The Potential for Low

Carbon Hydrogen in
Indonesia

APRIL 2021
 Profile summary
Brendan Boyle Brendan is an expert Project Leader in the Southeast Asia Energy
O&G and Energy Transition Senior
Consultant practice, supporting downstream oil & gas, refining,
Singapore petrochemicals, and energy transformation.

Relevant experience
• Expert consultant for BCG in SEA, with a focus on O&G
operations, asset optimization, decarbonization, and energy
transition

• 15+ years experience with ExxonMobil, with roles in R&D,

refining & petrochemical operations, optimization, energy
management, global supply chain, HSSE and corporate reporting

Copyright © 2020 by Boston Consulting Group. All rights reserved.

• Research Fellow for the US Department of Energy Argonne
National Laboratory, with a focus on hydrogen production
pathways

Education
Brendan graduated with a BSE in Chemical Engineering and a BA in
Philosophy from the University of Pennsylvania. He also holds an
MBA from Tulane University
2
 Hydrogen overview, history, and uses

Hydrogen The role of H2 in decarbonization and

Discussion the energy transition
Agenda
Low-carbon hydrogen supply,

Copyright © 2020 by Boston Consulting Group. All rights reserved.

demand, and production costs

Building a hydrogen business

3
 Substantial role for low-carbon hydrogen to meet
decarbonization commitments, with applications in the hardest
and costliest abatement areas

A full 'hydrogen economy' is unlikely; however, while new

technology will broaden applications, industrial and long-haul
transport are the most prominent use cases in short term
Key messages: Most countries have viable domestic H 2 production options and
Context + global with hydrogen much harder to transport than other fuels, more
H2 outlook regional, less centralized markets will emerge… ammonia the
most viable seaborne option in the medium term

Copyright © 2020 by Boston Consulting Group. All rights reserved.

While estimate are wide-ranging, the opportunity is significant
with a market potential of >$100B by 2040 and >$1T by 2050

Energy incumbents increasingly investing in hydrogen,

especially in Asia and Europe... generally through cross-sector
partnerships and/or scaling of pilot initiatives

4
 Hydrogen has been produced for over 200 years, achieving scale and maturity in many
applications, while remaining nascent and aspirational in others

ny

1776: Elemental H2 discovered 1910s: H2 1920s: First 1920s: Haber- 1930s: 1950s: 1960s: H2 used 2016: First 2019: Suiso Today-2050:
1800: Electrolysis discovered airships H2 powered IC Bosch process World's first commercial- as rocket hydrogen Frontier, the Liquid
1838: Fuel cell effect commonly used engines commercialized H2 pipeline scale propellant in US fuel cell world's first hydrogen will
discovered for commercial developed to manufacture built in hydrogen space programs Mirai liquefied be major fuel
air travel ammonia Germany production in like the Saturn- passenger hydrogen
1889: First H2 fuel cell refineries Apollo missions car launched carrier was
created by Toyota launched in
Japan

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Global annual hydrogen demand, Mt

150

100

50

0
1900 1920 1940 1960 1980 2000 2020 5 2040
Hydrogen is a zero-carbon fuel
with multiple applications

Transport [29%]

Low-carbon hydrogen has many advantages over

Power generation [19%]
Ammonia production
[1%]
alternatives, but challenges remain
Advantages
• Clean, with no CO2 or particulate emissions at point of
consumption
• Secure, when sourced from domestic renewable
energy

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• Versatile, with multiple end users and customers
Refinery / • Scalable, with modular production anywhere with
Petchem feedstock [1%] water and power

Challenges
• Technically immature beyond current applications
Steel production [1%]
• Costly vs. alternatives
• Difficult to transport and store
• Low round-trip efficiency in some applications
Injection into gas grid /
methanation

[Sector / % of global primary energy demand] 6

 25% Emissions reduction ability
decarbonization
addressable only
thru CCUS & H2
Hard-to-abate sectors are paying greater attention to hydrogen due to its deep
emissions reduction ability
Low
(UK example)

Carbon H2 Wider range of benefits

+3
interest new benefits
Hydrogen is increasingly seen as a potential contributor to further policy
objectives than purely climate change related ones: (1) energy security, (2) local

picking up air pollution, (3) economic development and energy access are now seen in scope

Support the growth of renewable electricity

100%
What is

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Electricity from Hydrogen can be stored and hence help match variable energy supply from
low-carbon
renewables and demand both temporally and geographically. This could mitigate

different
source
the variability of energy output from wind & solar

this time? > 250 Positive experience from renewables

Hydrogen prod. Success of clean energy technologies such as solar PV and wind turbines can bring
projects since
2000
investors confidence that governments are able to mobilize and push for the
development of hydrogen

