UKEn South Dorset Hydrogen Storage Project Update
UK Oil & Gas PLC
("UKOG" or the "Company")
UKEn South Dorset Hydrogen Storage Project Update
UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that DEEP.KBB GmbH, one of Europe's leading salt cavern design and underground energy storage engineering groups, has completed preliminary project design ("Design") for the Company's proposed new underground hydrogen storage facility located west of Weymouth in Dorset ("South Dorset" or "Site"). The Design, prepared for the Company's wholly owned UK Energy Storage subsidiary ("UKEn"), confirms the suitability of the Site for a material scale hydrogen storage project, comprising 24 salt caverns at a depth of ~1330 m below surface. The project is fully in keeping with the Government's Clean Power 2030 ambitions.
The following metrics summarise the Design and its advantages versus UKEn's original Portland site ("Portland"), see Table 1 and also RNS of 27/06 and 21/08/2024:
· The Design comprises 24 caverns providing up to 1.01 billion standard m³ ("bcm") working hydrogen volume, 12% greater than Portland's 0.9 bcm;
· Calculated hydrogen withdrawal and injection rates could provide up to 2.9 times the annual cycling capacity of Portland, creating a technical maximum annual storage capacity of 30.2 TWh¹/yr vs Portland's 10.4 TWh¹/yr, a substantive increase;
· If delivered and operated at full capacity, the Site's technical maximum 30.2 TWh¹/yr annual storage capacity could represent a material proportion of the currently predicted UK 2050 annual hydrogen storage demand of 50-100 TWh¹/yr ²;
· The Design's adoption of a conventional "cushion gas" operating scheme would significantly reduce project development costs (CAPEX) by around 36% compared to Portland, reducing costs by around £450 million;
· The Design's resultant increased cycling capacity, lower CAPEX and operating costs create potential for a significantly increased future annual revenue base versus Portland and a more competitive submission for government revenue support;
· The Site also lies closer to the planned H2 Connect hydrogen trunk pipeline, designed to connect South Dorset to the UK hydrogen transmission pipeline system (Project Union) and the main hydrogen clusters in the South, East Coast and Northwest.
Notes: ¹ TWh = terawatt hours; 1 bcm of pure hydrogen has the energy equivalent of ~3.0 TWh; ² based upon 2023 National Grid/NESO and Royal Society hydrogen demand predictions as per RNS 27/06 and 21/08/2024.
The Design's significantly greater injection and withdrawal rates and consequent increased annual energy storage capacity compared to Portland, are a direct consequence of the underlying geology at the location. The Triassic salt is thicker, permitting larger caverns, and lies 1070m closer to surface at 1330m versus 2400m at Portland. The associated lower hydrostatic pressure and temperatures within the salt underlying the Site enable a simple, conventional "cushion gas" scheme to be utilised to provide the minimum necessary cavern working pressure required to maintain cavern integrity.
The cushion gas scheme, as proposed by DEEP.KBB, is a proven technology used in numerous salt caverns in the UK, Europe and USA, offering a much simpler development and operation than the required brine compensation scheme (see glossary) at Portland. The Design's scheme requires no additional brine wells, brine facility or brine pipelines, plus there is only one well per storage cavern versus two for brine compensation.
Therefore, applying Xodus supplied cost data to the proposed cushion gas scheme, South Dorset CAPEX is now estimated to be around £800 million in today's money, around £450 million lower than the Portland project.
As the Company intends to apply for government revenue support only for its strongest hydrogen storage projects (see RNS of 29th May, 27th June, 2nd August 2024), it is the Company view that South Dorset's potentially significant increased revenue potential, plus the simpler, substantially lower CAPEX renders it more economically competitive than Portland and versus other potential applicants' projects on a cost/TWh basis.
Consequently, the Company has made a strategic decision that it will pursue revenue support only for its more competitive South Dorset and East Yorkshire projects and will no longer pursue the Portland project. The new South Dorset hydrogen storage project will therefore play a flagship role in the Company's activities to help the decarbonisation of the UK energy system, the Portland Energy Hub, the pan-Dorset economic framework and regional Solent Cluster. Similarly, as clean power and hydrogen storage is now the Company's primary focus, the Company has also ceased its activities in Turkey.
