BP is doubling down on hydrogen as the fuel of the future

  • BP sees rapid growth in low-carbon hydrogen
  • Fuel to benefit from government subsidies
  • CEO Looney to announce hydrogen production targets
  • BP is planning a major hydrogen project at its Whiting, Indiana refinery

LONDON, Dec 5 (Reuters) – BP Chief Executive Bernard Looney is betting on hydrogen to power future low-carbon businesses as governments in major economies raise money to develop the fuel to decarbonise.

Low-carbon hydrogen already has a large fan base and is predicted to play a major role in reducing greenhouse gas emissions from heavy industry and some forms of transportation.

But it is expensive to produce and often needs government support to compete with fossil fuels.

The United States, for example, is offering huge incentives for manufacturing under President Joe Biden’s $430 billion Inflation Relief Act (IRA).

BP ( BP.L ) was quick to react and its Whiting, Indiana refinery, Tomeka McLeod, BP’s newly appointed head of hydrogen in the United States, told Reuters.

When Looney took office nearly three years ago, he pledged to reshape BP and cut carbon emissions by cutting oil and gas production and increasing renewables. He is set to update investors on where things stand on February 7.

BP sources told Reuters that hydrogen will play a leading role alongside offshore wind.

BP overhauled its structure to create a dedicated hydrogen division headed by Felipe Arbelaez and staffed with 150 employees. It has also made several investments in major hydrogen projects, including in Australia, Europe and Britain.

It is also exploring the potential to develop green hydrogen in Oman, the company told Reuters, and is also exploring projects in Mauritania.

BP’s spending on low-carbon hydrogen remains modest, but is expected to reach hundreds of millions of dollars by the end of the decade as projects proceed, company sources said.

BP has spent about a quarter of its $15.5 billion budget in 2022 on low-carbon businesses, including a $4.1 billion acquisition of U.S. biogas producer Archaea, according to Reuters estimates.

Looney and Anja-Isabel Dotzenrath, BP’s head of renewables, will announce a clean hydrogen production target for the first time in February, aiming for 10% of hydrogen in “core markets” by 2030, company sources said.

“Hydrogen is going to be a big focus and it’s moving faster than we thought,” Chief Financial Officer Murray Auchincloss told Reuters last month.

Most hydrogen is currently used in the oil refining and fertilizer industries and is usually made by heating natural gas, a highly polluting process known as gray hydrogen.

But if polluting emissions are captured, gray hydrogen becomes “blue hydrogen.” There is also “green hydrogen” produced by splitting water using renewable energy-powered electrolysis.

To expand its blue hydrogen business, BP is counting on its oil and gas expertise to build carbon capture and storage facilities, where carbon is pumped into depleted reservoirs.

It also plans to increase its renewable energy generation capacity to 50 gigawatts by 2030, which will be used in part to power electrolyzers.

BP declined to comment on whether it would set a hydrogen production target or on spending plans for hydrogen.


BP’s project at the Whiting refinery will initially replace about 200,000 tons of gray hydrogen used annually by the refinery with blue hydrogen, McLeod said. The project could start operations in 2026-2027 and expand to green hydrogen.

“Our focus is similar in the U.S. and around the world, how we can decarbonize and reimagine our assets,” he said.

The low-carbon fuel will be used in a second phase by other heavy industries in the region to reduce the roughly 36 million tons of CO2 emitted there each year.

The project will highlight the challenge of hydrogen competing with lower-cost fossil fuels based on subsidies.

The IRA offers a $3-per-kilogram tax credit for clean hydrogen, which analysts say would bring green hydrogen equal to or even lower than the cost of gray and blue hydrogen.

“With the hydrogen production tax credits that are now available, it … has allowed green hydrogen to be more competitive,” McLeod said.

McLeod said the subsidies would initially allow green and blue hydrogen to compete with gray hydrogen and allow consumers to switch to cleaner fuels.

“The increase in demand for new hydrogen applications will be a function of cost competitiveness,” said Andy Brogan, Global Head of Oil & Gas at EY.

“There are material components of energy demand where hydrogen is the only obvious technological alternative to carbon-intensive options,” Brogan said. “However, these are often price sensitive, so rapid acceleration will depend on cost.”

BP is already one of the biggest investors in hydrogen projects among the world’s top oil and gas companies, including Shell ( SHEL.L ), TotalEnergies ( TTEF.PA ), Repsol and Italy’s Eni ( ENI.MI ), according to Globaldata. provider.

In June, BP bought a 40.5% stake in a 26-gigawatt renewable energy project in Australia that could produce green hydrogen. It is developing two projects in Britain that aim to produce 1.5 gigawatts of blue and green hydrogen by 2030.

Reuters graphics

Reporting by Ron Bousso; Edited by Simon Webb and Jane Merriman

Our standards: Thomson Reuters Trust Principles.

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