7
We see four fundamental drivers for low-carbon H2

Key climate measure
Low-carbon hydrogen is needed
for ambitious decarbonization
It has high abatement cost ($75-
200/t), but large potential
Long-term commitment to
decarbonization is needed
Abatement Costs
Improving economics
The main cost driver for green
H2 is low-cost renew. power
Electrolyzer efficiency and
capex also critical drivers
We see $1.5-3/kg production
cost by 2030 depending on geo
Local production favored
medium term, until long-haul
transport economics improve
Climate driven policy
EU is pushing climate strongly,
with massive Green Deal
Japan's roadmap commercializes
hydrogen and develops
international supply chains
Policy in AP currently agnostic on
green vs. CCS-sourced H2
Massive potential
In deep decarbonization
scenarios, H2 is a must-have
Market in product, equipment,
service has strong outlook
$100-350B by 2040 depending
on depth of decarbonization
5-15% SEA market share of H2
production1

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Low Carbon H 2 2040 market size ($B)
$/tCO2e
Green H2 2020-2050 ($/Kg)
175
6.0 Japan's H2 power
$100B
15-30GW generation
5.0 ambition $350B
3.0
4.0 75
2.0
CO2 Emissions Blue H2 1.6
Singapore's 50
S$50M
1.5
Mt CO2e 1.2 commitment to 30 25
0.8 hydrogen & CCUS 5
Power&Buildings Transport Industry
2020 2030 2050
Stated Policies (SPS)
Source: IEA; BNEF; METI Japan; Singapore MTI; BCG H2COST model; BCG Analysis Scenario 2.0°C (SDS)
1. Combination of domestic consumption and exports 8
Hydrogen comes in three primary 'colours' based on source & carbon emissions
Foundational nomenclature of Hydrogen

Carbon emissions
1 ‘Grey’ H2

High
1
~95% • H2 produced directly using fossil fuels
• H2 does not meet low-carbon threshold
• SMR (49%), coal gasification (29%), oil reforming (18%)2
‘Grey’ H21 Global H2 production
from fossil fuel sources

2 ‘Blue’ H2
• H2 produced using fossil fuels
• H2 meets the low-carbon threshold

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2 3 • E.g., natural gas with steam reformer + CCUS
Low/
none ‘Blue’ H2 ‘Green’ H2
3 ‘Green’ H2
• H2 produced by using renewable energy & electrolysis
• H2 production without carbon emission
Non-renewable Renewable
Source

1. 'Black' and 'brown' are common colours to describe this source as well. 2. Source IEA 2019
Note: Other secondary 'colours' do exist e.g., 'turquoise' which uses a by-product of methane pyrolysis to split hydrogen and solid carbon, 'pink' referring to
hydrogen produced from nuclear sources, 'yellow' of mixed non-renewable and renewable origin, and 'white' which is naturally occurring in geological formations
Source: IEA (2018); IHS; CCS Cost, Trends and Outlook—E.S. Rubin; Feasibility Study into Blue Hydrogen—CE Delft, BDEW; BCG analysis 9
 Demand % Example use cases (non-exhaustive)

Hydrogen use •
•
Liquid rocket fuel for space exploration
Metalworking, in particular alloying
currently 12% Other •
•
Generator cooling & corrosion prevention in pipelines
Warehouse forklift equipment
concentrated…
• Used as a resin for wood composites in construction
18% Methanol • Specialized plastics and coatings (via formaldehyde)
…~70% of total • Octane enhancer for gasoline products

demand from • Used to remove sulfur from crude processing units (~1-

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26% Refining
ammonia & 2.5kg/bbl); likely to grow as sulfur regulations increase

refining • Synthetic urea or ammonium-nitrate fertilizer to increase

applications 44% Ammonia

crop yield (>75% of total ammonia demand)
• Household cleaning products
• As a refrigerant gas and in air-conditioning equipment
• Manufacturing of explosives

Source: HIS; IEA; other public news sources 10

 Future demand for clean H2 will be driven by decarbonization across sectors

By-product Biomass based Imported Aviation

hydrogen hydrogen
Renewable electricity
Building
Green H2 Heavy-duty

CO2 (CC) Power

Electrolyser
Fuel cell
electric vehicles
Grid

Methanation Re-electrification
Electricity Blending (power to power) FC Trains

Storage (Salt caverns

Storage tanks)

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+
Blue H2 Gas grid Shipping

Natural Gas / crude + High-grade- Industry Transport

Reforming CO2 to heat (>6500C) feedstock
CC Industry

Industry Transport Power Buildings

Short-term
potential
Large existing use of 'black' H2 or H2-derivatives likely needed to Potential application in energy H2 challenged vs. alternatives
H2; low-carbon H2 only real decarbonize aviation, rail, shipping; storage for grid stability, but (electrification, heat pumps)
decarbonization options BEVs dominate passenger and light duty only on last increment; PtP 11
Source: IRENA; BCG research
Hydrogen already used in range of applications with broad range of potential
future uses
Start of Mass market
commercialization acceptability1

