there is a market for the very valuable noble gases, like argon that are used for welding, in double-glazed windows, and in laboratories. Proton may decide to sell food-grade CO2. Finally, carbon credits are likely to become a major revenue stream.
Proton Technologies has calculated that if the known uneconomic fuel deposits of western Canada only were turned into hydrogen production facilities, the country could supply 100 percent of global energy for at least 50 years! That may not be practical, but the calculation shows that the market for the Proton green hydrogen production solution is massive.
Decarbonizing the entire energy industry is a $2.5 trillion opportunity by 2050. Strem emphasizes the critical advantage of the Proton innovation compared to electrolyzing water with electricity from windmills and solar panels: “There is no need for new ecological disturbance. We can produce hydrogen from existing assets for centuries.”
The secret of a disruptive innovation is that it succeeds in designing a new combination of existing technologies. History is full of examples—from the iPhone to the electric car. Proton offers a breakthrough energy solution for the world based on existing assets and infrastructure and tested technologies. The solution offers a major contribution to reversing global warming and it makes energy cheaper than it ever was. And cheap energy has always been a driver of human prosperity. While we look out into the vast emptiness around the Proton oilfield in Saskatchewan, Grant Strem sees the future: “I want to trigger the next renaissance for humanity.” [JK]
