Hydrogen in Peru

1. CURRENT STATE OF HYDROGEN PROJECTS IN PERU

The hydrogen industry is emerging in Peru but is at an early stage. Hydrogen is likely to develop over the coming decade as it will become key to the country achieving a reduction of 30% of its carbon emissions by 2030, 1 http://www.minam.gob.pe/cambioclimatico/wp-content/uploads/sites/127/2019/01/10.-Mitigaci%C3%B3n.pdf as agreed under the Paris Agreement.

Currently in the Peruvian oil & gas sector, hydrogen is used in the process of desulfurisation of diesel fuels in oil refineries, in order to produce “cleaner” fuels which, when consumed, will contribute to reducing greenhouse emissions in comparison to traditional fuels, and as such, will safeguard air quality and public health. The hydrogen used is all “grey” hydrogen made using fossil fuels.

In this regard, oil refineries in Peru have started adapting and implementing carbon reduction strategies in their hydrogen facilities. The Pampilla Refinery, one of the country’s most important oil refineries, owned by Repsol, in 2016 started the operation of a hydrogen plant. The Talara Refinery, operated by NOC Petroperu, is also currently in the process of adapting its own hydrogen plant as part of a major upgrade that will increase its refining capacity and make the refinery more energy efficient. Longer term, low-carbon hydrogen options may be pursued also. 

Furthermore, according to Peru’s National Energy Plan 2014 – 2025, 2 https://minem.gob.pe/minem/archivos/file/institucional/publicaciones/PEN_INGLES_2014_2025.pdf there is a deep political commitment for the promotion of clean energy strategies. Likewise, the National Energy Policy 2010-2040, 3 http://www.minem.gob.pe/minem/archivos/DS_%20N%C3%82%C2%BA%20064-2010-EM.pdf approved by Supreme Decree N° 064-2010-EM, has set having a “diversified energy mix, with an emphasis on renewable sources and energy efficiency” as one of the country’s main goals for 2040. According to the aims of the Supervisory Agency for Investment in Energy and Mining ("OSINERGMIN"), by 2040, renewables will represent 20% of Peru’s energy production. Since green hydrogen is produced from renewables, the opportunities for producing such hydrogen will increase, given the decreasing costs of renewable energy generation. 

2. MARKET PROSPECTS FOR HYDROGEN 

Peru’s market for production and use of hydrogen is currently very limited. However, as the country’s energy policy has shifted towards a clean energy approach, with more focus on efficient energy sources and the reduction of carbon emissions, the government may therefore implement a legal framework that could potentially include the promotion of a low-carbon hydrogen market. 

3. CHALLENGES FACING HYDROGEN PROJECTS IN PERU

Absence of legal framework

Peru has yet to implement any legislation regarding hydrogen-based projects. The introduction of such legislation would contribute to clarifying and promoting the use of hydrogen in different industries. 

Given the nascent status of low-carbon hydrogen discussions as a clean energy alternative, there is still little public awareness of it. 

When this industry attracts enough attention from the Peruvian Government, given its evident benefits for achieving low-carbon emissions, the Government will most likely approve a Hydrogen National Strategy by which regulations, incentive schemes, transport and storage of hydrogen would be specifically regulated.

4. REGULATION OF HYDROGEN 

Legislation

As mentioned above, Peru has no legislation that regulates hydrogen-based projects specifically. As a result, the general regulations on industrial gasses apply to hydrogen. Such regulations, which include technical standards, are the following:

  • Law N° 28256, Law that regulates the Land Transportation of Hazardous Materials and Waste;
  • Supreme Decree N° 021-2008-MTC, which approved the National Regulations for Land Transportation of Hazardous Materials and Waste;
  • the Peruvian Technical Standard NTP 512.001:1989 (Revised in 2012) “Requirements for storage, transportation, handling and transfer of compressed gases”; and
  • the Peruvian Technical Standard NTP 399.013:1974 (Revised in 2012) “Identification Colours of Industrial Gases Contained in Pressure Containers, such as Cylinders, Bottles and Tanks”.

However, considering that hydrogen is used in oil & gas processes, industry specific regulations can apply. For example, Law N° 28694 established that the regulation of the sulphur levels contained in diesel fuel were of public necessity and of national interest, and also established tax measures to promote clean fuels. In compliance with this law, oil refineries decided to implement hydrogen plants, in order to “clean” their diesel fuels. 

In 2018, a project was presented to Congress, to promote the use of vehicular natural gas, liquefied petroleum gas, hydrogen, and other non-polluting energy sources in government vehicles as well as in public and privately owned urban public transport vehicles, which include buses, micro-buses and taxis. 4 Bill Project Nº 3753/2018. This bill has not yet been approved but once it passes would create a market for low emission vehicles, including those powered by hydrogen and would in turn create demand for hydrogen fuelling stations. It is worth mentioning that approx. 70% of metropolitan journeys in Lima, capital city of Peru, are made by public transport, such as buses taxis

Transport of hydrogen by road

The transport of hydrogen is regulated by the National Regulations for Land Transportation of Hazardous Materials and Waste, approved by Supreme Decree N° 021-2008-MTC, under the provisions for flammable gasses transport, in accordance with the UN Orange Book. These regulations require that a permit is obtained from the Ministry of Transport and Communications for transporting hydrogen. 5 As per article 37 of Supreme Decree Nº 021-2008-MTC.

5. REGULATORY BODIES 

Peru does not have a regulatory body that exclusively regulates projects related to hydrogen and as such, the competent authority for the regulation of the development, construction and operation of projects that incorporate the use of hydrogen will depend on the applicable industry. The responsible agencies who may be involved are the following: 

Activity

Regulatory Body(ies)

Transport

  • Ministry of Transport and Communications: sets the legal framework.
  • Superintendence of Land Transport of People Cargo and Goods (SUTRAN): supervises and inspects compliance with legal framework.

 Energy

  • Ministry of Energy and Mines: sets the legal framework.
  • Supervisory Body for Investment in Energy and Mining (OSINERGMIN): supervises and inspects compliance with legal framework.
  • Environmental Audit Agency (OEFA): supervises compliance with environmental regulations.

Environmental Instruments

Depending on the Environmental Instrument required and the industry in which the project falls, any of the following authorities may be relevant:

  • the Ministry of Energy and Mines;
  • the National Service of Environmental Certification for Sustainable Investments (SENACE); or
  • the Ministry of Production.

6. UPCOMING DEVELOPMENTS 

As the hydrogen industry expands worldwide, and considering Peru’s commitment to producing cleaner and less carbon producing energies, the government may start regulating and promoting, in a more active way, investment in hydrogen-related projects in the near future. 

At present there are no low carbon hydrogen projects being developed in Peru but, as mentioned above, Talara’s Refinery, located in the north coast of Peru, is going through a major upgrade process. The upgrade is valued at $5 billion and expected to be finished in the first quarter of 2021. 

Picture of Alejandro Diez Canseco
Alejandro Diez Canseco
Associate
Lima
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Carlos Hamann
Partner
Lima
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Augusto Astorga
Partner
Lima