Today 2020 2025 2030 2035 2040 2045

Power generation, buffering In renewables-constrained countries

In other countries
Forklifts
Transportation Medium and large cars

City buses
Vans
Coaches
Trucks
Small cars
Minibuses Synfuel for freight

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Trams and railways ships and airplanes
Passenger ships
Industrial energy Medium-/low industry heat

High-grade industry heat

Building heat Blended hydrogen heating
and power

Pure hydrogen heating

Industry feedstock Production of methanol, olefins and BTX using H2 and captured carbon2
Refining
Ammonia,methanol Steel3
Decarbonization of feedstock4

1. Mass market acceptability defined as sales >1% within segment in priority markets 2. Market share refers to the amount of production that uses hydrogen and captured carbon to replace
feedstock 3. Iron reduction in blast furnaces and other low-carbon steel making processes using H2 4. Market share refers to the amount of feedstock that is produced from low-carbon
sources
Source: Hydrogen Council 12
Long-term prospects should broaden H2 applications
Important feasibility indicators are upcoming in the next decade

Use of hydrogen in Ammonia and/or H2 derivatives as Production of

steel production (EAF hydrogen in power marine fuel (e.g., synthetic biofuels
vs. tradition BOF) generation methanol) for aviation

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Major indicators to watch for:

Steel mill capital Japan's trial with ammonia Monitor IMO regulations on Airbus ZEROe H2 plane
investment decisions power plants a technical maritime fuel and pilots expected to be in
forthcoming in 2025-30 success; watch for scaling currently underway commercial use by 2030

Note: See appendix for details of each new application

Source: Public news sources; BCG knowledge 13
 Hydrogen overview, history, and uses

Hydrogen The role of H2 in decarbonization and

Discussion the energy transition
Agenda
Low-carbon hydrogen supply,

Copyright © 2020 by Boston Consulting Group. All rights reserved.

demand, and production costs

Building a hydrogen business

14
Betting on low-carbon hydrogen means betting on global net-zero emissions
Hydrogen's likely to play a key role in abating the most costly 20-30% of carbon emissions

Almost any objective analysis for getting

to zero emissions includes hydrogen

>120
—Jack Brouwer
Professor, University of California, Irvine

Number of countries
We will have some oil & gas by 2050 but have made
commitments to 'net
it will be predominantly low-carbon
Nunc viverra imperdiet enim. Fusce electricity, biofuels and hydrogen
zero' by 2050

est. Vivamus a tellus. Pellentesque —Ben van Beurden CEO, Royal Dutch Shell
habitant morbi tristiqueNunc viverra

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imperdiet enim. Fusce est. Vivamus a Hydrogen’s moment has come… there is global momentum
tellus. and Canada is harnessing it
Global Demand Efficiency Renewable Fuel Low CCUS —Seamus O’Regan
emissions managment/ power switch carbon H2 Canadian Minister of Natural Resources
circularity

$ Avg. abatement cost $$$ Very quickly, probably by 2030, 2035, 2040, you’re going to
see hydrogen as the fuel [of choice] rather than natural gas
—Jim Robo
Chairman and CEO, NextEra Energy

Source: IEA; BNEF; New York Times; Wall Street Journal; Canadian Ministry of Natural Resources; United Nations; BCG analysis 15
There are a wide range of potential scenarios for adoption of hydrogen
depending on decarbonization scenario

Wide range of decarbonization futures… …creates range of demand scenarios for low-carbon hydrogen

Scenario "PILOT STAGE" "SELECT USE"

Global GHG emissions • Green H2 prod. remains at pilot • Commercial scale reached
(Gt CO2e) scale, with heavy funding support • Meaningful de-carbonization
Paris pledges • Mostly captive demand, and only volume in select sectors
50 Gt (57 Gt) from existing sectors (e.g. • Remains largely local customer
chemicals) base
• Largely local
Power Gap

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"S-CURVE MOMENTUM" "WIDESPREAD ADOPTION"
Transport • Strong progress up adoption curve • Technology maturity throughout
• Strengthening, stable demand from value chain
Buildings sectors without alternatives to de- • Widespread use across sectors incl.
2ºC pathway carbonise (industry, heavy as syngas for air & sea transport
Industry
(23 Gt) transport) • Large, mature export markets
Other1 • Export market emerging
$1T global market
LULUCF2

2010 2050 2025 2050

Time
1. Agriculture, Waste and Fugitive emissions 2. LULUCF: Land use, land-use change, and Forestry
Source: IEA, WEO 2017; WRI; IMF; World Bank; Climate Action Tracker, BCG analysis 16
Long-term: H2 growth predicated on countries pursuing deep decarbonization
H2 required for last 10-35% of carbon emissions abatement along with CCUS

Selected Examples

GHG emissions
(Mt CO2e) Total1 Total2 Total1 Total1

2016 3,673 291 2,229 417

'Conventional'

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Green Technologies
65%
(e.g. efficiency, battery- 73% 82%
75% 90%
82% 65%
electric vehicles, heat
pumps, etc.)

