"The Energy Transition is Here!" Part 3

It’s the finale of our special miniseries on the global energy transition. We had the pleasure of speaking with Henrik Larsen, KBR vice president of Clean Ammonia and Hydrogen, who outlines the current state of the energy transition, points of resistance, and what the big opportunities look like, particularly around value chain development. Check it out!

Transcript

IN ORBIT: A KBR PODCAST

Season 4, Episode 9

“The Energy Transition is Here!” Part 3

John Arnold

Hello, I'm John and this is In Orbit! A warm welcome to everyone listening. Wherever you are in the world we are excited that you're checking in with us and we appreciate you staying in our orbit. We're excited too because this is the long-awaited third and final installment in our mini-series on the global energy transition that we kicked off back in April. If you like, you can hit pause on your device and go back and listen to the two previous episodes if you want to get caught up. Those were episodes five and six of this current In Orbit season. Hopefully that's not too confusing.

So far, we've talked about some of the opportunities and barriers around the global energy transition, the critical role of hydrogen, as well as some unique solutions KBR is delivering that are helping to pave the way to net zero. Today to round out our discussion on the energy transition, we're thrilled to welcome Henrik Larsen, vice president of KBR Sustainable Technology Solutions business. Welcome to the podcast Henrik.

Henrik Larsen

Thanks John and great to have me here. I would like to, as you say, elaborate a bit more on the energy transition and particularly for my case at least, the ammonia and hydrogen value chain and its importance in this whole big energy transition picture, which is probably a bit blurred for most people. Maybe to start off, a few words about me, as you say. Henrik Larsen, 51 years old. I'm married. Two daughters. And currently working as the vice president for Clean Ammonia and Hydrogen business unit within KBR Technology, and I've been here for about two and a half years now, so really from the first day of the energy transition really taking off, I've been with KBR, so it's been quite a ride.

John Arnold

That's fantastic.

Henrik Larsen

Yeah. Yeah. Maybe a bit of background. Chemical engineer by training and basically born and raised in the ammonia world since graduating, actually 25 years back, so 25 years in the business. Before joining KBR, I actually left for a couple of years the whole ammonia industry because before there was something even cooler than energy transition. The ammonia industry was really about feeding the world, and it still is to a large extent, of course, but it was just that those days. Back in 2018 it was same old, same old, so 2% growth per year and that was it basically. I left the business for a couple of years and then when things really started to heating up back in '22, I had the opportunity to join the KBR team and didn't hesitate at all.

John Arnold

That's fantastic. It's so interesting to hear about your long career in ammonia and that there was this paradigm shift almost immediately, I guess sort of correlating between 2018 and 2022, the pandemic of course happened. Did that have anything to do with a big upswing in ammonia for purposes other than fertilizers?

Henrik Larsen

No. Those things were, you could say unrelated. We were all affected by it obviously, but energy transition of course came out of the Paris Accord and the 2050 agreement basically to reach net zero and then really accelerated in, I would say, late '21, '22 and here we are two and a half years later.

John Arnold:

Understood. We've talked a lot about energy transition here on the podcast. As I said in the open, this is a third part in a miniseries that we've done on the topic and we were pleased to have Umesh Baliga and Shane Tierling join us for those discussions, but now we want to hear from you about where we are as a planet, as a society now in mid-2024, regarding energy transition. What's the general state of things?

Henrik Larsen

Yeah, very good question. Actually, I think we, on a daily basis, we hear about announcements, movements, government schemes, incentives and all kind of things going on and a lot about clean fuels and the energy transition as a headline for all of that. The fact is that CO2 emissions, which is really the whole, let's say the target of the Paris Accord and the Net Zero 2050, it's still going up globally. It reached about 36 gigatons last year, so it's still creeping up there. But the good thing is and that's the message I want to send here, is that it is about to peak. All the things that you're hearing in the radio and the news and we feel every day in Cape Verde, it has an effect.

As an example, the CO2 emissions of U.S. peaked years ago. Same with Europe, same with certain regions. but as a globe it's still going up. Actually, the expectations from all the major institutions out there looking at this, is that in '25-ish, we will see that peak and then you'll see it coming down. Then of course the big question is whether we will actually make net zero in 2050.

