As more countries continue to plan for a carbon-neutral world, many companies are beginning to invest in hydrogen. Hydrogen can support many decarbonization efforts by emerging as an alternative fuel in transportation, becoming a cleaner heat source in industrial applications. While we expect the demand for hydrogen to grow significantly in several large-scale applications, there is a lot of talk about hydrogen playing a big role in commercial transportation. Hydrogen’s role in transportation will most likely be limited in the passenger vehicle market because of the head-start battery electric vehicles enjoy, but companies such as Toyota believe it can break through as they continue to invest in the technology. Despite this, hydrogen is expected to have a big future in commercial transportation such as trucks and forklifts where it is already seeing growth. However, there have been promises of hydrogen becoming big before. Why would things be different now?
One of the key differences with the current hydrogen wave is the diversity of players involved in this space. No longer are we looking at a handful of renewable players promising a better tomorrow on a small-time budget. This time we’re seeing investment from oil and gas majors such as Repsol, Equinor, BP, and Shell. For instance, Shell has many hydrogen refueling stations set up across Europe for fuel cell electric vehicles (FCEVs) and is growing its presence in California. As seen in Exhibit 1, BP currently has a hydrogen production facility in Teesside, England, and they project to be producing up to 1 gigawatt of blue hydrogen by 2030.
Oil producers aren’t the only O&G companies looking to be a part of the action, though. Major oilfield service companies such as Halliburton and Schlumberger have thrown their hat into the arena as well by looking into hydrogen storage projects and launching a clean hydrogen production venture in France, as seen in Exhibit 1. For many, oil companies taking an interest in a hydrogen future is proof enough that the world is moving away from fossil fuels to a greener future. On the contrary, others are skeptical of the sudden shift of these long-time oil and gas producers.
Skeptics often point out that it benefits oil and gas companies to produce hydrogen. This is because hydrogen is predominantly produced using fossil fuels. Brown and grey hydrogen use coal and natural gas respectively for their production. Blue hydrogen is essentially the same as grey, but with the use of carbon capture technology to trap emissions. Green hydrogen is produced from renewable energy through electrolysis. Green hydrogen only makes up about 3% of total production making hydrogen production an attractive area for O&G companies as it is reliant on their resources. Others think that hydrogen is not a feasible solution in the long term, and oil companies are using it to hedge their bets and offer alternatives to electrification.
Whatever the driver, oil companies’ interest in hydrogen is undeniable. Even if their role is limited to increasing blue hydrogen production, the new capacity will help lower the cost of hydrogen making it more attractive for use in various applications.
– Thomas Dennis and Utkarsh Gupta