Decarbonization only
addressable through 27% 25% 35%
H2 and CCUS 10%

2050 2°C path

1252 82 703 133
(50% reduction vs 2000 levels)

1. Including waste, agriculture, fugitives 2.Excludes LULUCF carbon sink figure

Source: CAIT, UNFCCC, BCG analysis 17
 Hydrogen overview, history, and uses

Hydrogen The role of H2 in decarbonization and

Discussion the energy transition
Agenda
Low-carbon hydrogen supply,

Copyright © 2020 by Boston Consulting Group. All rights reserved.

demand, and production costs

Building a hydrogen business

18
 Backup

Recently announced green H2 projects in refining and chemicals have begun to

increase significantly in size
Size of New Projects (MW) Selected examples

4,000
NEOM Ammonia – ~4,000 MW
• Announced: 2020, completion1: 2025
• Integrated 650 tpa H2 and ammonia
production facility for use in transport
300
Port of Rotterdam – 250 MW
250 • Final decision: 2022, completion1: 2030?
• Supply BP refinery in Rotterdam
200

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Engie-Yara Pilbara Test – 55 MW
150
• Start: 2020/21, completion1: 2022
• Supplies Yara ammonia plant
100
Refhyne – 10 MW
50 • Start: 2018, completion1: 2020
• PEM electrolyzer delivered by ITM Power
0 • Located at Shell Rhineland refinery
2015 2016 2017 2018 2019 2020 2021 2022
1. Planned completion year, not yet completed
Source: Quarton & Samsatli (2018); IRENA; Nouryon; BCG analysis 19
 Positive consensus outlook but significant variation in demand trajectories
Reflective of fundamental assumptions, especially on adoption in transportation

Global hydrogen market

Trillion Nm3 per year However, long-term green H2
uptake contingent on 3 drivers
Short-term Long-term
Refining, ammonia, Potential for significant growth driven by new applications
methanol account for in industry (e.g., steel), transport (e.g., FCEVs, e- fuels), Push for deep
~85% of demand and power (nat. gas / H2 blending) decarbonization
8 (e.g., 1.5-2℃ path)

6
Technology improvements &
>300%

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capex reductions to increase
Forecast Difference competitiveness
4 range in 2050F
(~30% in 2030)

2 Access to low-cost
2.63 2.76 renewable power to
0.95 1.02 1.02 1.40 reduce green H2 cost
0.79
0
2017 2022 2030 2035 2040 2045 2050
APAC share 46% 46% 44%1 45% 46% 47% 48%

1. APAC share dip in 2030 due to a forecasted increase in H2 application for electricity that is led by non-APAC regions 20
Source: IHS (2018), Shell Sky Scenario, ACIL Allen, IRENA, Hydrogen Council, IEA, BCG analysis
Low carbon H2 production is starting point for different supply chain pathways
Simplified overview1

H2 production Other inputs Conversion Storage and Transport Re-Conversion/processing

Liquefaction H2 shipping
H2
pathway
PEM
electrolysis Ammonia synthesis Ammonia shipping Ammonia Cracking
Ammonia N2
pathway

CH₃ Hydrogenation (Toluene to MCH) Toluene/MCH shipping Dehydrogenation (MCH to Toluene)

Toluene AEC
electrolysis Toluene
pathway

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Fischer-Tropsch Synthesis E-crude shipping
E-crude
CO2
pathway SMR with
Refinery
CCUS
Methanol synthesis Methanol shipping
Methanol
CO2
pathway
Refinery

H2 flow N2, CO2 & Toluene flow H2 derivative flow

1. Focus on long distance transportation paths in this overview, short distance transportation can be done via pipelines or in some cases trucks; those are
considered in the respective pathways if required
Source: BCG 21
Japan has made consistent progress on using ammonia to co-fire plants
JERA's plans alone would double global ammonia trade by 2030

2017 2018 2019 2020

IHI and Chugoku Electric tested
20% NH3 co-firing in Mizushima
coal power plant (156 MW)
• First time co-firing in large
commercial power plant
implemented
• NOx emissions found to be
the same as when burning
100% coal
• CO2 emission reduction
IHI tested large scale 20% NH3
co-firing in its own pilot power
plant in Aioi
• Testing used pulverized
coal in a single burner
• Proved that with minimal
changes to the burner NOx
emissions can be
constrained to same level
as 100% coal combustion
IHI and Chubu Electric ran tests
and combustion simulation on
Hekinan IGCC plant
• Testing done in multi-
burner for mixing gasified
coal and ammonia injected
at multiple locations
• Testing reached similar
temperature in the burner
when cofiring NH3 at 20%
JERA announces roadmap to zero
carbon power by 2050 incl. 100%
ammonia by 2040s
• Focus remains on the 4GW
Hekinan power plant with
20% co-firing by the 2030s
and 100% by 2040s
• Series of 40mt runs w/ blue
ammonia from Saudi Arabia
• Ammonia council created to