Given our positive relationship with Portland Port and the role of hydrogen in decarbonising the marine sector, the Company believes that there remain synergies between our South Dorset project and the port. With this in mind, the Company is considering the opportunity of a green hydrogen pilot plant at the port that could be linked directly to the South Dorset site's storage, offering the potential for local clean Hydrogen to Power generation both for the port, Weymouth and its environs.
The Company's aim of delivering these key strategic energy infrastructure elements is fully in step with the Government's ambitious target to decarbonise the UK power system by 2030. The currently envisaged project time scale, subject to necessary regulatory consents and financing, would see construction well under way by 2030, with first operational caverns in the 2030-32 window.
Stephen Sanderson, the Company's Chief Executive, commented:
"DEEP.KBB's Design work demonstrates that the South Dorset Site has the potential for far greater future revenues and profitability versus the Company's original and otherwise robust Portland hydrogen storage project. It is, therefore, also likely to be a more compelling case for government revenue support in the forthcoming hydrogen storage procurement process, now scheduled for later this year. Consequently, our efforts will now be focussed upon this material project and its northern sister in East Yorkshire, both of which plan to utilise simple and proven cushion gas operating technology."
TABLE 1: South Dorset Site versus Portland hydrogen storage metrics:
|
|
|
South Dorset Site |
Portland Site |
|
|
Approximate Cavern Depth (m) |
1,330 |
2,400 |
|
|
Number of Caverns |
24 |
19 |
|
|
Number of Wells |
24 |
38 |
|
|
Operational Mode |
Cushion gas |
Brine compensation |
|
Static Working Hydrogen Volume (bcm) |
1.01 |
0.90 |
|
|
|
Max Annual Cycling Capacity (TWh) |
30.2 |
10.4 |
|
|
Max Cycles per year |
~10 |
~4 |
|
|
Xodus Estimated Project CAPEX (million) |
~£800 |
~£1,250 |
For further information, please contact:
UK Oil & Gas Plc
Stephen Sanderson / Kris Bone Tel: 01483 941493
Zeus (Nominated Adviser and Broker)
James Joyce / James Bavister / Andrew de Andrade Tel: 0203 829 5000
CMC Markets (Joint Broker)
Douglas Crippen Tel: 0203 003 8632
Communications
Brian Alexander Tel: 01483 941493
Glossary
|
Annual cycling capacity |
the maximum amount of energy (or volume of hydrogen) that can be withdrawn from and injected into a salt cavern on an annual basis. It is calculated from the maximum number of times in a year the WGV can be fully withdrawn and injected. |
|
Brine compensation scheme |
A mode of cavern operation employing injection/withdrawal of saturated brine to maintain cavern operating pressure and integrity. The cavern, initially containing 100% saturated brine, is filled by withdrawing the brine and replacing with an equal volume of compressed gas (hydrogen) until the cavern contains 100% gas. To empty the cavern, the gas is withdrawn and replaced by an equal volume of injected pressurised brine. The process ensures that the cavern remains within a narrow window of operating pressure. The annual cycling capacity is limited by the brine injection and withdrawal rate. No cushion gas is required to remain in the cavern. The scheme is more CAPEX intensive as it requires multiple wells per cavern and a separate saturated brine source plus brine injection/withdrawal and pipeline facilities. |
|
Cushion gas (hydrogen) volume (CGV) |
the volume of hydrogen that is permanently stored in a salt cavern to maintain sufficient pressure to ensure cavern volume integrity. In the case of South Dorset being approximately 32% of the TGV. In the case of hydrogen storage, cushion gas could be hydrogen or other heavier gases (CO2, Nitrogen, Methane). |
|
Salt caverns |
man-made caverns constructed by the physical dissolution of naturally occurring halite (rock salt) deposits. The dissolution provides an impermeable gas tight cavern space that is permanently filled with gas and/or brine at an equivalent pressure to that within the surrounding rocks i.e., it is not an empty void at any time. Halite deposits with sufficient thickness to accommodate significant caverns are confined to three areas of Great Britain: South Dorset (Triassic), Cheshire (Triassic) and the northeast Yorkshire coast (Permian Zechstein age). |
|
Total gas (hydrogen) volume (TGV) |
the maximum volume of hydrogen that can be contained within the cavern(s). TGV= WGV+CGV. |
|
Working gas (hydrogen) volume (WGV) |
the amount of hydrogen that can be injected, stored and withdrawn during the normal commercial operation of a hydrogen storage facility. WGV = TGV-CGV. |
The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon publication of this announcement, this information is now considered to be in the public domain.
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