Tree Energy Solutions (TES) is developing synthetic methane production projects in the US, Canada, the Middle East and Australia as it bets on potential demand for a green fuel that can be supplied via existing natural gas infrastructure.

The Belgium-based company aims to supply liquefied synthetic methane to Germany via an LNG import terminal and green energy hub it is developing at the northern port of Wilhelmshaven together with Australia’s Fortescue Future Industries, a TES shareholder.

TES is also targeting the Japanese market, where it believes synthetic methane will play a key role as the country decarbonises, Yves Vercammen, the firm’s CCO, said during a fireside chat at Petroleum Economist’s European Gas Strategy conference in London.

“Japan is one of the biggest LNG importing countries, roughly 100bcm/yr, and they have decided to go for synthetic methane because they do not have a lot of other solutions. Everything that they can [decarbonise] from electrification is already done. They need to import molecules,” Vercammen said.

TES recently signed an agreement with Japanese utility Tokyo Gas to explore and develop synthetic methane supply chains globally.

Power play

A key factor behind the choice of location for production of synthetic methane—achieved by combining green hydrogen with CO₂ to produce an identical molecule to natural gas—is the need for low-cost solar and wind power to drive electrolysers. Electricity accounts for more than 50% of the cost of producing green hydrogen.

“We go to the regions where we are convinced that we can get the cheapest electricity,” said Vercammen, whose previous roles include head of commodities trading at Italy’s Eni and director of energy transition projects at Belgian gas network operator Fluxys. “We are a global company and we have a slogan: put the panels where it is sunny.”

“We do a kind of industrial photosynthesis. We take sun, wind, carbon and water, and we make usable energy out of it” Vercammen, TES

TES’ main focus is Texas, where it is developing two projects. The US offers all the elements needed to develop its synthetic methane supply concept—access to low-cost renewables and water for green hydrogen production, as well as an existing CO₂ infrastructure network and liquefaction capacity. Subsidies in the form of tax credits offered under the Inflation Reduction Act are also beneficial, Vercammen said.

The ability to use existing natural gas infrastructure is a major advantage for synthetic methane over green hydrogen at this early stage of the market’s development. Dedicated hydrogen infrastructure is not expected to be in place for at least a decade, while potential industrial hydrogen consumers will need to alter their own processes to switch away from natural gas, incurring significant capital costs.

Synthetic methane is considered carbon neutral even without capturing the CO₂ when the fuel is burned, Vercammen said. But ultimately TES aims to create a closed cycle by capturing its customers’ CO₂ and re-using it to produce more synthetic methane. “What we do is a kind of industrial photosynthesis. We take sun, wind, carbon and water, and we make usable energy out of it.”

Green premium

However, synthetic methane’s high cost relative to natural gas deters many potential offtakers. “It is clear that the cost is going to be and is much higher than the fossil alternative,” said Vercammen. “So there are not a lot of companies that are saying: ‘Yes, I like your product, it is renewable and I am willing to pay three times the price of natural gas for it.’”

That said, for those industries that are still using natural gas feedstock and need to convert to green hydrogen to cut emissions, synthetic methane is an easier option at this stage of the transition.

Synthetic methane costs remain high, largely because of green hydrogen costs. “The biggest issue we are having today is scale. If you do not have scale, you cannot bring the costs down,” Vercammen said. He highlighted the high capital cost of electrolysers as a key factor inflating levelised costs.

Signing up long-term offtakers for green hydrogen remains “extremely difficult”, partly because potential buyers need to invest in process alterations and infrastructure to make the switch. Synthetic methane, which is chemically identical to natural gas, eliminates the need for new infrastructure. “With the infrastructure [and] with a renewable molecule like ours, we already make 80% of their problems disappear,” Vercammen said.

---

Author: Stuart Penson