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tested to be above 7% • Testing was funded by SIP • Testing was funded by SIP develop supply chain for
~20M mt/ year (~100% of
current ammonia traded)

Note: 'SIP' means Social Investment Partners and a Japanese based venture philanthropy organization.
Source: Bloomberg; Press releases; BCG analysis. 22
Marine fuel pilots and legislation currently in active development
Collaboration often happening in industry-wide partnerships (or ecosystems)

Legal framework for methanol Dual-fuel powered pilots Research projects ongoing,
as maritime fuel under development by several shipping companies e.g., in green maritime methanol group

International Maritime Organization (IMO) Dual fuel applications (methanol & other) Focus on short sea shipping, comparing
is preparing applicable legislation, Methanol with other fuels (LNG, H2, biodiesel
not yet fully in place and electrical)

• 2018: ISO invited to develop Target is to investigate feasibility of

an international standard methanol as a sustainable fuel more widely
for methy/ethyl alcohol fuels Chemical Passenger Other/ pilot for mainstream commercial and military
(still ongoing) tankers (~20) ferry boats shipping/ support vessels

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• End 2018: Draft of interim Guidelines Participants from entire value chain: ship
validated owners, shipyards, manufacturers incl.:

• Nov 2020: IMO's Sub-Committee on

Carriage of Cargoes and Containers
approves amendments to regulations to
permit the use of methyl and ethyl
alcohol on ships1

Project kickoff 2019, conclusion 2021 expected

1. Industry sources, official IMO minutes not yet released.

Source: BBC; Methanol Institute (2019); Methanex; BCG analysis. 23
 Reducing green H2 costs will require reductions in power costs along with
electrolyzer capex from scaling and learning

Share of total costs 100% Key cost reduction levers

Electrolyzer 10-15% El. cost per kW El. efficiency El. utilization

Cabling & Agreement

power 1-5%
with TSO
CAPEX

Off-take
RNW clustering
volume
Piping & On-site
transport 1-3% location
Green H2
Off-take
production Storage 1-2% Cost per m3

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flexibility
Highest impact lever
costs
Power Regulatory
Power 50-75% PPA
wholesale price support
OPEX

Water 3-5% Water price El. efficiency

Other OPEX 1-2% Plant efficiency

Source: Expert interviews; BCG Techno-Economic H2 model; BCG analysis. Max impact on single cost component: 0-5% 90+% 24
 Meaningful reductions in blue H2 production cost will likely need to come
through lower methane costs and/or reformer capex reductions
Share of total costs 100%

CAPEX
Reformer 20-25%
evolution

CAPEX
CCUS system 10-12% digression
CAPEX

Piping & Regulatory

transport 1-2% Efficient
support
On-site conversion of
applications current
Blue H2 Gas Storage 1-2% infrastructures
Highest impact lever
production

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costs Methane 35-45% Methane price

Power 5-10% Power price

OPEX

Other OPEX 3-5% Plant efficiency

Likely to increase
CO2 cost 1-2% CCS efficiency CO2 price
in the future

Source: Expert interviews; BCG Techno-Economic H2 model; BCG analysis. Max impact on single cost component: 0-5% 90+% 25
Green H2 | Declining costs for renewable power across Southeast Asia are
driving down the levelized cost of green H2

Power represents 40% - 80% of the

Solar LCOE $/MWh SEA Renewables Capacity, GW
cost to produce green H2
200

SEA renewables capacity is expected

to increase up to 3-fold over the
next 10 years

100

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The LCOE of solar is decreasing
Philippines (-7%) rapidly with a CAGR of ~10%,
Thailand (-8%) although the cost is still higher than
Indonesia (-11%) the global average
Vietnam (-10%)
Malaysia (-10%)
Global Average
0
2016 2018 2020f 2022f 2024f 2026f 2028f 2030f Solar will be the cheapest
Forecast renewable power by 2030 for all
SEA countries

Note: CAGR from 2019 to 2024 is used for the forecast until 2030
Source: Bloomberg NEF; IRENA; IEA WEO report; BCG Analysis 26
4 | Build company roadmap for LCOH, leveraging advantages and regulation

Potential evolution of LCOH ($/kg) Indonesia Wind-Solar PV Example

Regulatory Regulatory
Key levers Technological Development
Support Support

Tax & Levies Cheaper RES More efficient and

CO2 taxes
Exemption generation cheaper electrolyzer
10.0
8.3
-1.7
75%
70%

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-4.3 2.3 2.2
21% 25% -1.8
4% 5%
Grid Connected Green H2 today Green H2 in 2030 Grey H2
H2 today in 2030
• Power at ~100 $/MWh • Avoid grid fees, • Power at ~30 $/MWh • 750 MW Capacity • Carbon taxes:
• Capex $1200/kW levies and taxes • Higher electrolyser • 35% reduction in • Low 35 $/tonne
• 25 MW Capacity efficiency 65% electrolyzer cost • High 70 $/tonne
• Efficiency 60%