John Arnold

That's exciting to hear that the general thought behind it is that things are creeping up, but it's very interesting and encouraging to hear that a peak is coming and then maybe then we'll be able to really execute on that 2050 vision. In regards to that, what are the challenges ahead toward meeting those net zero targets? Why have things still been creeping up, I guess, and what are the challenges that'll keep us from meeting the goals as set by 2050?

Henrik Larsen

Yes well, to sum it up, it is this whole scale of the challenge obviously. If you look at the globe, John, coal and oil still powers more than 50% of the world. That's a fact. With that comes massive CO2 emissions, obviously, but a lot of things have been done to address that and not to point out China in this picture obviously, but China, they have a lot of people, and they are the biggest emitter quite right now and they still rely a lot on coal. But they also do an awful lot about the energy transition. Just as a note here: in '23, China installed more solar panels than U.S. have done combined historically. Just to give you an idea of the pace that they're moving at in China and some of the other Asian countries. But still coming from, let's say, a very coal- and oil-heavy energy setup basically.

Coming back to your question, it is the scale. It's a massive turnaround of everything basically. It's a buildup of infrastructure to support the whole transition and naturally the cost. It will cost trillions of dollars to achieve this, and it'll take time. And with trillions of dollars investments, there's a price check and we will all feel that, for sure, one way or the other.

John Arnold

Where are we seeing the most resistance to and obviously scale that there's lots of socioeconomic implications behind what it takes to scale for developing or underdeveloped countries. Where are we seeing the most resistance or difficulty regarding making those decisions around energy transition? I guess to follow on with that, what are the harder-to-abate areas? Then maybe we can talk about some solutions after that. But first, where's the resistance and what are the specific hard-to-abate areas?

Henrik Larsen

Yeah, let me start with the first part. Infrastructure and cost and maybe to repeat myself, it is really who's going to pay for all this because it is a complete shift. Imagine that everybody here in U.S. tomorrow will go and buy a Tesla, basically. Our whole electricity grid would collapse.

John Arnold

Interesting.

Henrik Larsen

The grid cannot carry all that electricity and that has to of course slowly be built up and that's probably as big a challenge as whatever ammonia plants or Teslas you can get on the streets, just getting the wires out there to support it all.

John Arnold

Right.

Henrik Larsen

Yes, the cost and the infrastructure buildup, you can say, is that a resistance? Well, it's a natural resistance to getting it done. It just takes time. It is the biggest shift of energy in the history of the world, and it doesn't happen overnight. And we have committed to do it in 25 years, so it's not easy. Just let's say maybe highlight a few things. Traditionally, you talk about the green value chain, and you talk about the blue value chain. The green value chain in this context is really power or energy coming from renewables or from mother nature basically. For that, you need electrolysers. Just a few years ago, electrolysers were around, but now they are major part of the solution if you want to even dream about making it to net zero in 2050. That build up is beyond imagination that you have to do and costs are still too high. They're definitely coming down, but it's going to take time. I'll come back to that on electrolysers a bit later.

On the other hand, we can do a lot already today and that's a positive thing. The KBR Technology, some of the ones we have and the ones we have in the clean ammonia and hydrogen group, we can deliver those tomorrow and we are doing that.

John Arnold

That's exciting.

Henrik Larsen

Yeah, yeah. But we are not going to cover the whole challenge obviously up to 2050, but we can do a lot. And I'm happy to share more about that as well, actually, what we do today and we'll do tomorrow as well.

I think you also mentioned the hard-to-abate areas. What is it actually, because that's also a phrase that has been thrown out there a lot and maybe not so obvious what it actually means. Basically, as an engineer, if you had all the renewable power in the world — so power delivered by wind turbines or solar panels or what have you — if you had all the power in the world, you would plug everything in you could because that's the most efficient way of using the power of mother nature basically. Your electric car, your house, you would power everything by renewable electricity basically, but of course you cannot plug in everything. It'll be difficult to plug in an airplane, it'll be difficult to plug in certain other industries and there are industries that just need liquid molecules.

