The Last Decade – A Look Back at the past Ten Years of Oil and Gas Policy
Oil and gas industry. Silhouette oil pump on a sunset sky background.

They say it is a dog-eat-dog world, and that phrase has never been more applicable than in the oil and gas industry. With the race to new energy development, several of the big players are shoring up strategy. Royal Dutch Shell Plc, BP Plc, Sinopec, and Equinor ASA are sizing up hydrogen in anticipation of the next demand while decarbonization trends increase.

Using existing pipelines, storage tankers, and fuel supply, these companies plan to establish a system to generate blue hydrogen, which is the process of capturing and storing carbon emissions. While green hydrogen is produced by renewable electricity and is the most efficient route to net-zero emissions, blue hydrogen is the less expensive alternative until potentially 2030.

15 Proposed Projects

With shrinking the carbon footprint being a pillar of the latest business models, lower emissions are sought in order to avoid becoming obsolete in a changing energy market. Approximately 15 projects are planned to go active through 2027 in the United Kingdom, Germany, the Netherlands, Norway, New Zealand and Sweden.

“Green is the destination, but we’ll get there on a blue highway,” said Al Cook, Executive Vice President for development and Production at Equinor. “At some point, green hydrogen might well be lower cost than blue, but that will likely not be for at least a decade.”

According to BloombergNEF, blue hydrogen production needs to receive increased attention because projects that do not come online by 2030 could potentially lack relevance and competitiveness. This thought process weighs heavily as by 2050, clean hydrogen could potentially meet a quarter of global energy needs, with annual sales proposed to be $770 billion.

Not Without Challenges

While the race is on, hydrogen production still experiences specific challenges. It is expensive to manufacture without releasing greenhouse gases, highly combustible, and is difficult to store. No matter, demand is still expected to increase drastically by 2050. According to the International Energy Agency, production is still viable as the industries of transportation, steel and chemicals strive to reduce pollution output.

Additionally, the majority of today’s hydrogen production uses natural gas. This finds negative receivement by those entities, such as ESG investors and environmentalists, attempting to decrease the rate of climate change. A common method, known as steam-methane reforming, produces large amounts of carbon dioxide, which find their way into the air.

The most timely option to rectifying this problem is by a process that has been utilized for decades. Capturing carbon allows for its use to be stored in the ground or to be reused. Natural gas plants, ethanol production facilities and fertilizer manufacturers have all used this method.

Finding a Solution

According to Paul Bogers, Shell’s Vice President of Hydrogen, blue hydrogen projects can be initiated at large rates on day one.

“Industry by industry, you’ll see that the mix of where blue and green can be applied, and where it’s affordable, will be different,” said Bogers. “It’s not as simple as saying, ‘Well, here’s the crossover, so from that point, you only invest in one.’”

Living up to strict emission mandates, though, could be accomplished by replacing gas with hydrogen. Shell previously planned for a 20% reduction in greenhouse gas emissions within one decade, but the company was ordered by a Hague court to reduce them by 45% instead and in that same period of time.

Blue Now, Green Later

While China is responsible for the largest portion of hydrogen produced in the world, and by the use of fossil fuels, Sinopec stated its plan to have a carbon capture project by 2025. The country also plans to collaborate with Saudi Aramco on blue-hydrogen projects.

Europe’s largest utility, Iberdrola SA, has directed attention to renewable power and green hydrogen due to Spain’s plans to spend 35 billion euros of EU stimulus. Joining the party, Cummins Inc. of the United States stated it will partner with Iberdrola to build a facility where electrolyzers for green hydrogen can be created.

“In the short term, there are opportunities in which you can apply blue, but in the midterm — five to ten years — it’s going to be a stranded asset,” said Diego Diaz Pilas, Head of New Ventures at Iberdrola.

Focusing on the production of 10 million tons of green hydrogen, The European Commission wishes to see a 470 billion euro investment allocated to help reach a 2050 net-zero goal. Bartlomiej Gurba of the commission indicated that natural gas pipelines could undergo conversion to transport hydrogen.

“We are ready to grant subsidies for green hydrogen,” said Elisabeth Winkelmeier Becker, Deputy Economy Minister of Germany. “Other hydrogen will certainly continue to be used, but its production will not be subsidized.”

With some seeking production of one type of hydrogen over the other, CF Industries Holdings Inc. is open to whatever is available. Producer of ammonia used in the manufacturing of fertilizers and chemicals, the company used gray hydrogen made from natural gas but witnesses the release of greenhouse gases. With permit prices continually increasing, the company is preparing to implement a carbon capture program.

Transitioning

While companies attempt to meet regulations, business plans will be adjusted and costs incurred. A strict economic strategy will be developed and implemented through a course based on the most logical means possible in changing energy usage, whether it be green or blue hydrogen.

Daryl Wilson, Executive Director of the Hydrogen Council, indicated that transitions are important and must be enacted in order to develop the clean hydrogen market.

 

“The marginal cost of converting gray hydrogen into blue hydrogen is much lower than jumping to green hydrogen directly,” said Wilson. “As long as blue hydrogen is useful from an economic point of view, there is no reason for it to go away.”

 

Nick Vaccaro is a freelance writer and photographer. Besides providing technical writing services, he is an HSE consultant in the oil and gas industry with eight years of experience. He also contributes to Louisiana Sportsman Magazine and follows and photographs American Kennel Club field and herding trials. Nick has a BA in Photojournalism from Loyola University and resides in the New Orleans area. 210-240-7188 [email protected]





 

 





 

 

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