Power Electrolyzer CAPEX O&M

Source: BCG H2 Cost Model; wind + solar generation optimized to maximize utilization of electrolyzer stack 27
4 | Build company roadmap for LCOH, leveraging advantages and regulation

Potential evolution of LCOH ($/kg) Indonesia Geothermal Example

Regulatory Regulatory
Key levers Technological Development
Support Support

Tax & Levies Cheaper RES More efficient and

CO2 taxes
Exemption generation cheaper electrolyzer
5.6

82%
2.1 2.2

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-3.5 52% -0.1 1.2
15% 39% -0.8
3% 9%
Grid Connected Green H2 today Green H2 in 2030 Grey H2
H2 today in 2030
• Power at ~84 $/MWh • Curtailed • Power at ~20 $/MWh • 750 MW Capacity • Carbon taxes:
• Capex $1200/kW geothermal power • Higher electrolyser • 35% reduction in • Low 35 $/tonne
• 25 MW Capacity at ~$20/MWh efficiency 65% electrolyzer cost • High 70 $/tonne
• Efficiency 60% • Avoid grid fees,
levies and taxes

Power Electrolyzer CAPEX O&M

Source: BCG H2 Cost Model; wind + solar generation optimized to maximize utilization of electrolyzer stack 28
 Significant potential for hydrogen in Southeast Asia due to low forecasted
production costs and early indications of increasing regulatory support
3.0 2.9 3.5
2.8 3.3
Vietnam Philippines

2.2 • Fairly low forecasted LOCE, LCOH • Fairly low forecasted LOCE, LCOH
1.7 • CCUS modeling TBD
• CCUS modeled at $45-95/T 2.3
1.5 2.2
LCOH_green LCOH_blue LCOH_grey • Limited regulatory support • Limited regulatory support LCOH_green LCOH_blue LCOH_grey
$/kg $/kg $/kg $/kg $/kg $/kg
• No projects under development • Projects MOU announced
4.6
3.0 3.0
2.8
Singapore
Thailand 4.0
3.0
• Fairly high forecasted LCOE, LCOH 2.5
2.2 • Fairly low forecasted LOCE, LCOH 2.6
2.3 • CCUS modeled at $95-110/T
• CCUS modeled at $95-120/T 2.1

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1.8 • Strong regulatory support
LCOH_green LCOH_blue LCOH_grey
LCOH_green LCOH_blue LCOH_grey • Moderate regulatory support
• Pilot projects under development $/kg $/kg $/kg
$/kg $/kg $/kg
• 1.2 MW project green H2 is operating

2.9 2.8 3.0 2.9 2.8

2.2 Malaysia Indonesia

• Low forecasted LOCE, LCOH • Low forecasted LOCE, LCOH

1.7 1.5 • CCUS modeled at $25-100/T 1.6 1.5
• CCUS modeled at $35-100/T
0.8 1.2
• Moderate regulatory support • Limited regulatory support
LCOH_green LCOH_blue LCOH_grey LCOH_green LCOH_blue LCOH_grey
$/kg $/kg $/kg • Pilot projects under development • No projects under development $/kg $/kg $/kg

Green H2 costs assume 750 MW electrolyzer, 65% efficiency, 2030 capex cost, 2030 LCOE for optimized
wind/solar PV combo; Blue & grey H2 assume a range of NG prices in 2030; Blue H2 estimates CCS costs per 29
proprietary BCG Emissions cluster modelling. 𝐻𝐻2 overall attractiveness
Source: Industry reports; BCG case experience; BCG analysis
Economics of hydrogen significantly impacted when
supplying export markets Simplified overview1
Re-conversion/ Economics/
H2 production Other inputs Conversion Storage and Transport processing maturity
Liquefaction H2 shipping Expensive
Liquid H2 liquefaction and
transport pilot-stage H2
shipping
Direct Hydrogenation (Toluene to MCH) Toluene/MCH shipping Dehydrogenation (MCH to Toluene) Most expensive
Hydrogen Toluene CH₃
route, vessels need
export (LOHC) Toluene
to return with
Renewables + carrier molecule
electrolyzer Ammonia synthesis Ammonia shipping Ammonia Cracking2 Ammonia to
Ammonia N2
hydrogen cracking
transport power intensive and
expensive

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Ammonia synthesis Ammonia shipping Direct ammonia use Ammonia shipping
Ammonia N2
mature, cost
product effective for some
SMR
+ applications
Carbon
capture
Methanol synthesis Methanol shipping Direct methanol use Methanol shipping
Derivatives Methanol CO2
mature, cost
effective for some
export product Refinery applications
Fischer-Tropsch Synthesis Synthetic fuel shipping Synthetic fuel use Fuel transport
Synfuel CO2
mature, synthetic
product fuel still small
Refinery market due to cost

H2 flow N2, CH4, CO2 & Toluene flow H2 derivative flow

1. Focus on long distance transportation paths. 2. Other methods exist, but also challenged by energy consumption
Source: BCG 30
Long-distance shipping economics are challenged near-term, incentivizing
shorter supply chains or local production