On top of that, you also have regions on this planet that are not placed with renewables or for that matter, natural gas like U.S., so what do they do? You cannot make a cable go from the U.S. Gulf Coast to Korea and electrify Korea. That's not really feasible. So you need other solutions and that's the solutions that we're talking about here. The solutions are the ones addressing the hard-to-abate area, and what is that? What's the size of that? It is estimated that about 15% of the world's energy usage has to be supplied by something else than electricity from a wind turbine or solar panel. Maybe it doesn't sound like much, but if you were to do that by let's say a solution that we have in KBR, so hydrogen or ammonia, it's about 500 million tons per year of clean hydrogen that you need to deliver globally and that's massive.

John Arnold

If you don't have this figure off the top of your head, what is the largest world-scale hydrogen plant producing as far as just a large amount? What's a large world-scale amount of hydrogen produced for the purposes of electricity? Does something like that exist already?

Henrik Larsen

Well, there are a couple of big plants that have been built in the Middle East. Those are all gray plants and when I say gray, it's a good old way of doing things. You burn some hydrocarbons and you emit the CO2. Those are big and they're up and running. What we are doing obviously is not repeating that. We are still producing hydrogen via burning of hydrocarbons, but we capture the CO2 and we are doing that right now for a project in the U.K. and that's maybe to use a number which most people can relate to, that's 1,000 megawatts of hydrogen. Whatever hydrogen comes out of that plant, it has enough power of 1,000 megawatts. That's a lot and it'll be one of the biggest hydrogen plants in the world and it'll be blue. When I say blue, it means that it captures close to 99% of the CO2 and you sequester that. That will be a very clean hydrogen that we will deliver in approximately three years from now after the construction and start up.

John Arnold

That's fantastic. We were just talking about resistances and hard to abate areas and you've already been mentioning them, a couple of them anyway. What are some potential solutions to those major challenges?

Henrik Larsen

Yes, as I already hinted, hydrogen is my favorite molecule, and it is a fantastic molecule. And those of you who maybe remember what you did back in the chemistry lessons in school, that hydrogen is H2, it's the smallest molecule we have. It's a gas. It burns so easily, and the only byproduct is water. Very easy. Obviously to cover those 15% of the world's energy, hydrogen would be a perfect molecule because it could easily, at least on paper or the chemistry behind it, could easily cover those 15% if you can make those 15% of the world's energy needs via hydrogen. That would be perfect.

The problem is that this fantastic molecule, it is a small molecule, so it's not easy to transport. It's a gas form and if you were to produce in the U.S Gulf Coast and ship it all the way to Korea, Japan, where they are in need of clean energy, you would today lose quite a bit of the hydrogen because it is a very difficult molecule to trap, and it'll also be very expensive. One of the solutions that seems to be the winning solution and we in KBR certainly believe in that, is to transport the hydrogen in the shape of ammonia. Ammonia is NH3, so it contains a lot of hydrogen, and ammonia is a chemical that we, as KBR have 80 years’ experience of producing, and there's an infrastructure already out there globally. You can put it on a ship. You can import it, and you can then use it as you see fit. Today it's mostly used for fertilizer, but that is what, including KBR and a lot of other people out there believe, that this would be the molecule of the future delivering quite a lot of those 15% of the needed, of let's say, the hard to abate areas that need to be covered.

That brings me back to the value chain in fact, because yes, we are extremely good at producing ammonia via our fantastic KBR ammonia technology, and we could today put that on a ship, sail it to Japan, let's say, and say, “Guys, here's clean ammonia, please use it.” But the ammonia is not necessarily interesting for them. In fact, if they will be using ammonia in Japan, they will put it into the power plants and fire it directly. But they will also need hydrogen because hydrogen goes into so many downstream processes and, as I said, can also burn, obviously. In order for KBR to be a better technology choice in this whole energy transition, we need to focus on much more than just the ammonia part, which we've been doing for many years and still excel at. But we need to really be sure that we also cover the other end of the spectrum, meaning making sure we can deliver the right product in Japan or Korea or wherever that ammonia might end up.

