Analogies from the E&P Business Model Applied for Green Hydrogen Developments Offshore Uruguay

Abstract

Uruguay is at the forefront in the use of renewable energy sources and has almost totally decarbonized its electricity matrix, reducing its dependence on fossil fuels. The country is advancing into a second energy transition, including the development of a green Hydrogen (H2) economy. This work presents the Analogies from the Exploration & Production (E&P) business model applied for green H2 developments offshore Uruguay. Considering the sovereignty Uruguay has in activities such as the production of energy from wind in its Exclusive Economic Zone (EEZ), the Uruguayan NOC has based its vision for a sustainable future on the H2U Offshore Round, for which it will offer offshore areas on bidding rounds for energy companies to carry out feasibility studies and potential installation of infrastructure to produce H2 from offshore renewable energy, at their own cost and risk entirely. In this work, the authors elaborated a probabilistic technical and economic model, including all the relevant considerations for the green H2 development project, which was used for the design of the proposed fiscal regime for the H2U Offshore Round. The Uruguayan NOC is managing and articulating the traditional Oil & Gas (O&G) upstream business and the green H2 offshore program together simultaneously, maximizing the synergies among them. The offshore of Uruguay presents a large technical potential and excellent conditions for wind resource, with high wind speed, capacity factors and the availability of large areas. This paper includes the main features of the H2U Offshore Round bidding terms and the contract model, highlighting the synergies and analogies with the E&P projects. In addition, the results of the abovementioned probabilistic model, such as project profitability measures, breakeven hydrogen price and minimum economic capacity factors are presented. In the recent past, Uruguay was able to attract over a billion of US$ of risk capital from the major O&G companies for exploration of hydrocarbons offshore. Hence, the NOC's innovative approach is to bring several similarities from the E&P business to the H2U Offshore Round, with a sound and fair balance between risk and rewards for the energy companies, leading a responsible transition pathway from fossil fuels to green hydrogen in Uruguay.