Potential low-cost production hubs … … although technical and economic challenges of transport favor
local production…
Middle East SEA to Japan
to Japan Japan domestic

5000km $/kgH2 4.8

4000km
3000km
3.8 3.8 3.9
2000km 3.6
1000km

2.5
5000km
5000km
4000km
4000km

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3000km
3000km
2000km
2000km
1000km
1000km

LOHC LH2 Ammonia LH2 - Solar PV LH2 - Hydro Onsite

electrolysis

Reconversion Transport Conversion Green electrolysis

Assumptions: ME Electrolysis - 2 GW AEC placed in Middle East, 6,150h, Capex 400 $/kW, CoC 7%, efficiency 63%, power renewable 20 $/MWh, water 2 $/m3; Shipping 13,000 km
(Middle East – Japan); EU conventional ammonia at 395 $/t; Japan power renewable 50 $/MWh, power 100 $/MWh, water 4 $/m2, 6,500 h, NG 8 $/mmbtu
Source: IEA (2019); Nexant (2020); IHS; BCG H2 COST model; BCG analysis

31
 Hydrogen overview, history, and uses

Hydrogen The role of H2 in decarbonization and

Discussion the energy transition
Agenda
Low-carbon hydrogen supply,

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demand, and production costs

Building a hydrogen business

32
 Three main commercial pathways for low-carbon H2
in Southeast Asia
Grey displacement
Compete with incumbent
grey H2 in local/regional
market
• Low-cost renewable power for green H2 production (wind, solar, hydro)
Key success factors / competitive advantages
Production • Low-cost natural gas or incumbent grey H2 production + favorable conditions
for CCUS (emissions clusters, proximate geologic storage)
• N/A
Conversion
• Proximity to existing
Transport industrial consumers
• Long-term off-take
agreement with reliable
Consumption
consumers
Financial support
• Tax credits
Policy and
• Govt grants & invest
regulatory • CO2 price (tax, ETS)
Source: IEA, BCG H2COST model, BCG Analysis
Green growth
Expand H2 market-share via
growth in new end-use
applications
• N/A
• Proximity to demand
centers
• New or repurposed infra
• Strategy to develop and
supply high-growth
markets
Policies
• National ambition
• Low carbon standards
• Blending mandate / FiT
Competitive green H2
International exports requires low-cost
Deliver low-cost H2 to renewables and
consumers in high-cost
proximity to current and
markets
future demand centers
• Low-cost power
Blue H2 well-suited to
• Ability to leverage
existing infrastructure decarbonize existing
for capital efficiency grey H2 in industrial
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sectors
• Proximity to import
markets
• Long-term off-take
agreement with reliable Southeast Asia has
consumers significant H2 potential;
Regulation winning will require
• H2 legal & regulatory investment, strategic
framework partnerships, &
• Permitting process government support
33
Set quantitative ambition, and move quickly from pilot to commercial scale
Example: Clear roadway to multi-billion topline business by 2030, must start today
Scale through industrial
and heavy transport

Initiate H2 scaling
Initiate decarbonisation
2030+
of own operations 7,500 MW electrolyser
2025 • Vertically integrate with
electrolyser JV or acquisition
750 MW electrolyser1
2021 • Initiate scaling opportunities in
• Decarbonize refining sector and
other industrial sectors like
25 MW electrolyser industrial applications: refining,
chemicals, ammonia, steel
• Internalize Low Carbon H2 steel, ammonia
• Decarbonize Heavy Duty

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production in refineries • Initiate scaling opportunities in
Transport
• Develop capabilities in H2 Heavy Transport: Trucks, Buses
• Drive decarbonisation agenda in
production & operations • Develop H2 refueling stations
transport: freight shipping,
deployment plan
trains …

~ 3000 Ton of Green ~ 100.000 Ton of Green ~ 1 M Ton of Green

~$15M Hydrogen production ~$400M Hydrogen production ~$3 bn Hydrogen production

Notes: Green H2 price: $5/Kg in 2020, $4/Kg in 2025 and $3/kg in 2030; 1. 750 MW electrolyzer @ ~63% efficiency will produce equivalent H2 to an industrial-scale SMR
Source: BCG project experience 34
Many paths to build a $1B business through H2 supply…large-scale industrial
applications offer likely the quickest opportunity for scale

Utilizing a 230 commercial

long-term One 600k b/d oil 30,000 long-
planes2 (50% blend
refinery1 haul trucks3
price of of synthetic fuel)

$3/kg of
H2 each
businesses
provides a $1B

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revenue
Four 0.5 Mt 11,000 regional 27,000 city
opportunity ammonia plants 4 trains5 buses6
through H2
supply