An example of that is our ammonia cracking technology, which takes this ammonia that we then deliver in Japan, for instance and we crack it back to hydrogen at the source of usage. We do that, of course, in the most efficient way so that you lose as little as possible in this whole value chain.

John Arnold

I think you're already starting to answer, a little bit, this question that we're addressing now. Specifically for KBR, we've mentioned that KBR and other companies are getting behind ammonia as a carrier for hydrogen and we're talking about the value chain. What's the focus and position of KBR's technology business unit specifically in that hydrogen value chain and what does the opportunity look like for KBR right now?

Henrik Larsen

Yeah, good question. I think the value chain is really the key, and I think to sum it up, it's about owning that value chain — and not physically owning it. We don't have to own the ships that transport the ammonia and all that, but we really need to know each of the steps and have a position or have friends that are positioned in that specific step. Obviously, we need to have the right technology offering along the value chain. As I said, we have done ammonia for many years, and we do it well. And today we really have the most efficient solutions for both blue and green ammonia. And I just mentioned this ammonia cracking technology that would then take the molecules back to hydrogen. In that sense, you can say we are well positioned on both ends of the value chain. We can produce the chemical that will be used as a carrier and we can bring it back to the core chemical that will be going into chemical processes, be used as a fuel or any other uses that might be needed in the region of the end user.

Then along the value chain, you have the shipping. You have actually getting the project up and running, and that is what we have seen in the last two and a half years, that we as KBR we are extremely well positioned to actually play an important role. You know KBR: we have been doing contracting, we have been doing EPC [engineering, procurement and construction] work, we have been doing construction. We have been across in so many areas for the last many, many years and that really brings value to the table now because we act as, not only supplier of the technologies needed in the value chain, but also basically as matchmakers in some of these steps.

John Arnold

Interesting. Yeah.

Henrik Larsen

We have a couple of projects where we have, of course, been offering our technology, but we have also put the right parties around the table and the guys that sit on land at the U.S. Gulf Coast, the gas supplier, the off-taker and the EPC contractor — all that coming together because of the heritage we bring in and that really is a key factor to success.

On top of that, obviously partnerships. We have two of the key technologies in the hydrogen and ammonia value chain, but those solutions are not going to cut it entirely. We do cover a lot and we need more tools in our own toolbox for sure, but we need to be humble enough to realize that we need partners to tick some of the boxes there where we are not necessarily the best. An example of that is Air Liquide. I think most within KBR know about that collaboration. Air Liquide is one of the largest gas companies in the world. They have a technology portfolio. Some of their technologies go really hand in hand with the KBR technologies and we teamed up last year and within the last year basically we already have backed two successful in this space of energy transition, two large ammonia projects at the U.S Gulf Coast.

John Arnold

That's fantastic. Yeah, I appreciate the candor of saying that not every company can literally do everything. Partnerships are needed. And that you do have to be humble in order to make something so ambitious as net zero happen. Just a couple more questions for you, Henrik, before we let you go. For clean ammonia and hydrogen, in that space and in the broader KBR technology business, what is on the horizon in the next five years in your estimation? I wonder if you could just prognosticate for us.

Henrik Larsen

Well, if I could predict precisely, then I would be in a good trajectory for sure. No, but things will be busy, but I already alluded to a couple of the things that we need to really focus on and one of them is adding the right tools in our toolbox and partnership and all that. Let me be a bit more specific here, John. For sure, CO2 is the big thing, the ghost here and the chemical that we want to either get rid of or sequestrate. We are doing a lot in this regard. We have added technology to the portfolio on capturing CO2. We want to do that better and cheaper going forward as well. You will see announcements on technology, you will see announcements on partnership in the CO2 space and that will go beyond my little shop because CO2 is in cement, it's in steel, it's everywhere. Whatever we do here, we dream about applying that across the board globally, obviously.

