Techno-economic assessment of hydrogen production from underground coal gasification (UCG) in Western Canada with carbon capture and sequestration (CCS) for upgrading bitumen from oil sands

This paper examines the techno-economic viability of hydrogen production from underground coal gasification (UCG) in Western Canada, for the servicing of the oil sands bitumen upgrading industry. Hydrogen production for bitumen upgrading is predominantly achieved via steam methane reforming (SMR); which involves significant greenhouse gas (GHG) emissions along with considerable feedstock (natural gas) cost volatility. UCG is a formidable candidate for cost-competitive environmentally sustainable hydrogen production; given its negligible feedstock cost, the enormity of deep coal reserves in Western Canada and the favourable CO2 sequestration characteristics of potential UCG sites in the Western Canadian sedimentary basin (WCSB). Techno-economic models were developed for UCG and SMR with and without CCS, to estimate the cost of hydrogen production including delivery to a bitumen upgrader. In this paper, at base case conditions, a 5% internal rate of return (IRR) differential between UCG and SMR was considered so as to account for the increased investment risk associated with UCG. The cost of UCG hydrogen production without CCS is estimated to be $1.78/kg of H2. With CCS, this increases to range of $2.11–$2.70/kg of H2, depending on the distance of the site for CO2 sequestration from the UCG plant. The SMR hydrogen production cost without CCS is estimated to be $1.73/kg of H2. In similar fashion to UCG, this rises to a range of $2.14 to $2.41/kg of H2 with the consideration of CCS. Lastly, for hydrogen production without CCS, UCG has a superior cost competitiveness in comparison to SMR for an IRR differential less than 4.6%. This competitive threshold rises to 5.4% for hydrogen production with CCS.