[SYDNEY] Commodity trading firm Trafigura said on Thursday it planned to build a A$750 million (S$735.6 million) hydrogen plant at its Port Pirie lead smelter in South Australia, as it seeks to lower its carbon emissions.

Geneva-based Trafigura has been looking to expand in clean energy since 2019 when it set up a renewables division to be a third core pillar alongside metals and oil trading. It also formed a joint venture last year to invest in green energy.

The commodity trader, which reported a record net profit for a second straight year on Wednesday, aims to initially produce 20 tonnes per day (tpd) of green hydrogen for export in the form of green ammonia from the plant, it said in a statement.

At full capacity, it is expected to create 100 tpd of green hydrogen, meeting both its export and domestic supply needs.

Green hydrogen is produced by splitting water molecules with a current of renewable electricity in electrolysers and is touted as a clean replacement for fossil fuels in industries that are otherwise hard to decarbonise.

A A$5 million grant, jointly funded by Trafigura and the South Australian state government, for the project's initial design study will be provided immediately, with the final investment decision expected by the end of next year.

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Hydrogen development is the one strategy for tackling climate change that Australian politicians on all sides of the spectrum have backed and is part of a push by Australia, a major coal and gas exporter, to lower carbon emissions.

New South Wales, the country's biggest coal-exporting state, said in October it would offer A$3 billion in incentives to attract hydrogen projects while other major resource-exporting states - Western Australia and Queensland - have already lured major green hydrogen project developers.

REUTERS