By Sergio Goncalves
LISBON (Reuters) - Portugal's oil company Galp hopes to take the final investment decision on its first 100-megawatt (MW) green hydrogen unit by year-end, but still needs to clarify some regulatory and tax issues, a company official said on Wednesday.
The Sines refinery, located south of Lisbon, is Portugal's biggest consumer of hydrogen from natural gas, but Galp wants to gradually produce the zero-carbon fuel there through a process of electrolysis using renewable energy.
Such hydrogen is now more expensive to produce than the heavily polluting conventional method of using heat and chemical reactions to release it from coal or natural gas.
Galp wants to accelerate its decarbonisation processes and plans to allocate around 50% of its capital expenditure to low-carbon activities through 2025.
Galp's head of hydrogen, Sergio Machado, told Reuters that the company is "closer to making the final investment decision for the 100 MW electrolyser, hopefully later this year."
"From our side, we are technically and commercially ready, but we still need some clarification about the rules from the European and Portuguese authorities to be sure that there will be regulatory and tax stability," Machado said.
The electrolyser is "just the first step on a very long road at the refinery" as Galp wants to install total green hydrogen capacity of between 600 and 700 MW, he said citing the fact that Galp will be the offtaker of the green hydrogen as a key advantage of its project compared to other projects in Europe.
Galp will be able to produce green ammonia or synthetic fuels, and as the project gains scale it could also sell green hydrogen to transport companies or highly polluting industries.
Energy Secretary Ana Fontoura said on Tuesday that Portugal "already has firm investment intentions to install hydrogen plants with double or even triple the 2.5 GW of capacity that the government forecast by 2030".
Galp is also working on another 100 MW electrolyser project in Sines in partnership with EDP-Energias de Portugal.