Then from my side and my shop here, you could dream about new technologies that even though you use hydrocarbons and you convert the hydrocarbons to ammonia or hydrogen, clean, you don't create any CO2. Imagine if you could do that and well, the reason why I bring it up is because I do believe we have technologies coming that would do that, so that will definitely also see in the next five years, John. Things like that will be announced and it'll be part of our portfolio. It should be because it's part of the solution. Also, the whole green value chain. We need to focus more on technologies that use, let's say, other kinds of renewables, not just the wind turbine or the solar panel, but biomass for instance.

John Arnold

Interesting. Yeah.

Henrik Larsen

Like the colleagues in the [KBR] PureSAF [sustainable aviation fuel] space are doing already today for clean fuels for the aerospace sector, we can and we will expand the portfolio of clean fuels based on these types of biomass and we would also, let's say, synergize with some of the existing products that we have or technologies. You can imagine putting CO2 into products that stick around basically, so you don't emit CO2. Another one would be then they're used to reuse, so that you have that continuous cycle. A lot of things going to happen in the next five years and you'll see quite a bit of announcements coming, John, in this space.

John Arnold

It's very exciting and very encouraging to hear. I wonder if there's anything else you'd like to add before we let you go today?

Henrik Larsen

Yeah, maybe just highlighting what I kind of hinted previously that actually being KBR and with the breadth of experience and the multiple of industries that the company has and still is involved in, we are well-positioned for really making a difference here. It's in our DNA to deliver solutions and part of the logo basically, we deliver and what we have delivered and done in the last two and a half years since it really took off, that's amazing and I'm so happy being in such a company that have all these things coming together, like I just said, about bringing the right partners around the table with the land, the gas and then we bring the technologies in, but actually we are the glue that binds everything together. That's really impressive and it's a fun place to be as well.

John Arnold

I remember speaking with Shane and Umesh and talking about being a part of — coming from a chemical engineering background — and now being a part of something that is so novel, so innovative. I wonder how does it make you feel to be involved in something, especially with a company with a legacy like KBR, but being involved in something, not necessarily at the ground level, but I mean pretty close to it and it's really, really important for the future of the planet. How does that make you feel, just as far as your career outlook?

Henrik Larsen

A bit of it is quite breathtaking and as you say, actually that's a good way of putting it because to some extent sometime we do a bit of a startup within a massive corporation like KBR because we are looking at new, new stuff and of course there's a certain pressure to take that new, new stuff and getting across the finish line and commercialize it as fast as possible. First of all, we want to make money, but also we want to actually contribute to the energy transition. Sometimes we really do things down on a group of five people, look at technology, we tweak it and get it up and running and then suddenly it becomes part of, let's say, the big KBR machine. That is really rewarding. I have to say, being surrounded by quite a few smart people, that's quite humbling as well and that makes every day quite rewarding, I have to say. Yeah, quite interesting and I can only recommend it. If you want to join clean ammonium hydrogen then give me a ring.

John Arnold

You can find him on LinkedIn, I know. I've done a little bit of stalking. So you definitely hit him up on LinkedIn. Well, Henrik, we thank you so much for your time and for your expertise in talking with us about this very exciting topic and we'll have to do a circle around at some point to see where we are, maybe in another year or so to see how far we've come since this conversation.

Henrik Larsen

Indeed. Yeah. Thanks for having me, John.

John Arnold

My pleasure. Thank you.

Henrik Larsen

It's a pleasure.

John Arnold

There you have it. We've covered a lot of ground related to the global energy transition and the role KBR is playing in making it possible. We want to thank Henrik Larsen, as well as our other guests in this miniseries Umesh Baliga and Shane Tierling, for sharing with us their time and expertise on this very exciting topic. If you've got questions or episode ideas for us or questions about energy transition, feel free to send them over to the podcast email address. That's inorbit@KBR.com. I also want to thank my colleague, Rebecca Lewis-Ricard for helping put this miniseries together. Can't forget to thank our amazing producer Emma for the amazing job she does, getting these episodes out there to you and as always, many thanks to you, our dear listeners. We know there's an awful lot going on in the world today, a lot vying for your attention, so please know that we appreciate you spending time with us and for keeping us in your orbit. Take care.