Hydrogen, the new frontier

• DOI: http://doi.org/10.1111/oet.12799
• Date: 01 June 2020
• Published date: 01 June 2020

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Hydrogen, the new frontier

Hydrogen is rising up the list of priorities for oil and gas

companies, especially in Europe. The zero-carbon fuel

can be used in transportation, heating, industrial pro-

cesses and power generation, and can be derived from

methane (in combination with carbon capture and stor-

age or CCS) using existing reserves and infrastructure—

representing a viable bridge for such companies to move

to a lower carbon energy system, while renewable capac-

ity is built up to produce the hydrogen using electrolysis

at scale in the longer term. Although policy frameworks

are not yet clear, hydrogen is already an essential compo-

nent in most European countries' net-zero plans.

Hydrogen, either produced from water by electrolysis

(green) or from methane by reformation, in combination

with CCS (blue), is now widely expected to fill key roles

in a low carbon system, replacing natural gas in CCGTs

for power generation during periods of low renewable

generation and in high temperature industrial uses. It

can also be used in heating and cooking, as well as in

transportation where it will compete with conventional

cars and EVs. Technically, it can do the job—in fact,

hydrogen looks like it is the only way, in combination

with renewables, that nations will be able to meet zero-

carbon goals at manageable cost. As such, it has growing

support from both the EU and leading European national

governments with zero-carbon targets, as well as others,

including Japan and Australia. European oil majors, in

particular, are aware of the worsening predictions of cli-

mate models and UN forecasters, and as more heat and

storm records are broken, are coming round to the view

that carbon policy measures are only going to get

stricter—the main question is around timing. Despite sig-

nificant cuts to their upstream oil and gas budgets this

spring, the biggest European majors—BP, Shell, and

total—are all maintaining low carbon spending, includ-

ing hydrogen. BP recently urged governments in an FT

article to “press ahead”with the climate push.

A new survey report

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from DNV GL shows that

hydrogen has already become a priority for many smaller

oil and gas companies too, taking a primary position in

the sector's decarbonization efforts. Half (52%) of senior

oil and gas professionals expect hydrogen to be a signifi-

cant part of the energy mix by 2030, and a fifth (21%) of

industry leaders say their companies have already

entered the hydrogen market, according to the report. At

a regional level, the outlook was less enthusiastic in the

Americas (North America [40%] and Latin America

[37%]) than in Asia-Pacific (56%), the Middle East and

North Africa (54%), and Europe (53%). Most analysts

believe that blue hydrogen will be needed to grow the

market, because green hydrogen does not yet have the

scale needed, partly due to insufficient volumes of green

energy. But eventually, blue hydrogen will also need to

be phased out as it does produce some CO

2

/methane

emissions, even with CCS. Cheaper green hydrogen could

eventually be developed from regions like the North Sea,

Northern Africa, Chile, Australia, and the Middle East,

which all have cheap renewable potential.

The European majors are pushing forward with initial

projects, both to produce hydrogen from methane at scale

though reformers, in combination with CCS (see below),

which is currently the cheapest way of producing at scale,

and by using electrolysis in key industrial markets such

as refining (where most use hydrogen made from hydro-

carbons to desulphurize refined products), and other

industrial areas where it can be used to replace natural

gas or coal in high temperature operations. Such projects

include a 10 MW unit at a Shell refinery in Germany,

which will start up in June; while Nouryon and Gasunie

are to build a 20 MW electr olyser in the Northern Neth-

erlands, which will be scaled up to 60 MW later, and then

100 MW. BP, Nouryon, and the Port of Rotterdam are

also exploring the opportunity of a 250 MW plant at BP's

refinery in Rotterdam.

A number of larger energy companies are investing in

smaller electrolysis and other innovative hydrogen com-

panies, including Shell in HyET in the Netherlands, as

well as utility EDF in McPhy in France; Linde, and ITM

Power in the UK; and Cummins' takeover of Belgium's

Hydrogenics

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(other major electrolyser producers include

NEL in Norway, and Siemens and Sunfire in Germany).

However, full economies of scale have yet to be realized,

and costs will also need to be reduced through standardi-

zation and an increase in electrolysis module size if

hydrogen is to penetrate lower value markets such as

heating and power generation (even with low-cost green

power). Experts expect Europe will see its first gigawatt-

scale electrolyser by 2030, and some manufacturers,

including NEL and ITM, are already working on GW-

scale production plants. In Australia, where renewables

DOI: 10.1111/oet.12799

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