1. Assuming 1.7 kg of H2 required per barrel output; 2. Based on Boeing 747, assumes 1.75M miles per year, consuming 5 gallons per mile where the replacement of jet fuel with
hydrogen doesn't impact efficiency; 3. 100K miles per year and 8 miles per KG; 4. 0.176 tons of H2 per ton of NH3, Nutrien's Joffre plant has 0.5 Mt of capacity 5. 0.3 kg/km
consumption, travelling 800 km per day, per FCH-powered regional trains using Hydrogenics fuel cells 6. 400km per day consuming 8.5 kg per 100km per new FCEB fleet in Europe
Source: Power Magazine; IEA; IER IMO; Chemical and Engineering news; Hyundai; FCH Europe; Hydrogen Europe; BCG Analysis 35
Engage along the hydrogen value chain consistent with competitive advantage
Value chain positioning Use cases Renewable Green H2 production Conversion Commer- Consump Closest
Archetypes power OEM EPC OPS. & Transport cial tion examples
"Asset Optimizers" • Power: H2 Adapted turbine
& decentral energy storage
Optimize RES & CCGT assets by
integrating H2 solutions

"RES Enhancers" • Industry: ammonia &

methanol production and
Leverage H2 to increase RES
steel decarbonization
demand & integration

• Industry, largely existing H2

"Grey-to-Green" users in particular
Leverage access to industry • Contractors specializing in H2
and expertise on H2 products and services

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"Gas Champions"
Use & retrofit existing gas
infrastructure for H2 storage &
transport
• Industry & Mobility
• Gas grid injection
• Energy storages
• Ports

"End-Use Marketers" • Mobility

• Buildings: H2 fueled data
Promote & provide H2 for end
centers
users

"Green Oilers" • Industry: H2 and P2X in

refineries
Drive new growth vectors
• Synfuels for car, trucks, ships
beyond fossil, leverage existing & planes
H2 position and capabilities

Source: BCG Experts, Company Investors data; press releases; Project team 36
 Build technology and commercial partnerships to navigate opportunities in SEA

Country

Participants AHEAD
Org.

Brunei
LNG
Pilot project to develop an MoU to develop a green H 2 MoU to establish green NH 3 MoU to develop a business MOU to jointly study the use The REIDS-SPORE project is an
Project international H2 supply chain supply network produced and H2 production and case for H2 import and of integrated energy solutions R&D platform comprising
details using Brunei NG as H2 with Sarawak hydropower, supply chains utilisation in Singapore. This to power data centres 100kW wind turbine and a
feedstock and toluene as a with intention to export involves the R&D of related hydrogen full chain for
transport medium for export technologies in importation, electricity and mobility
to Japan transportation, and storage
Key Nov 2019: hydrogenation Oct 2020: MoU signed Feb 2021: MoU signed Mar 2020: MoU signed Nov 2020: MoU signed 2017: Wind turbine installation
plant commissioned
dates Jan 2021: Feasibility studies 2018: Partial commissioning

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Dec 2019: First MCH shipment to commence 2019: H2 full chain partial
from Brunei arrives in Japan commissioning
May 2020: H2 from MCH 2021: REID SPORE inauguration
fueled a gas power plant

Value chain Grey Hydrogen, conversion & Green hydrogen, conversion
transport & transport
Key Successful pilot, progressing Abundance of cheap
strengths towards full hydroelectric power in
commercialization Sarawak
Existing storage and
transpiration facilities can
be leveraged to export H2
as MCH
Green ammonia, Green
hydrogen
Both firms are highly
committed having made net-
zero CO2 emissions by 2050
Petronas already a producer
of (grey) ammonia
Green H2, gas grid, port
infrastructure
Multi-faceted exploration of
H2 opportunities
Green H2, data center, fuel Green H2, power grid,
cell tech. mobility, fuel cell tech.
SP Group provides expertise Full H2 chain available
for low carbon energy
Sembcorp brings expertise in
providing urban sustainability
solutions to deployment of H2
fuel cell tech.

Note: Advanced Hydrogen Energy Chain Association for Technology Development (AHEAD), Methlycyclohexane (MCH), Memorandum of Understanding (MoU),
Renewable Energy Integration Demonstrator Singapore (REIDS) 37
Source: Press search, BCG analysis
 Substantial role for low-carbon hydrogen to meet
decarbonization commitments, with applications in the hardest
and costliest abatement areas

A full 'hydrogen economy' is unlikely; however, while new

technology will broaden applications, industrial and long-haul
transport are the most prominent use cases in short term
Key messages: Most countries have viable domestic H 2 production options and
Context + global with hydrogen much harder to transport than other fuels, more
H2 outlook regional, less centralized markets will emerge… ammonia the
most viable seaborne option in the medium term

Copyright © 2020 by Boston Consulting Group. All rights reserved.

While estimate are wide-ranging, the opportunity is significant
with a market potential of >$100B by 2040 and >$1T by 2050

Energy incumbents increasingly investing in hydrogen,

especially in Asia and Europe... generally through cross-sector
partnerships and/or scaling of pilot initiatives

38
 Session
Question & Answer

39

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