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30 October 2024

Oil profits of $2.3bn are deemed low… and H2 loses out? – FREE TO READ

Confusing headline, isn’t it? BP has halted or shelved 18 early-stage hydrogen projects, part of a $2 billion cost-cutting strategy focused on streamlining operations and boosting returns on high-value developments. This is fancy talk for ‘doubling down on oil and gas assets will make us more short-term returns so the board will be happy.’

Wouldn’t it make more sense to invest in the energy of tomorrow… but we’ve already lost BP at that point, since today is the only thing that matters. Silly mistake. Another mistake would be to continuously rely on the traditional oil giants to move the needle on decarbonization and promote investment into clean energy sources.

This proves that half of what the likes of BP invest into as part of the green transition is merely a marketing exercise, also known as greenwashing. These companies are investing a fraction of their marketing budget into renewables and low-carbon fuels.

The company aims to prioritize five to ten hydrogen and renewable energy projects for final investment decisions (FID) by 2030 – we’ll see about that – scaling back other potential investments. CEO Murray Auchincloss noted that, in total, BP has paused 24 potential projects across renewables and hydrogen, with a specific reduction in hydrogen-focused initiatives.

Through this refocusing, BP expects to reduce annual cash costs by around $200 million. These reductions are seen as necessary, given BP’s declining quarterly profits, which fell to $2.3 billion in Q3 2024, marking the lowest profit level in four years. Perhaps it is time to listen to the people that keep saying the era of oil is over.

BP’s clean energy project pipeline has also declined by 11.5 GW since the beginning of 2024. While the company previously expanded its hydrogen ambitions, growing its low-carbon H2 project pipeline to 2.9 million tons annually, its focus remains on ‘high-value’ blue hydrogen projects this decade. BP has already reached FID on two smaller green hydrogen projects in Scotland and Spain, both developed with Iberdrola.

This is reminiscent of the steps that Shell and TotalEnergies took in closing down SAF (sustainable aviation fuel) facilities across Europe and the US, citing difficult market conditions as the trigger.

The conclusion here is something of a sidestep – that this isn’t terrible news for green hydrogen, whose true investments and collaborations never came from the oil giants in the first place anyway. Those come from people and organizations with a real interest in sustainability.

In other hydrogen news

H2Global is set to launch a new round of auctions with a budget of €3.5 billion to procure green hydrogen produced in the EU and renewable hydrogen from outside. This marks the first time auctions will be “product and vector open,” allowing hydrogen to be transported in various forms, including ammonia and methanol.

AM Green has signed a memorandum of understanding with BASF for the offtake of 100,000 tons of ammonia from its renewable hydrogen projects. The ammonia will meet EU standards for renewable fuels. The companies will also explore co-developing low-carbon chemical plants in India as part of the partnership.

A consortium led by TotalEnergies, along with Copenhagen Infrastructure Partners and A.P. Møller Capital, has announced plans for a large-scale green hydrogen and ammonia project near Morocco’s Atlantic coast. The initiative, known as the ‘Chbika’ project, aims to harness 1 GW of onshore solar and wind energy to produce green hydrogen primarily for the European market. The partners have signed a preliminary contract for land reservation, allowing them to initiate front-end engineering design studies. The project will utilize desalinated seawater to convert renewable energy into green hydrogen and then produce 200,000 tons of green ammonia annually for export.

The US government is allocating $3 billion for zero-emissions infrastructure at ports, including hydrogen technologies like H2-powered trucks and refueling stations. The funding, announced by President Biden, will support projects across 27 states and aims to reduce pollution in near-port communities significantly.

Russia’s Gazprom is currently exploring natural hydrogen in Eastern Siberia, specifically assessing fields like the Kovykta gas condensate and Chayanda oil & gas condensate fields. However, early findings have been underwhelming, with the concentration levels found at the tested wells being too low to justify further development. Originally, Gazprom established a hydrogen subsidiary in 2020 as part of a broader strategy to supply blue hydrogen to Europe via pipeline, but these plans were scaled back significantly following the invasion of Ukraine in 2022. The future of global natural hydrogen (white hydrogen) production remains uncertain.