OX2 and Södra, together with e-NG project development company TES, have announced that they are moving forward with their development plans for a hydrogen-based e-NG (electric natural gas) facility on the Värö peninsula in Varberg, Sweden, by entering the pre-engineering design (Pre-FEED) phase.
The decision follows the signing of a letter of intent (LoI) in January 2025 and the completion of an initial feasibility study that evaluated the technical and commercial feasibility of the concept.
Sweden imports significant amounts of fossil natural gas and biogas to supply chemical and industrial companies that rely on gas in their processes, mainly via pipeline from Denmark, where fossil-based natural gas still accounts for the lion's share of this energy mix. The Värö e-NG project can significantly support the Swedish energy transition, economy, energy security and resilience.
The plant is designed to produce 1.2 TWh of e-NG (e-methane) per year. e-NG is produced by capturing biogenic carbon dioxide from Södra's pulp mill in Värö and combining it with hydrogen produced on site using renewable electricity. With 1.2 TWh of e-NG, the share of Swedish-produced fossil-free gas in the Swedish gas grid would increase significantly and involve a more than fourfold increase in domestic production of fossil-free gas.
The pre-FEED phase, which will last one year, is supported in part by 16.8 million SEK (~1.6 million EUR) in funding from Industriklivet, the Swedish Energy Agency's industrial carbon reduction programme under the EU's Recovery and Resilience Facility (RRF), and Next Generation EU. The funding will cover approximately 50% of the pre-design costs.
During pre-design, the partnership will prepare technical designs, evaluate the potential for integration with Södra's existing pulp mill, secure necessary grid connections for electricity and gas distribution, drive permitting processes and refine commercial agreements.
The partnership behind the project brings together complementary competencies along the entire value chain. Södra operates the pulp mill that generates biogenic carbon dioxide as a by-product of its production processes. OX2 develops large scale renewable energy projects in the region, while TES specialises in e-NG production technology and contributes technical knowledge and market insights from scaling up similar projects globally.
e-NG is a fossil-free gas that is chemically equivalent to fossil natural gas, and can therefore be used directly in existing infrastructure without any modifications. Potential applications include marine fuel, feedstock for the chemical industry and industrial processes.
The project has entered into a framework agreement with a major energy company for the purchase of the majority of the planned production volume. Depending on the results and the partners’ subsequent investment decisions, the plant should be operational in the early 2030s, in time for the entry into force of significant EU RED III RFNBO commitments. Decisions on moving forward to subsequent phases will be taken jointly by the partners based on the results of this phase.
Emelie Zakrisson, Head of Sweden at OX2, said: “The Värö e-NG project is a unique opportunity to deliver large-scale Swedish production of renewable gas close to the existing distribution pipeline. By combining Sweden’s natural resources with strong industrial know-how, this project has the potential to support industrial transformation, reduce emissions and bring Sweden closer to true energy self-sufficiency.”
Johannes Bogren, Business Area Manager for Södra Bioproducts, commented: “This project represents a strategic opportunity to convert existing biogenic carbon dioxide into renewable gas on a large scale. By integrating our processes with new market needs, the project can strengthen long-term value creation, increase the value of each tree and support the industry's transition from fossil gas in Sweden and the rest of Europe.”
Marco Alverà, co-founder and CEO of TES, added: “With its abundant renewable energy, access to biogenic carbon dioxide and strong industrial base, Sweden has the potential to become a pioneer in large-scale e-NG production. Together with Södra and OX2, we are developing a project that is ready to meet the growing demand driven by RED III requirements across Europe.”
The Värö e-NG project is financed through the Industrial Step, which is part of the EU’s Recovery and Resilience Facility (RRF). The RRF is part of Next Generation EU. The Industrial Step is a government initiative run by the Swedish Energy Agency.